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    Published on: February 7, 2019


    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, and I want to follow up this morning on the FaceTime commentary I did two weeks ago, bemoaning the fact that some colleges seem to be getting rid of humanities courses and majors in favor of a focus on STEM subjects that a) people seem to want and b) people seem more willing to pay for.

    I thought it was short-sighted then, and I think that even more right now.

    There was an interesting piece in the Wall Street Journal the other day about a new study from the labor market analytics firm Burning Glass Technologies suggesting that while the left brain “is popularly associated with logic and analytic thought; the right, with intuition and creativity,” one has to be careful about putting too much emphasis on one over the other.

    That’s because, the survey says, “many of the good jobs of the future … will require being good at using both sides of the brain.

    According to the story, “To some extent, that future is already here. Jobs that tap both technical and creative thinking include mobile-app developers and bioinformaticians, and represent some of the fastest-growing and highest-paying occupations.”

    The term for just employment is “hybrid jobs,” and the Journal suggests that their growth is twice that of traditional employment. And they pay better.

    What Burning Glass found is that “many employers want workers with experience in such new capabilities as big-data gathering and analytics, or design using digital technology. Such roles often require not only familiarity with advanced computer programs but also creative minds to make use of all the data.” And they found that many employers will be better off if they offer existing the employees the ability to have the side of their brain that is being less used further educated so that they can live up to the new demands of the economy.

    What this means, I think, is that schools aren’t doing anyone any favors when they focus on science and math-based programs and give less emphasis to the humanities, which is where a lot of creativity is encouraged.

    I love the line from Pablo Picasso: “The purpose of art is washing the dust of daily life off our souls.” I take it seriously, and I even think about it when I choose stories for MNB. I am dismayed when I hear about schools that do not invest in them, or make them less important than science or (heaven help us!) football.

    There’s a lot of dust out there, sometimes so much that it obscures vision and inhibits heart. To be more effective, more relevant and resonant, we have to do our best to wash it off our souls.

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


    KC's View:

    Published on: February 7, 2019

    by Kevin Coupe

    Amazon will deliver to you at your home. Amazon will deliver to you at your workplace. Amazon will deliver to you at any of its locker installations. And Amazon even will, in certain cases, deliver to your car.

    But now, it has patented a new system for delivering someplace else.

    The bus.

    That’s right. The Star Tribune reports that “Amazon last week received a patent for transforming public buses into mobile delivery stations. Customers would simply meet the bus at a convenient stop, and pick up their items from a removable delivery module attached to the vehicle.”

    The patent application notes that “some customers may not live or work near pickup locations, or may otherwise not want to take the time to travel to one. In addition, some customers may live and work in regions where there are few or no carriers for delivering packages, thus complicating the delivery of items to any destinations near the customer.” Hence, the development of a delivery system that would use public transportation systems to go to them.

    The Star Tribune writes that “Amazon’s patent does not specify any financial arrangements that might be associated with fastening its delivery modules to buses, but it would clearly have to pay to do so.” Such arrangements could provide a financial lifeline to public transportation systems that, from some reports, have been losing riders to ride sharing systems such as Uber and Lyft.

    Now, let’s be clear. Amazon has a ton of patents, and not all of them have found their way into actual use, at least not yet.

    But this Eye-Opener demonstrates how the company thinks, and what is possible.

    Could you, would you on a bus?
    We will, we will, without a fuss.
    In the end, its all about trust,
    And, Amazon says, it is all about us.

    KC's View:

    Published on: February 7, 2019

    Delivery service Instacart, facing a class action lawsuit alleging that the company “intentionally and maliciously misappropriated gratuities” in order to pay employee wages despite its assurances to the contrary, yesterday tried to stanch the public relations bleeding.

    It gave its shoppers a raise.

