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    Published on: February 19, 2019

    by Michael Sansolo

    The sad truth is that not everything in business is wonderful and not every day is a sunny day. Frequently there are all manner of problems and many are beyond any one company’s control.

    The corollary to that sad truth is for the most part shoppers don’t really care about your problems because they have enough of their own. Yes, you may be out of a specific item because of a food safety issue or a water shortage at a farm thousands of miles away and far out of your control, but the only place they can assign blame is at the very display that is suddenly empty. It isn’t fair, but that’s the way it is.

    Recently I got an unusual note from the medical practice my wife and I have been using for more than 20 years. The note - actually, an e-mail - informed us that the practice would start routinely charging patients $50 to deal with assorted costs. It was direct, nicely worded and completely impossible to understand.

    It was hardly surprising when just a few days later we received another e-mail announcing that the previous policy was being rethought thanks to significant blowback from patients. The second e-mail would have gone better by simply referencing an old “Saturday Night Live” routine and just saying, “never mind.”

    But here’s the thing. I know we live in the real world and I know that the medical practice would have gotten complaints and bad feedback over this policy no matter how they worded the first e-mail. However, I have to believe things would have gone a whole lot better had they actually tried to explain the new charge.

    They could have easily blamed the incredible paperwork involved in medical insurance, the rising costs of labor, rent or especially malpractice insurance or even the cost of bringing state of the art equipment into the practice. In nearly all of those cases I would have been irritated by the new charge, but I would have understood why it was being levied and I might have even supported it.

    But instead they said almost nothing and the negative reaction was loud and quite well deserved.

    I think there’s a lesson in that for all of us. We live in a world of non-stop communication both true and phony, which means that more than ever we need to make sure we advance our own messages and do so with credibility and clarity. It isn’t always easy and some messages - whether on price increases or product availability - won’t always be welcome. But anything beats silence and the confusion that silence leaves.

    For example, I have been in many stores that have taken interesting environmental steps such as using freezer and refrigerator cases that go dark when no shoppers are nearby. It’s interesting that some stores post signs on the cases explaining how the cases work and why they are important. It’s a small bit of communication that may turn a shopper into a supporter.

    Increasingly we see shopper concerns about plastics and it is interesting to see restaurants posting signs that they no longer give straws or lids unless asked and they explain the reason. Yet again, communication makes the point.

    Lastly, as a shopper and fan of Wegmans I am always impressed at the signage in my store and how it explains the absence or poor quality of a product, connecting folks in my suburban area back to the real life issues on the farm. It probably doesn’t change our behavior at all, but it gives us an explanation and frequently turns disappointment over the lack of a product into understanding.

    Again, the reality is that there is always bad news and always some problem that might result in a disappointed shopper. So let’s talk to them and explain it rather than suffer, as the classic movie Cool Hand Luke reminds us, “a failure to communicate.”

    Michael Sansolo can be reached via email at . 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.
    KC's View:

    Published on: February 19, 2019

    by Kevin Coupe

    USA Today reports this morning that Swiss technology company Scandit is coming to the US with technology that will allow you to “use your smartphone to scan a grocery store shelf and pinpoint items that specifically meet your dietary needs.”

    According to the story, shoppers at some supermarkets - the companies are not identified, but Scandit says they are expected to offer the feature before the end of the year - “will be able to narrow down what they're looking for in an app similar to how they filter products when buying and browsing online.

    “Retailers can decide what types of information they want to offer. When customers open the store app, they will see different categories – such as lactose or nut free – and can click on what they’re interested in.

    “Then, when they aim their smartphones at a grocery case, icons will pop up on the device’s screen, hovering over items that meet their dietary requirements.”

    In my view, supermarkets ought to embrace this option, and make available every piece of information available … because we live in a world where transparency has enormous value to shoppers, which means it ought to be a high priority for marketers.

    This, in my view, is a great example of going beyond being a simple source of product, and becoming a resource of information for shoppers.

    It is the kind of Eye-Opener that can change people’s perceptions, and maybe even their lives.
    KC's View:

    Published on: February 19, 2019

    Supermarket co-op Allegiance Retail Services has announced that it plans to open a new 49,000 square foot Pathmark store - a brand that it bought out of A&P’s bankruptcy in 2015 - in central Brooklyn sometime in the next two months. The store is being defined as being consistent with Pathmark’s historical image as value-driven, and the company says it will “assess the response to this first unit … before announcing any additional new or retro-fitted existing units.”  

    The announcement says that “after the purchase of the Pathmark name, Allegiance Retail Services began a brand review and market analysis, then developed a business plan and refined the format's operating principles. Additionally, Allegiance set-up rigorous guidelines related to a 'go-to-market' operating strategy, physical requirements, and the experience needed to potentially be designated as a Pathmark operator.    Some of the physical requirements associated with the Pathmark format include a store measuring at least 30,000 selling square feet; a full parking lot with easy ingress / egress; and a local consumer-base which aligns with the profile associated with Pathmark's past success … that profile being a disproportionate number of area residents who are millennial families with one or more children, who demand wide variety, strong promotions, everyday values and ingredient-based products.”
    KC's View:
    First of all, a quick question - aren’t the vast majority of items sold in a supermarket ‘ingredient-based?’ If the point here is that Pathmark is going to be food-centric, especially fresh food-centric, then there has to be a better way to tell that story that using a clinical, dispassionate construction like ‘ingredient-based.’

    Second … I am not yet persuaded that Pathmark has all the value as a retail brand that Allegiance seems to believe it has, largely because I tend to believe that those marvelous marketers at A&P pretty much destroyed its brand equity before the whole business went down the bankruptcy drain.

    When I was younger, I can remember retail experts explaining to me that it can take years - not to mention enormous discipline - to develop a value-oriented image, and about five minutes to lose it … and they’d almost always cite Pathmark as an example of a company that lost its way and violated core principles in search of just a little more profit.

    I’m not saying I can’t be persuaded. I like to think of myself as an open-minded guy. But I’m not yet entirely sure that it would not have been a better idea to look to the future for a branding identity, rather than to the past.

    Published on: February 19, 2019

    The Philadelphia Inquirer reports that Amazon is fighting back against a proposal there that would essentially ban checkout-free stores; the proposal actually is designed to prevent retailers from opening stores that do not accept cash, on the premise that “cashless stores effectively discriminate against poor consumers who do not have access to credit or bank accounts, especially in a city with one of the highest levels of poverty in the country.”

    According to the story, Amazon has reached out to local officials to say that if the city passed such an ordinance, it would impede its ability to open Amazon Go stores there - though, to be clear, it has yet to announce such plans.

    The Inquirer notes that Amazon is not the only target of the proposal: “As technology gives consumers more ways to pay, including through smartphones, some stores have gone cashless to improve efficiency, avoid handling cash, and reduce the risk of robbery. In Philadelphia, that includes the salad chain Sweetgreen, coffee shop Bluestone Lane, and locations at Franklin’s Table, a food hall at the University of Pennsylvania.”

    The bill has been passed by the city’s legislature, and now has been sent to Mayor Jim Kenney’s office for a signature or veto.
    KC's View:
    I’m not sure you can legislate this way, but not every store serves the same population. I remember that when I went to a Starbucks in Seattle that didn’t take cash, the barista told me that nobody ever used cash anyway, so it wasn’t an issue. But I can imagine that there are a lot of places where not taking cash would create a lot of problems.

    If a store doesn’t take cash in a neighborhood where such an approach doesn’t work, then won’t the end result be that people will go to stores that do take cash? Isn’t the offending store the ultimate loser?

    Published on: February 19, 2019

    Interesting piece in the Washington Post that looks at a study from the Institute for Self-Reliance, a nonprofit advocacy group, arguing that dollar stores - which have “gained attention as success stories in the country’s most economically distressed places” - in fact are more hurtful than helpful when it comes to helping residents deal with poverty.

    Here’s how the story frames the issue:

    “In cities, dollar stores trade in economic despair, with many residents saying they are a vital source of cheap staples. But as the stores cluster in low-income neighborhoods, some residents worry the stores deter other business, especially in neighborhoods without grocers or options for healthful food. The Institute for Self-Reliance, a nonprofit advocacy group, argued in a December report exploring the effect of dollar stores in Tulsa that ‘there’s growing evidence that these stores are not merely a byproduct of economic distress. They’re a cause of it.’ Dollar stores rarely sell fresh produce or meats, but they can undercut grocery stores on prices of everyday items, often pushing them out of business.”

    The dollar store format “‘creates an overall sense of the neighborhood being run-down,’ said Stacy Mitchell, the co director of the Institute for Local Self-Reliance. ‘It’s a recipe for locking in poverty rather than alleviating it.’
    Grocery stores run on thin profit margins — usually between 1 and 3 percent. And they employ more workers than dollar stores to keep perishable food stocked.”

    The response to this sense is that some cities - like Tulsa, Oklahoma, and Mesquite, Texas - are developing legislation that will prevent or inhibit the expansion of these kinds of stores in specific neighborhoods, with a greater emphasis on finding ways to attract grocery stores that will sell fresh, healthier food.
    KC's View:
    It probably isn’t fair to say that dollar stores cause poverty; they are a response to it, not an instigator. But it may be entirely fair to say that in their choice of products, they may not being doing people suffering from economic distress any favors.

    If indeed, as as happened, a growing awareness of this issue means that some dollar stores are acting to have items such as “grapes, apples, avocados, potatoes sandwiched between bags of fried pork skins and cases of Michelob Ultra,” then that’s a good thing. Serving a community ought to mean more than just profiting off its lack of good luck and marketing to the lowest common denominator.

    Published on: February 19, 2019

    Technology columnist Kara Swisher of the New York Times had an excellent piece the other day about Amazon’s decision to not build part of its HQ2 project in New York City because of local opposition.

    Swisher writes that this move is “yet another indication that the dulcet attractions of tech have lost their charm for many and that the business - which has been this country’s most innovative and promising and often its most inspirational - is just that: a business, like any other, out for itself and itself alone, and most definitely not changing the world for the better.

    “That was the cry of tech from its start - especially of the internet types like the Amazon head, Jeff Bezos. Bankers never said they were going to make the world a better place. Nor did makers of toilet paper or potato chips. Maybe soda makers like Coca-Cola said it in their ads, but we were all in on the joke when they told us that sugar water would bring the world together.
    But Silicon Valley truly believed its own myths - that tech leaders had arrived from the mountaintop to deliver the gleaming devices and magical software that would transform humanity, and that they would never be evil.”

    It is a really good column, pointing out what we can - and cannot - expect from major technology companies, and you can read it here.
    KC's View:

    Published on: February 19, 2019

    TechCrunch reports that Amazon has announced a new environmental policy, which, it says, commits the company to “reducing its carbon footprint. The company says it aims to reach 50 percent of all Amazon shipments with net zero carbon by 2030.”

    The new commitment is called “Shipment Zero,” and the story notes that there aren’t many details available beyond the broadly stated goals.

    However, the story also notes that in some ways, the announcement of the policy seemed timed to blunt criticisms it might’ve received as a result of a new Greenpeace report suggesting that Amazon has failed to deliver on previous environment-oriented goals; the new Greenpeace reports says that “Amazon’s data centers in Virginia are powered by only 12 percent renewable energy, compared with Facebook’s 37 percent and Microsoft’s 34 percent.”

    Amazon responded directly to the Greenpeace by saying that its data was inaccurate and that it “has a long-term goal to power our global infrastructure using 100 percent renewable energy, and we are making solid progress.”

    CNBC has a story about how there seems to be a consensus among analysts that Amazon is on pace to become a significant “player in the logistics and shipping industry” - it recently expanded its Amazon Air “to include 50 planes and several new regional hubs, including a $1.5 billion hub opening in northern Kentucky in 2021,” and now may be handling its “own shipping for 26 percent of online orders.”

    The reason this makes sense: “Amazon's shipping costs jumped 23 percent last quarter, reaching a record $9 billion. It spent $27 billion on shipping in 2018. The more of these steps Amazon can control itself, the more it can control the costs.”

    TechCrunch reports that Amazon has “secured some retail space in the heart of London, and the speculation is that it could end up being its first non-US checkout-free Amazon Go store.

    The story notes that “there are now 10 Amazon Go stores in the U.S. — four in Seattle, four in Chicago and two in San Francisco. Based on this pattern, the company doesn’t want to spread itself too thin. When Amazon decides on a city, the company launches multiple Amazon Go stores. Let’s see if the same thing happens in London.”
    KC's View:

    Published on: February 19, 2019

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

    • Walmart-owned Jet has announced a new alliance with the Fulton Fish Market that will bring same-day delivery of seafood to its New York City customers.

    Seafood Source points out that Jet “is the only major online retailer to provide same-day delivery of fresh seafood from Fulton Fish Market, which is the largest fish market in the country … For now, is supplying 24 different fresh SKUs to Jet’s New York City customers as part of the online retailer’s Jet City Grocery program, launched last fall.”

    Big fan of the Fulton Fish Market, especially as its CEO, Mike Spindler, has made a strong case for how it now defines itself as “an information Tech company that STARTS with the information,” which I think puts itself at odds with a seafood industry that often is purposefully opaque, creating big questions about authenticity and sustainability. Smart move for Jet.

    Bloomberg has a story about why, despite all the bad publicity received by American Media Inc. (AMI) - including a cooperation agreement with federal prosecutors related to hush money it paid to a woman who claimed to have had an affair with Donald Trump, as well as a public spat with Amazon founder/CEO Jeff Bezos over coverage of his divorce and what he has called an extortion attempt related to racy photos - it is likely that Walmart will resist calls from some quarters to remove the publication from its front end racks.

    It actually is pretty simple - Walmart represents 23 percent of the Enquirer’s sales … While magazine sales at supermarket checkouts have plummeted in recent years - part of the broader decline wrought by digital media - Walmart still makes money pushing gossip titles, which depend heavily on single-copy sales at retail newsstands.”

    “Walmart is loath to remove the Enquirer, which at $4.99 an issue is a buck less expensive than rival celebrity magazine People, and so more appealing to penny-pinching shoppers,” the story says. “AMI also works closely with Walmart to avoid upsetting the retailer with the Enquirer’s racy coverage.”

    The idea that the Enquirer may be publishing racy and intimate photos of Walmart’s biggest competitor is, I’m sure, just gravy.
    KC's View:

    Published on: February 19, 2019

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

    • Kroger has announced a new partnership with Texas-based MarkeTouch Media on a new plan called MedSync that “leverages a central call center and 2,200 Kroger Family of Pharmacies locations to enroll patients and support pharmacy associates” and then “allows patients to refill multiple prescriptions on a single, convenient date.”

    MedSync, the two companies say, “is proven to increase a patient’s medication adherence, health outcomes and improves their pharmacy experience … The new approach and service have led to higher pharmacist-patient consultation rates and increased patient exposure to other important clinical services such as immunizations, health screenings, and medication therapy management.”

    • The New York Times this morning reports that Payless ShoeSource, “a once-popular seller of inexpensive women’s footwear and a staple in many suburban shopping malls, is closing all of its American stores.” The company also is closing down its e-commerce site.

    The story says that “the retailer, which filed for bankruptcy two years ago, had already closed hundreds of stores in recent years as its brand lost luster among women searching for deals on shoes. It is the latest mass-market retailer to vanish from the retail landscape.” And, the Times suggests, its liquidation “is another example of how bankruptcy has helped retailers shed their debt, but it has not helped many of them restructure their businesses and regain sales.”

    There is, Jimmy Buffett once sang, a thin line between Saturday night and Sunday morning. But there’s a thick, hard-to-traverse line between getting rid of debt and creating a compelling business sustainable into the future. Lots of companies can do the former, but the latter … not so much.
    KC's View:

    Published on: February 19, 2019

    Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire.

    • The Washington Post reports on a new study from researchers at Duke University and Grinnell College suggesting that last year’s $300 billion business tax break, which was “pitched as a way to boost hiring and wages,” instead only had “a modest effect on employment, no effect on wages and probably has accelerated the rate at which companies are able to replace workers with machines.”

    Here’s why. The story notes that “the tax break in question, known as bonus depreciation, allows businesses to take larger upfront write-offs on the depreciation, or expected wear and tear, of newly purchased equipment … Bonus depreciation is often pitched as a way to spur business investment, which in turn will create jobs and raise wages.”

    The problem is that, as the Post writes, “The tax break made it cheaper for companies to invest in equipment, such as automated checkout machines, that replaces workers … The paper’s results strongly suggest that, on net, businesses’ equipment investments aren’t helping workers become more productive but rather replacing the workers entirely. Because the cost of investing in new equipment is reduced by the bonus depreciation tax break, it makes it more affordable for businesses to shift to new production technologies that rely on machines rather than human labor.”
    KC's View:

    Published on: February 19, 2019

    Responding to our story last week about an interactive map that vividly illustrates how climate change could affect communities in North America 60 years from now, one MNB reader wrote:

    While I am not a huge believer in Human made climate change, I couldn't help but notice that LA will be like Las Palmas, MX, but San Diego would be like........ Westmont, CA? Since they are only 80 miles apart, that seems somewhat counter intuitive.

    There will be some places where the changes will be enormous, and some less so … but I’m completely on board with the idea that there is likely to be change, that all scientists can do is make intelligent and informed estimates, and that both the public and private sectors ought to be paying attention and planning for how these shifts could affect their citizens and customers in the future. To not do so, I think, would be a kind of malpractice.

    A note from another reader, on another subject:

    Probably apropos of nothing, but I thought it strange to see a Kroger TV commercial for their Simple Truth brand of products, considering I live in NH.  It was Sunday night during the Grammy's.  Unusual, no?

    It was a national buy, I’m sure.

    On the other hand, now that people will be able to buy Kroger products online and pick them up and a local Walgreen store, it may be that Kroger is starting to play the awareness game … believing that it may be able to generate market share even in places where it has no physical stores.

    I’d certainly be testing that premise if I were at Kroger. Then again, I’m not nearly as smart as Rodney McMullen and his folks.

    Got a number of emails about Amazon’s decision to not build its HQ2 campus in New York City, and the revelation that it will pay no federal taxes this year.

    From MNB reader Mike Bach:

    I’m of two (very different) viewpoints on the Amazon tax situation:  Maybe there should be an AMT for corporations, just as there is for high earners today.

    Or, we should consider a national sales tax instead of all the convoluted income and property taxes.  No deductions just a national sales tax applied to all, including imports.  Then we avoid all the tax abatements.  I’m certain there’s a debate to be had about either option.  At least with Amazon, we’re reasonably certain of having new jobs that pay over $150k / year.  That guarantee doesn’t exist every time a local jurisdiction gives a tax break to Target, Walmart, Costco or Wegmans to build.  In fact, we’re more assured that health insurance for those workers is covered by taxpayers.

    MNB reader Andy Casey wrote:

    Not too concerned about the breakup as my guess is both Amazon and NYC will each be just fine going forward, together or not. But if I were Amazon, I would be more than a little worried about publicity around that zero tax bill. Populist politics seems rapidly swinging to something of an “eat the rich” mentality and one of the world’s largest companies not paying any income tax will likely not play well.

    MNB reader Ron Pizur wrote:

    Your observation is right on.
    There isn’t a pot with $3 billion in it. Those incentives are dependent on Amazon spending a certain amount of money and creating a certain number of jobs. Those jobs now won’t be created, nor will the ancillary businesses be created that would’ve served Amazon and its workers. That’s an enormous loss.
    The politicians cheering the pullout do not seem to have a solid understanding of how their budgets work. That is scary!

    From MNB reader Roy St.Clair:

    I am a simple man with no expertise in tax law, etc.
    But please, someone, explain to me how a company worth $800 Billion, that generates over $11 Billion in profits, pays ZERO taxes?
    I don’t get it, and it makes me kind of sick to my stomach actually.
    Am I contributing to this absurdity by virtue of my status as an Amazon Prime customer?
    Maybe I should re-think this whole thing?

    There may be moire than a few people asking themselves that question.

    However, MNB reader Dan Jones has one answer:

    Amazon is valued at $800B by the stock market – and its value changes daily based on the whims of the market.  Amazon has made a profit in the last two years, but made no profit for several years prior.  It is perfectly legal and appropriate to offset current federal taxable income with prior income losses.  There is a reason that we have an Income tax and not a Value tax.

    As for a tax on value and net worth, that policy change has been proposed by Elizabeth Warren, AOC and others.  That will take a Constitutional Amendment – and we should have that debate. 

    But for Income Tax liabilities to be compared to company value is an inappropriate metric.  It does nothing but stir the emotions of the people that do not think this through.

    Lots of emotions being stirred these days.

    Another MNB reader chimed in:

    I also think the city could have made a better job selling this deal to the citizens, and trying to put some perspective on how this will help the real people of NYC in the short and long term. The problem is that not a lot of us believe it's going to happen.

    On a personal level, the potential of at least a billion dollars in revenue for the city sounds good to me, but I don't think it will benefit me, people in the area, or the city. It will probably benefit Cuomo and DiBlasio in a political sense but no one else. The project could have had more support if they would have made a deal that makes real people feel benefited, not just politicians. What about promising a % of those jobs to residents of NYC? training for STEM jobs for people in the community (Queens)? or just explaining better how this supposedly $ +1B is going to be invested? (I am dreaming, I know).

    After many years living in NYC and being priced out of Manhattan myself, I can only imagine what the people that rent not in Long Island City, but Jackson Highs or Ditmas Steinway could be feeling when they heard the news. I have options because I have education and a high paying job (with student loans), but many of them not.

    The people that live in LIC (Long Island City) are now households that can rent a small studio for almost $3k a month in a high rise. The rest of the neighborhood are old warehouses and very few middle class or low income residents. It's very small.

    Just one subway stop away is where the real Queens starts. Astoria, Ditmas and Jackson Heights. Astoria is gentrified but affordable to middle class, young people. Ditmas and Jackson are heavily low income or immigrant communities that don't own their places and have long commutes to the highest paying jobs in the service industry, Manhattan. Gentrification is coming to these places as well but Amazon would have done that in a year instead of 10. The perspective of losing your home of years and increasing the already long commute in the next 6 months is not pleasant.

    On top of that, it's not clear if these 25k jobs could benefit those communities. People think they are most likely STEM jobs which of course they are not trained for. Even high education here is about Finance and Business, not STEM. So most likely the people that would get these jobs are going to be from out of the state in the short term until our universities and colleges could supply a demand for an Amazon HQ.

    Anyway, I can't say I am happy that the deal is off, it could have been great to have another industry here, but I think that at least here in NYC there is already so much $ from corporations that people feel there are options. I can imagine in a smaller city in Virginia is a different story. I agree with you that this city needs to progress in terms of infrastructure to host a HQ like that.  NYC is a lovely but messy place to live. But we are not starting from scratch like in Virginia. I saw those buildings near the airport being built for the technology industry and it looks amazing, but there is so much land there that I can imagine they didn't need to displace a large group of people to build it.
    KC's View:

    Published on: February 19, 2019

    CNBC reports this morning that Walmart has reported “earnings and revenue for this past holiday quarter that topped analysts' expectations, as its e-commerce sales surged 43 percent.”

    The retailer reported that Q4 net income was $3.69 billion, compared with $2.18 billion a year ago, on revenue that was up almost two percent to $138.79 billion from $136.27 billion a year ago.

    US same-store sales were up 4.2 percent, while traffic at stores was up just 0.9 percent during the quarter, compared with growth of 1.6 percent a year ago; average sales were up more than three percent, however.
    KC's View: