business news in context, analysis with attitude

Published on: February 5, 2019

by Michael Sansolo

One of the more enjoyable parts of the work Kevin and I do is getting the opportunity to speak at and attend meetings for companies and associations in many different businesses. We usually come back with perspectives and insights far afield from what we might encounter if we only stayed in one industry.

In many respects, it allows us to do the opposite of one bit of advice that is currently popular: that is, we get out of our lane. It’s invariably eye opening as you can hopefully tell in stories here on MNB about hotels, sports, movies, etc… Lane changing, I think, can be game changing.

The furthest Kevin may ever have gotten out of his lane is when he gave a talk to the National Court Reporters Association. And last week, I had a similar, lane-changing opportunity when I was asked to speak at a company meeting for a large publisher of children’s books. I wasn’t really sure whey they wanted me until I got there and now I only wish I had more time to spend with them.

The simple reality is that the consumer - while they behave in many confounding and complicated ways - is just one person. The same young parents who go shopping for books to read their toddlers at bedtime also visit supermarkets, buy cars and homes and engage with businesses everywhere. So the problems publishers are facing are, in so many ways, the same that every other business has.

Mainly, understanding how to serve, delight and gain the loyalty of today’s young adults.

A few things stood out to me from this short trip into the world of Dr. Seuss and Pete the Cat.

First, reading is best established at a young age, so book publishers need to connect with young parents. If they read to their kids, the kids will move on to reading themselves. But demographics are causing some problems in this sensible circle. First, young parents are financially strapped and most are balancing work and family, which puts a crimp on reading time. Also, millennials are having children later than previous generations.

The one ethnic group having children at a fairly traditional rate are Hispanics, yet as a group they tend to read less so the publishing world is struggling with how to connect with the parents and determining if they want books that reinforce their heritage or enable assimilation. Sounds like a debate being held in many supermarket companies, doesn’t it?

We also heard from an interesting research group called the Family Room, which tracks the issues that keep parents up at night. Their recent findings are chilling. Thanks to numerous societal changes - from the political scene to the frequency of school shootings - parents’ worries have shifted dramatically from educating and preparing their children to focus on safety. That, in turn, is leading to more cocooning at home.

The good side of that shift is it can strengthen the family and put more emphasis on family mealtime, which is always a goal of supermarkets. The down side is those same fears might convince them to rely more heavily on electronic commerce so they can avoid shopping trips.

Possibly the single comment I heard that most connected the publishing world to everyone else was a simple message from one executive, who reminded the group “what got us here, won’t get us there (the future).” That line wasn’t meant to launch a new Seuss book, but to remind everyone in this successful company that yesterday’s results are no indicator of what tomorrow will demand.

As I said, it’s good to get out of our lane, to hear perspectives from an industry foreign to our everyday experiences, and to recognize how relevant business challenges are across channels of trade and even more. I know that isn’t how we’ve traditionally done things, but remember, what got us here won’t get us there.

Of course, you don’t need to go to a meeting. Change lanes by simply talking to people inside your company who are different than you, and by going to stores that are in a different commerce segment, and yet can often relevant lessons.

Remember. Lane changing can be game changing.

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Published on: February 5, 2019

by Kevin Coupe

TechCrunch has a story about how, while Amazon’s best-selling item during the recent quarter was its Alexa-powered Echo Dot, it didn’t make much money off the item. In fact, Amazon says it hasn’t priced the Dot to make money.

Instead, the story says, “Amazon sees Echos as another means of connecting with its customer base — its most avid, engaged customers, that is … While some reports have dismissed Echo devices’ potential for online shopping, Amazon appears to be playing the long game with regard to voice computing. With an Echo in the home, consumers are more likely to remain a Prime subscriber, streaming Prime music or audiobooks or — on its devices with a screen — watching Prime Video. As Amazon advances its e-commerce strategy with Whole Foods and Prime Now, it also sees Echo as a means of getting items to your door within an hour or two, simply by way of voice commands.”

Exactly.

We’ve been saying this here on MNB pretty much from the moment that the Alexa technology was introduced - that sure, you can get the time and weather and all sorts of other information and content from Amazon’s Alexa-powered devices, but they’re really there to make buying easier.

Same goes for Google Home. And Apple’s Siri and HomePod. It is all about creating ecosystems, and enabling behavior, and then locking people into their own habits. This is a race, no question about it.

Making a lot of money off each Dot sale is short-term thinking. Putting a Dot in every home in America is long-term thinking.

By the way, the Dot is just the tip of the iceberg. TechCrunch notes that in 2018, Amazon “saw more than 100 new products with Alexa built-in launched from third-party manufacturers, bringing the total up to more than 150. And Alexa works with more than 28,000 devices, like smart home devices and other hardware, from across 4,500 brands.”

By the way … I’m scheduled to participate in a session on this subject, entitled “Giving Voice To A New Consumer-Retailer Connection,” at the upcoming National Grocers Association (NGA) convention in San Diego. Sounds to me like it is pretty timely … and an Eye-Opener.

Published on: February 5, 2019

Good piece from Bloomberg about how some influential new brands with a direct-to-consumer business model are redefining the notion of “brand affinity,” putting a higher priority on creating a positive customer experience and creating trust - even love - than they are on making a short-term sale.

The story makes the point that one of the reasons that these brands are able to deliver on this part of their value proposition is their access to - and commitment to using - data: “The ability to instantly feed customer data back into a business model is perhaps the most critical change. ‘While these disrupter companies are obviously much smaller, they are advantaged in their ability to obtain and to use that first party data much, much more rapidly,’ said Randall Rothenberg, chief executive of the Interactive Advertising Bureau.”

Leading the way with this strategy are companies like Warby Parker, Casper, and Away - described as digital native brands “known for indulgent niche products at accessible prices.” And their approach is “forcing legacy companies to play catch up on yet another front … But they’ll have to move fast. Close to 7,000 physical stores were shut down by the end of 2017, according to research and advisory firm FGRT. In the same period, e-commerce builder Shopify Inc. powered over 600,000 online businesses, with 73 percent of purchasing traffic coming from mobile devices.”

Americus Reed, a marketing professor at the University of Pennsylvania’s Wharton School, tells Bloomberg, “Retailers in the physical space are going to have to provide something that is more experiential, that is going to draw people in to hang out and do stuff.”

Published on: February 5, 2019

Bloomberg reports that Flamingo, the direct-to-consumer hair removal and body-care brand for women created by Harry’s, which provided some significant disruption to the men’s shaving segment, now will be sold in Target stores around the country.

Flamingo was announced last fall, and its razors, wax strips, lotions and gels have been available online, but this is its first availability in a bricks-and-mortar location. The company has said that its online sales far exceeded expectations, and it actually ran out of some items because of high demand.

Bloomberg writes that the deal with Target “positions Flamingo as a direct threat to Procter & Gamble Co., which has sold Gillette Venus razors for women since 2001 and whose men’s shaving lines are facing new competition from the likes of Harry’s and Dollar Shave Club. And it’s a big sector: Each year, women spend $1.1 billion on razors and blades in the U.S., according to 2017 statistics from Euromonitor. Tack on $179 million for hair removers and bleaches, and $141 million in pre-shave products like lotions or foams, and you’re looking at a $1.4 billion women’s hair-removal market up for grabs.”

Published on: February 5, 2019

The Washington Post has a story about how former Toys R Us employees recently got together with a group of former Sears and Kmart employees - all of them “laid off as their companies plunged into bankruptcy and began liquidating stores” - to share “stories of losing their jobs, then their medical insurance, then their homes.”

But there’s also another item on the agenda, the Post writes: Late last year, “Toys R Us workers secured a $20 million fund from Bain Capital and Kohlberg Kravis Roberts — two of the firms that bought Toys R Us in a leveraged buyout more than a decade ago. One hundred percent of the fund is going directly to eligible employees … That $20 million falls well short of the $75 million that advocates say former workers are owed. But the fund is still considered rare among private-equity-backed companies that file for bankruptcy. And it could set a precedent for companies like Sears … Sears and Kmart workers are hoping that by mobilizing in the same ways Toys R Us workers did in 2018, they’ll be heard, too.”

The story notes that “the workers joined forces in New York through Organization United for Respect, a workers rights group. For months, OUR’s ‘Rise Up Retail’ campaign has connected former Toys R Us, Sears and Kmart employees over Facebook and social media. But this was the first time they could share memories and ask questions face to face. How much notice were you given before your store closed? How much longer do you have on unemployment? Were you nervous the first time you joined a rally?”

The story notes that as Sears Holdings and its chairman, Eddie Lampert, have closed stores and laid off employees, many of those workers have complained that they are not getting clear and definitive answers about their pension benefits. It remains to be seen whether the bankruptcy judge overseeing Sears’ affairs will allow Lampert to acquire what’s left of a hollowed out company, or bow to some credits’ demand that it be liquidated.

The Post notes that “as part of Lampert’s proposal, his hedge fund, ESL Investments, agreed to pay $43 million in severance obligations. Recently, the Pension Benefit Guaranty Corp., which often steps in for underfunded pension plans when companies can’t pay, said it would take over some of Sears’s defined-benefit pension plans covering 90,000 people.”

Published on: February 5, 2019

The New York Times this morning has a story about the increasingly bifurcated economy, in which the labor force is being cleaved in two:

“There is a small island of highly educated professionals making good wages at corporations like Intel or Boeing, which reap hundreds of thousands of dollars in profit per employee. That island sits in the middle of a sea of less educated workers who are stuck at businesses like hotels, restaurants and nursing homes that generate much smaller profits per employee and stay viable primarily by keeping wages low.”

The story uses the Phoenix market as an example of the premise:

“For all its success in drawing and nurturing firms on the technological frontier, Phoenix cannot escape the uncomfortable pattern taking shape across the American economy: Despite all its shiny new high-tech businesses, the vast majority of new jobs are in workaday service industries, like health care, hospitality, retail and building services, where pay is mediocre.

“The forecast of an America where robots do all the work while humans live off some yet-to-be-invented welfare program may be a Silicon Valley pipe dream. But automation is changing the nature of work, flushing workers without a college degree out of productive industries, like manufacturing and high-tech services, and into tasks with meager wages and no prospect for advancement.”

You can read the entire story here.

Published on: February 5, 2019

Amazon announced this morning that it has opened its fourth Amazon Go checkout-free store, and its tenth overall, in Chicago, at Illinois Center, located at 111 E Wacker Drive.

The 1,950 square foot store is about a mile from the closest Amazon Go store, and all four of the Chicago units are located within an approximately two mile radius.

The are four Go stores in Seattle, and two in San Francisco.

Published on: February 5, 2019

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

• More trouble for Instacart, as KIRO-TV News reports that “workers behind Instacart, the grocery delivery company and app, say they’re getting punished for getting a tip. People who shop and deliver for the app say the higher the tip, the less wage they make – and that the company is using customers’ tips to subsidize wages.”

Instacart denies the charges, saying that it remains “committed to ensuring competitive earnings for our shoppers, which are on average well over the local minimum wage.”

Yesterday, MNB took note of a New York Post report about how “a small army” of Instacart employees has taken to social media “demanding better pay and treatment by the $7.6 billion unicorn, which has raised nearly $2 billion over the past seven years largely on the promise that it gives grocers a fighting chance to compete with Amazon.”

I repeat my comment from yesterday … whatever the facts of the situation, these disgruntled workers are out there representing retailers that have contracts with Instacart, and that are depending on these workers to be an important part of the shopper experience. Sounds a little risky to me…

Published on: February 5, 2019

• India Today reports that new rules in India regarding foreign direct investment (FDI) that have put restrictions on planned expansion by Amazon and Walmart could lead to a Walmart decision to “back out of its merger with Indian e-commerce giant Flipkart.”

That’s the assessment from investment bank Morgan Stanley, which says that “an exit is likely, not completely out of the question, with the Indian e-commerce market becoming more complicated.”

The story notes that “implemented from February 1, the new FDI rules bar online marketplaces with foreign investments from selling products from sellers in which the online marketplaces hold a stake. The new FDI rules also ban exclusive marketing arrangements … The new FDI regulations are expected to heavily impact Flipkart as the e-commerce giant may have to remove up to 25 per cent of its products from its site. The biggest effect will be on the smartphone and electronic inventory of the website, a high earning segment for the website, due to the government targeting exclusive deals.”

Walmart tells India Today, however, that it remains “optimistic about the e-commerce opportunity in India given the size of the market, the low penetration of e-commerce in the retail channel and the pace at which it is growing.”

Published on: February 5, 2019

• Fashion retailer Charlotte Russe has filed for Chapter 11 bankruptcy protection, saying that it plans to close some 94 of its more than 500 stores, and will seek a sale of the company. However, according to the USA Today story, management says that “the chain plans to completely liquidate if it can't find a buyer by Feb. 17.”

The story notes that “the bankruptcy marks the latest in a series of similar cases among mall retailers that have been unable to identify a sustainable path amid declining foot traffic and intense digital competition.”

Published on: February 5, 2019

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

• The Seattle Times reports that Amazon has named Rosalind G. Brewer, the former Walmart executive who currently is Starbucks COO, to its board of directors.

The story notes that Brewer, who was identified as “one of the most powerful women in business” last year by Fortune, “was appointed to Amazon’s leadership development and compensation committee.”

This makes sense for lots of reasons - can you think of two companies that have redefined retail and a single city - Seattle - more than Amazon and Starbucks? And, this increases to four the number of women on Amazon’s 10-person board (she replaces a man) … and that is a step in the right direction. But I have to admit I was surprised that, as the Times reports, “Brewer is the second African-American woman selected for Amazon’s board. Myrtle Potter, a pharmaceuticals executive, was on the company’s board from 2004 to 2009.”


• Jeff Stephens, who began working for Publix Super Markets 38 years ago as a rail dock associate, and now is the company’s vice president of manufacturing, has announced his retirement, effective May 1.

Published on: February 5, 2019

Ron Joyce, who was instrumental in the growth of an iconic Canadian retail business, has passed away at age 88. Joyce was a high school dropout and former policeman who bought a single shop in a fledgling doughnut chain started by hockey great Tim Horton. Then in 1967, he became Horton’s partner …eventually turning Tim Horton’s into a chain of more than 1,000 stores before it was sold to Wendy’s. Joyce, a billionaire, was known in Canada as someone who never forgot his impoverished beginnings, and who was a philanthropist with wide interests and concerns.

Published on: February 5, 2019

…will return.