    The company said that from now on, it will pay shoppers a minimum of $7 to $10 for full-service orders and a minimum of $5 for delivery-only orders. In addition, the company said, “Tips should always be separate from Instacart’s contribution to shopper compensation … All batches will have a higher guaranteed compensation floor for shoppers, paid for by Instacart … Instacart will retroactively compensate shoppers when tips were included in minimums.”

    In a blog posting, Instacart CEO Apoorva Mehta wrote, “After launching our new earnings structure this past October, we noticed that there were small batches where shoppers weren’t earning enough for their time. To help with this, we instituted a $10 floor on earnings, inclusive of tips, for all batches. This meant that when Instacart’s payment and the customer tip at checkout was below $10, Instacart supplemented the difference. While our intention was to increase the guaranteed payment for small orders, we understand that the inclusion of tips as a part of this guarantee was misguided. We apologize for taking this approach.”

    TechCrunch writes that “in addition to the lawsuit, workers have taken to Reddit and other online forums to speak out against Instacart’s paying practices. Since introducing a new payments structure in October, which includes things like payments per mile, quality bonuses and customer tips, workers have said the pay has gotten worse - far below minimum wage. In one case, Instacart paid a worker just 80 cents for over an hour of work. Instacart has since said it was a glitch - caused by the fact that the customer tipped $10 - and has introduced a new minimum payment for orders.”

    In its coverage, the New York Times suggested that “the gig economy’s work force is fighting back, and in some cases, it’s winning.”

    And, the Times put the Instacart situation in a broader context:

    “The victory at Instacart, which will ultimately affect thousands of workers, is just the latest in a string of successful pressure campaigns by workers for gig economy platforms. Drivers for Uber and Lyft in New York successfully agitated for a citywide minimum wage that went into effect this week. Postmates, another high-flying start-up, recently settled a class-action suit with thousands of delivery workers who contested the way the company classified them as contract workers.

    “It’s no secret that many modern gig workers exist in a state of permanent precarity, with few legal protections, unstable working conditions and pay that varies based on who’s flush with venture capital money that week. Most gig economy workers are still classified as contract workers, meaning that they aren’t covered by federal minimum wage laws and other labor protections.

    “Still, by organizing en masse and expressing vocal opposition to exploitative policies, they have managed to wring some concessions out of the billion-dollar corporations whose labor they provide.”

    Instacart CEO Mehta, in his blog posting, tried to put the controversy to rest: “I want to thank you for your feedback,” he wrote. “It’s our responsibility to change course quickly when we realize we’re on the wrong path and we believe today’s changes are a step in the right direction.”
    KC's View:
    If Instacart has been persistently deceptive about this, what else have they been deceptive about?

    Like maybe the whole notion that it is serving retailers‘ best interests?

    I think the Times observations point to a specific financial reality - as startup companies evolve and grow and continue to seek venture capital, they are looking for any possible advantage that will make their numbers look good, and therefore more attractive to potential investors. This can mean a short-term focus that is not necessarily sustainable, and does not serve all the stakeholders in a business.

    That’s strikes me as the case with Instacart. It has a model that makes sense short-term for retailers, because it enables them to get into the e-commerce business quickly and efficiently … in the same way that when Priceline many years ago tried to market a “name your own price for groceries” system that some retailers (Kroger included!) thought could serve as an e-commerce solution. But it is not a long-term solution, because, like the Priceline offering, it erodes a retailer’s value proposition over time.

    Here’s the deal. Startup businesses like Instacart can address this by focusing less on their own branding and economic needs, and more on their customers. It might take longer to get traction, but in the end, I think that focusing on customer needs is the best prescription for success.

    Published on: February 7, 2019

    Kroger and Home Chef said yesterday that they will expand their in-store meal kit offerings to new cities, “bringing the weekly rotating meal solution to 500 additional Kroger Family of Stores across the country.”

    In addition, the companies said, Home Chef “has launched a customizable meal kit feature for online orders, allowing customers to have more flexibility in deciding what’s for dinner by providing the choice to change and upgrade recipe ingredients.”

    Kroger introduced Home Chef retail meal kits into its stores last October, and now will have more than 700 stores offering the option.
    KC's View:
    It seems pretty clear at this point that the meal kit business has been new life with the addition of traditional retail to the mix … it is a concept that has a lot of relevance to people, and actually adds relevance to the retailers that offer them. The ability to tie into these businesses, while also customizing the offerings, makes a lot of sense.

    Published on: February 7, 2019

    The Chicago Tribune reports that sandwich chain Panera is closing the last of the locations where it was testing a pay-what-you can model. The units have been operating in Chicago; Clayton, Mo.; Portland, Ore.; and Dearborn, Mich., and Boston.

    The story notes that “the original idea was to allow customers to give a suggested donation for their food in a bid to raise awareness about hunger across the U.S. The funds collected were supposed to cover the store's operating costs while also paying for those who couldn't afford their food.” However, the company found that the concept simply was not sustainable.

    According to the Tribune, “The JAB Holding Co.-owned chain said that those who couldn't afford their food, including homeless patrons, were supposed to eat in-store. That was intended to create a feeling of community, but it also highlighted the tensions that arise when private businesses try to be welcoming for everyone.”
    KC's View:
    Too bad … it was an idea that captured the imagination, even if it wasn’t workable in real life. It calls to mind the line from Nelson Mandela, that “a Nation should not be judged by how it treats its highest citizens, but it's lowest ones.”

    Good for Panera taking a shot.

    Published on: February 7, 2019

    MediaPost reports that Amazon has “quietly launched Amazon Cash, a service that allows consumers to purchase products on Amazon without having to use a debit or credit card … There will be two different ways to add cash to an Amazon account. At participating stores, shoppers can either scan their barcode at the cashier or kiosk or use their mobile number to identify their Amazon account, then add cash.”

    The move, the story says, is designed to appeal to the 32.6 million households in the U.S. that either don’t use banking services or make limited use of them; the story also suggests that this is an effort by Amazon to appeal more to “African-American and Hispanic consumers, who just so happen to be the most likely ethnic groups to be unbanked, according to an FDIC study.

    “Several factors impact this disparity, including lower average household incomes as well as a distrust of financial institutions. Amazon’s message to these consumer groups, however, is loud and clear: ‘being unbanked or underbanked should not be a barrier to using our service’.”

    Bricks-and-mortar chains participating in the Amazon Cash program include CVS, GameStop, and 7-Eleven.
    KC's View:
    The move by Amazon to better serve the unbanked and under-banked is just part of its broader competition with Walmart, which always has had a strong connection to that part of the community.

    Published on: February 7, 2019

    The Motley Fool has a piece about how Costco seems to continue to believe that launching its own free video streaming service “could build additional value into its warehouse club membership.” Such a plan appears to still be “on the drawing board for Costco,” but Motley Fool is unimpressed, saying that “Costco investors would be better off if it shelved its plans … There's nothing Costco can bring to the table that will improve upon what's already in the marketplace, but it can damage its own finances by doing so.”

    Here’s the analysis: “There is certainly no shortage of streaming outlets to choose from. Beyond Amazon.com and Netflix, consumers can also select services from Roku, Hulu, SlingTV, and YouTube TV. And more will be coming soon. Disney is launching Disney+ this year;  AT&T, Comcast, and Apple are considering their own services; and Elon Musk even has dreams of streaming from space. Discovery also keeps teasing one.”

    Beyond that, Walmart - recognizing reality - recently decided against launching one that would exist in tandem with its existing Vudu service.
    KC's View:
    One of the observations that Motley Fool makes about the streaming business is that providers such as Amazon and Netflix have differentiated themselves not by streaming other people’s movies, but by producing and acquiring content that nobody else has … it is with originals that they attract customers.

    Unless companies such as Walmart and Costco want to get into that business, the upside may be limited.

    Short of that, you have to have a strong and direct pipeline to a context provider. One example, Disney, which said this week that when its still-to-be released Captain Marvel eventually is available for home viewing, it will only be available on Disney+, and not on Netflix. (Captain Marvel is expected to be an enormous blockbuster, so this is a big deal … and a line drawn in the sand.)

    This is all going to force a lot of home viewers to make choices … and I guarantee it’ll annoy a lot of people. Will that mean a shakeout at some point? Maybe. But it also suggests that pipelines may et a lot more narrow, which will create some challenges for new players in the streaming business.

    Published on: February 7, 2019

    • Forget pop-up stores. Walmart now seems to be investing in pop-out stores.

    CNN has a story about how Walmart is creating a rolling showroom that serves as a mini-store from which it can demonstrate its online mattress and bedding brand, Allswell. “Beginning in New York,” the story says, “Allswell will head to major cities to introduce the brand to new customers and gain their feedback.”

    The move by Walmart is seen as a sign that “a physical presence remains a key retail component for online brands,” and follows in the footsteps of similar brands, such as Casper and Tuft & Needle, that also are investing in bricks-and-mortar operations as a supplement to their e-commerce businesses.

    The tiny home on wheels is “a four-room, 238-square-foot showroom. It has a living room, bathroom, bedroom, and kitchen area that customers can explore and shop.”

    Allswell is a homegrown digital brand for Walmart, introduced a year ago and until now “only sold through its own website, Walmart's main site, and on Jet and Hayneedle.”
    KC's View:

    Published on: February 7, 2019

    • The Cincinnati Business Courier reports that Kroger “is offering up to $1 million in grants for ideas that will help it achieve its mission to prevent food waste.” It made the commitment while launching its Zero Hunger | Zero Waste Innovation Fund, which is designed to “eliminate hunger in the communities it serves by 2025 and to eliminate waste across the company, including food waste.”

    According to the story, “Kroger will award grants from $25,000 to $250,000 per project in this first open call for ideas. Applicants are required to submit a letter of intent by March 4 detailing their ideas and solutions to prevent food waste.”

    “Achieving Zero Hunger | Zero Waste requires creative ideas and scalable solutions to disrupt the food system as we know it,” says Jessica Adelman, Kroger’s group vice president of corporate affairs.


    • The Philadelphia Inquirer reports that Ahold Delhaize-owned Giant Food Stores, which has just opened its first urban format, Giant Heirloom Market, in Philadelphia, has announced plans for three more such stores in the city - in the University City, Northern Liberties, and Queen Village neighborhoods.

    Company president Nicholas Bertram tells the Inquirer that “while the new stores will include many of the successful products featured at the recently opened 2303 Bainbridge St. location, they will also adapt to each neighborhood … The University City location, for example, will have more grab-and-go meals and breakfast options, and intends to accept the Drexel University and University of Pennsylvania student cards, the DragonCard and PennCard, as payment.”

    “It proves that we are serious about serving Philadelphians. We’ve already got a strong e-commerce business, we love our store on Grant Avenue [in the Northeast], and we love our business in the suburbs,” Bertram says, noting that with the Heirloom Market format, “we’re flexing our innovative muscles a bit more than we have in the past.”


    Reuters reports that JC Penney will “stop selling major appliances, including fridges and washing machines, and revamp the layout of its stores in a bid to focus on apparel to boost profits. The company also plans to largely halt selling furniture, which will now only be available in select stores in Puerto Rico and on J.C. Penney websites.”

    “"Optimizing the allocation of store space will enable us to prioritize and focus on the company's legacy strengths in apparel and soft home furnishings, which represent higher margin opportunities," the company said in a statement.


    • The Associated Press reports that a new outdoors-oriented online retailer, Highby Outdoors, has been launched by former employees of Cabela’s, which was acquired by Bass Pro Shops for $4 billion in 2017.

    According to the story, “Highby Outdoors is owned by former Cabela's employees Matt and Molly Highby, and he says all of the company's employees formerly worked for Cabela's. The new company will sell online only for now but hopes to later add retail locations and catalog operations.”

    Bass Pro Shops is suing the Highbys, “alleging their plans for Highby Outdoors violated noncompete agreements. Bass Pro lost its bid for an injunction to stop the Highby Outdoors launch.”


    • The New York Times reports that the city of Key West, Florida, “voted this week to ban the sale of sunscreen containing chemicals believed to harm coral reefs,” a move that “will ban sales of sunscreens containing the chemicals oxybenzone and octinoxate. The legislation will go into effect on Jan. 1, 2021.”

    According to the story, “The law’s supporters see it as a crucial step toward protecting the great treasure of the Florida Keys: the world’s third-largest barrier reef ecosystem, which runs nearly 150 miles, hosts thousands of species of marine life, and attracts divers and snorkelers from around the globe.”

    Similar bans have also been enacted in Hawaii and the Western Pacific nation of Palau, as well as certain parts of Mexico.
    KC's View:

    Published on: February 7, 2019

    • SpartanNash announced that it has hired Lori Raya, formerly of Albertsons/Safeway, to be its new Chief Merchandising and Marketing Officer, effective February 18.

    Raya comes to SpartanNash after more than three decades with Albertsons/Safeway, most recently serving as Division President of Albertsons from 2015-2018, and before that serving as Division President of Vons.

    Raya will be assuming the CMMO position from Larry Pierce who will be retiring.
    KC's View:

    Published on: February 7, 2019

    From MNB reader Dan Jones, regarding Instacart’s recent troubles:

    I understand why grocers leverage Instacart.  And I also understand the risks of losing that connection.  Here is a simple thought – if an Instacart employee gets a tip for delivering products from “Retailer A” Retailer A should match that tip.  That would ensure a focus on the service in the last mile, and set the retailer apart for the disgruntled Instacart employees. 
     
    It might take some negotiation regarding current contracts – but worth the effort.


    Not a bad idea. Not what Instacart did, but this could be a nice addition.



    Regarding one particular part of Amazon’s business model, MNB reader David Fowle wrote:

    I have to wonder.... Amazon's push for replenishment shopping could be a huge win for them, and not so much for consumers... Hit the button when you need more laundry detergent, and you get another box of whatever you normally buy, but if a comparable brand is on sale, too bad you missed it. 

    As a shopper, I like trying products that are on sale (which Alexa won't tell me about), and stocking up when my favorites are on promotion (which currently helps Jeff Bezos' profit margin). I'm sure not going to buy produce online - I like to know that the avocado I'm buying is going to be perfect for tomorrow's guacamole. 

    I am a Prime member, and use Amazon often for many items not easily available locally, but I doubt grocery shopping will ever be primarily online for me…




    And, from another MNB reader, who wanted to follow up on his email yesterday saying that he was unimpressed with one of the Amazon Go stores in Chicago:

    OK, so I’m admitting to being somewhat of an idiot because I didn’t really see what went on and passed judgement.

    So, I felt guilty forming an opinion without more observation and today I stopped at a railing across from the AmazonGo store, and watched what happened when a train came in. Sure enough, the hordes swarmed out onto the mezzanine and past AmazonGo. It wasn’t a huge crowd, maybe because of the ice storm, but I’d guess it was still 3 – 4 hundred.

    8 people went in. Yes, Stealth Shopping . . . grab your stuff and split. Just as anticipated.

    So there, Mr. Bezos, it does work! I see it’s appeal.

    If it were a ubiquitous 7-11, you’d have to wait for checkout, and I suppose if you were the 8th person, you’d have to wait maybe 4 or 5 minutes.

    Is that worth it? Is that what the buzz is about?

    Or is it their stuff? I haven’t been in, but it sure looks like the same stuff everybody else carries.

    Price maybe?

    Does it just boil down to something else you can do with a phone?

    I don’t know. I don’t get it.

    OK, I guess I’m just old.

    KC's View: