Published on: March 4, 2019
A New Podcast about “Technology, Innovation, and the Independent Retailer”
From the floor of the National Grocers Association (NGA) Show in San Diego, “Retail Tomorrow” host Kevin Coupe engages with a power panel of retailers and experts in a discussion of the unique technology challenges and opportunities facing independent retailers, which often are without the resources available to larger competitors, but that often have the cultural flexibility to experiment and innovate.
This Retail Tomorrow podcast is sponsored by the Global Market Development Center (GMDC).
Our guests (pictured below, next to the Content Guy, from left to right):
• Lauren Johnson, CEO/President, Newport Avenue Markets, Bend, Oregon.
• Lisa Mangino Swanson, Communications Director, Hugo's Family Marketplace, Grand Forks, North Dakota.
• Sterling Hawkins, Co-founder, Center for Advancing Retail & Technology (CART).
• Tom Furphy, CEO/Managing Director, Consumer Equity Partners.
• Glen Terbeek, the retired force behind Anderson Consulting’s Smart Store initiative (who brings uncommon sense and historical perspective to the conversation).
This podcast, as well as past editions, also can be found on the Retail Tomorrow site. In addition, check out more details about GMDC’s Retail Tomorrow initiative here.
- KC's View:
Published on: March 4, 2019As Amazon announced that it was largely getting out of the Dash replenishment button business, the Wall Street Journal broke the story on Friday that Amazon “is planning to open dozens of grocery stores in several major U.S. cities … as the retail giant looks to broaden its reach in the food business and touch more aspects of consumers’ lives.”
While Amazon has not yet officially commented on the report, which is based on Journal interviews with “people familiar with the matter,” those sources suggest that the initiative is far along - the first store could open in Los Angeles before the end of the year, with at least two more leases already signed for locations that could open early next year. Markets that could see the new stores include San Francisco, Seattle, Chicago, Washington, D.C., and Philadelphia, and the story also suggests that Amazon could jumpstart its push into the grocery business by acquiring regional chains of roughly a dozen stores.
The new Amazon supermarkets may or may not carry the company’s name, the story says. Company leadership is said to be intent on differentiating the new stores from its Whole Foods business by offering a different and more mainstream product mix, as well as lower prices.
It is unclear, the story says, whether Amazon could use the checkout-free technology it pioneered in its Amazon Go stores in the new chain; it has been reported that it has been testing the technology in mockups of larger stores than the c-store-sized Go format. “Amazon is also looking to have some control over the attached parking lot to speed shoppers’ ability to get groceries, the Journal reports.
The Journal writes that “for its new stores, Amazon is targeting new developments and occupied stores with leases ending soon. It could, for instance, consider a portion of a vacated Kmart, a person familiar with the matter said. Stores in the new grocery brand could be in strip centers as well as open-air shopping centers, the people said, and will be about 35,000 square feet, smaller than the typical 60,000-square-foot supermarket.
“Amazon doesn’t want restrictions on the type of goods it may sell at its stores and wants the ability to change the store and sell health and beauty products for instance, the people familiar said. Leases in shopping centers often include limitations so that businesses complement rather than cannibalize each other.”
It is, the Journal suggests, the company’s “latest move far beyond its origins selling books and music on the web. Over the years it has become a cloud-computing giant, a major player in Hollywood entertainment and a burgeoning provider of logistics services. More recently it has emerged as a major competitor in digital advertising and launched forays in finance and health care.”
However, the Journal also cautions that this concept may not happen, that “retailers sign contracts and then pull out or delay store openings if certain conditions aren’t met.”
Meanwhile, CNet reports that Amazon has decided to stop selling the Dash buttons that it introduced back in 2015 as a way to facilitate replenishment of items that people already had bought from Amazon. The buttons, which carried the brand logos of participating companies, allowed customers to place them in relevant and convenient places (like a Tide button on the washing machine) ands then simply press them when they wanted to reorder that item. The buttons cost $5 apiece, but that was reimbursed to customers by taking that amount off their first orders.
Dash buttons were seen by Amazon “as a speedy jury-rig to add a bit of internet connectivity to an appliance that didn't have it.” But now, the story says, the button “isn't nearly as necessary as it used to be. Today, plenty more appliances connect to the internet. Amazon also integrated its Dash Replenishment Service into hundreds of products from major manufacturers like Whirlpool and Samsung worldwide. DRS lets appliances automatically reorder the stuff they need, like a printer purchasing new ink. No need to even push a button.”
In addition, the company has enabled voice shopping through its Alexa-powered voice assistant system, which it expects to grow exponentially in coming years.
People who use Dash buttons, however, won't be cut off: “Amazon plans to continue supporting new orders through existing Dash buttons so long as the public keeps using them,” CNet writes.
- KC's View:
- I am intrigued by both decisions, but, to be honest, not entirely on board with either one. (Not that Amazon needs or wants my approval. I’m just saying…)
First, let’s work on the assumption that the Journal is being given accurate information, and this isn’t just a trial balloon to see what the response would be. (One response was that traditional retailers’ stocks took a hit on Friday, just as they did when Amazon bought Whole Foods. My feeling is that this may say more about the stock market than it does about Amazon or these other competitors.)
For me, the only way this makes sense is if Amazon brings something really unique to the bricks-and-mortar party, as it did with the Amazon Go format, or even the Amazon Books or Amazon Four-Star concepts. Each of these represented some sort of fundamental rethinking of a specific kind of retailing or some sort of original application of data that Amazon had gathered through online interactions with shoppers. Each of these worked in some ways and probably didn’t work in others, but they illustrated how Amazon was willing to challenge conventional thinking and risk failure in its efforts to disrupt and innovate.
I think that if Amazon has the same thing in mind for this supermarket format - that it has identified some way in which it can serve shopper needs that couldn’t really be accomplished at Whole Foods, and that will try to change the game in some sort of radical and yet foundational way - then I’m all for it. But I just cannot imagine that it makes any sort of sense for Amazon to open stores under its own name that have a traditional shop-by-aisle-after-aisle-after aisle experience, followed by some sort of traditional checkout system. I cannot imagine that it thinks that just offering curbside pickup at these stores would be a differentiator, since pretty much any retailer of any size and/or ambition already is doing it. There’s got to be something else…
I don’t care how low the prices are … you can always be undercut on price. This would be the wrong battlefield on which Amazon should engage its competitors. In fact, that’s probably exactly what its competitors would want … it is what they’ve always wanted, for Amazon to come to them, instead of forcing them to play on Amazon’s turf.
My friend Eric Claus’s son Christopher posed the question this way over the weekend: “Tech guys think being smart and good at one thing means they'll be good at anything, but that's usually not the case. Grocery strikes me as one of those areas where decades of experience in the industry trumps any great intellect Amazon brings to the table. Give me experience over intelligence any day of the week.”
Christopher may be right. Though it also is possible that the reports are incomplete, and that rather than looking to engage its competition in a game of checkers, Amazon actually is thinking in terms of three-dimensional chess, and we have no idea what its leadership really is thinking. At the very least, they have to have figured out a way to deploy their data - which is the company’s most potent advantage - as a weapon of considerable power in a bricks-and-mortar format.
Now, if they have figured out a way to reconfigure the physical store business model in a way that drives down costs, and gives brands a stronger connection to the shopper … maybe even engineering something that in its own way disintermediates traditional retailers from the existing brand-retail-customer continuum and creates a more frictionless physical and digital experience … well, that might be kind of interesting. And worthy of being an Amazon initiative.
If they have figured out a way to use Prime membership information to streamline and accelerate the replenishment process on everyday products, building Subscribe & Save into an ever bigger powerhouse than it already is … well, that might be kind of interesting. And worthy of being an Amazon initiative.
So on the subject of Amazon opening grocery stores around the country, mark me down as undecided, though willing to be persuaded by a big hairy audacious insight and idea.
As for the Dash buttons … well, there’s absolutely nothing wrong with stepping away from a business model that, even though you’ve pretty much created it, has grown to be pretty much obsolete. In fact, that willingness to kill its young is an Amazon hallmark - it doesn’t allow itself to become so emotionally connected to anything that it cannot walk away at the right time.
Which by itself is a pretty good business lesson.
Published on: March 4, 2019Reuters reports that Kroger’s “Smith’s Food and Drug Stores division will stop accepting Visa Inc’s credit cards, starting April 3, because of excessive transaction fees.”
This is the second such ban imposed by Kroger, which “stopped accepting Visa’s credit cards at its Foods Co stores in California in August last year, because of a price dispute over interchange rates and network fees.”
“"At Smith's, Visa's credit card fees are higher than any other credit card brand that we accept. Visa's excessive fees and unfairness cannot continue to go unchecked," said Kroger CFO Mike Schlotman.
A Visa spokesperson responded: “It is unfair and disappointing that Kroger is putting shoppers in the middle of a business dispute … When consumer choice is limited, nobody wins.”
- KC's View:
- For the record, if Kroger tells the story effectively and does not allow Visa to capture the narrative, then it will make clear to its customers that it is advocating for them, not working against them. That strikes me as a pretty reasonable position to take, and certainly positions Kroger on the right side of the issue - against usurious financial institutions that are hardly better than those who would send some guy named Bennie the Frog to break your kneecaps.
Published on: March 4, 2019The New York Times reports on a new study from Boston University and Tufts researchers concluding that even as fast food chains have positioned themselves as having healthier offerings, “many options grew in size and the calories and sodium in them surged.” As a result, the research suggests, “even with lighter items in the mix, fast food menus are less healthy than they were 30 years ago.”
The Times writes that “the fat and salt content and the sheer size of fast food meals have long been a public health concern. They are often blamed for pushing up the obesity rate among adults in the United States, which rose to 40 percent in 2016 from 13 percent in the early 1960s.
“The new study suggests the problem is getting worse.
“Across the 10 chains, the researchers found, the average entree weighed 39 grams more in 2016 than in 1986 and had 90 more calories. It also had 41.6 percent of the recommended daily allotment of sodium, up from 27.8 percent.”
- KC's View:
- The story notes that while “local governments have adopted menu-labeling initiatives that require fast food restaurants to list calorie counts for the items they sell,” these efforts have “faced substantial opposition, including from the Food and Drug Administration.”
Which I find extremely annoying.
First of all, I don’t trust anything that fast food restaurants say. I don’t eat in them much, but when I do, I don’t kid myself that anything they are serving is the least bit healthy.
Example: The Times points out that “Carl’s Jr. recently added a plant-based burger, the Beyond Famous Star, to its lineup.” Even that option, with cheese, “has more than 700 calories.” If I’m going to order it, I’ll do it for the taste or the convenience, and just jog a little farther or faster or both tomorrow.
What I really hate are efforts from the food industry to prevent transparency, and to hide the information that people need to make intelligent, informed decisions. It is just a crock, and positions the industry as being at odds with their customers.
Published on: March 4, 2019Publix has announced a new collaboration with Flagler Health+ that will allow for the creation of three Flagler-branded “telehealth sites” at Publix stores, in addition to the opening of a Publix pharmacy at Flagler Hospital.
According to the announcement, “The telehealth sites will have a private room with teleconferencing and medical diagnostic equipment, including stethoscopes, blood pressure cuffs, high-definition cameras and other tools necessary for common diagnoses, and allow patients to speak directly via video conferencing technology with a board-certified physician. The physician can direct the patient to use the available diagnostic tools in order to make a diagnosis and write any necessary prescriptions. Publix Pharmacy support staff will be available to assist patients, if needed.”
The exact locations are still to be announced.
- KC's View:
- As long as they don’t want to start guiding me through some sort of self-surgery, I like this idea a lot.
Published on: March 4, 2019The New Yorker has an excellent and provocative piece about concerns that the rapid growth of robotics, AI and machine learning will have a dramatic impact on the future of work, with some predicting that close to 50 percent of jobs in the US could be affected by this technological revolution.
What’s required, the story suggests, is a sense of context and a reality check - predictions are just that, and not inevitable:
“People who are in the business of selling predictions need to present the past as predictable - the ground truth, the test case. Machines are more predictable than people, and in histories written by futurists the machines just keep coming; depicting their march as unstoppable certifies the futurists’ predictions. But machines don’t just keep coming. They are funded, invented, built, sold, bought, and used by people who could just as easily not fund, invent, build, sell, buy, and use them. Machines don’t drive history; people do. History is not a smart car.”
And, it goes on:
“The robots-are-coming omen-reading borrows as much from the conventions of science fiction as from those of historical analysis. It uses “robot” as a shorthand for everything from steam-powered looms to electricity-driven industrial assemblers and artificial intelligence, and thus has the twin effects of compressing time and conflating one thing with another. It indulges in the supposition that work is something the wealthy hand out to the poor, from feudalism to capitalism, instead of something people do, for reasons that include a search for order, meaning, and purpose.”
You can read the entire story here.
- KC's View:
Published on: March 4, 2019Bloomberg reports on how “Americans, drunk with options, are turning away from beer at an alarming rate. U.S. alcohol consumption dropped in 2018, the third straight year of declines. The main culprit is the beer slump, with consumption of the classic American adult beverage down 2.8 percent since 2015. That’s despite continued growth for craft beer, which saw consumption jump nearly 15 percent in the same period, according to data from IWSR, which studies global alcohol trends.”
The story goes on: “Beer has a lot going against it for today’s consumer, especially carbs and calories. The industry has struggled for years to attract female customers, and while a cold beer is still the drink of choice at a baseball game, there are a lot of alternatives these days for discerning drinkers. It’s a similar story to what’s been happening elsewhere in the grocery store: classic brands that dominated shelves for decades—think Kraft Heinz—have been losing sales to upstarts as options proliferate.”
The story cites two problems facing the beer business:
• “While hangovers have never been popular, there’s a growing sense that Millennials and the Gen Z consumers who come after them have less of a tolerance for feeling terrible the next day. It’s hard to include getting drunk in an active lifestyle: Work starts earlier, and on the weekends, living life on social media means getting out of bed to go hiking or running or rock climbing in the hopes of grabbing a perfect picture for Instagram.”
• “As cannabis legalization spreads across the U.S., pot is viewed by many modern consumers as healthier than alcohol, particularly among younger cohorts. So far, the alcohol industry has insisted that weed isn’t a threat, but beer may not be as immune as wine or whiskey.”
- KC's View:
- There’s also the fact that so many of the young people I know like to drink Tito’s and sodas, with a slice of lime … which seems to have turned into the drink of choice for an entire generation. (And old guys like me like it, too … I must confess that I’ve cut way back on my beer consumption, preferring wine or Tito’s, and only indulging in a good craft/local beer on rare occasions.)
Published on: March 4, 2019Axios reports that Scott Gottlieb, commissioner of the Food and Drug Administration (FDA), “has presented senior White House staff with his plan to effectively ban the sale of flavored e-cigarettes in
convenience stores throughout the United States … The FDA announced the substance of this plan in November. The agency has spent the past three months writing the guidance and getting it cleared through the Department of Health and Human Services.”
Before the FDA can move forward, the White House has to approve the plan.
The story notes that “Gottlieb has foreshadowed a larger plan to reduce smoking rates. But the plan he gave the White House … is only his narrower plan to restrict the sales of flavored e-cigarettes - to keep them away from children and teenagers.”
- KC's View:
- Good. Shut these guys down. ASAP.
Published on: March 4, 2019The Food Marketing Institute (FMI) and the the North American Meat Institute’s Foundation for Meat and Poultry Research and Education, the foundation for the North American Meat Institute have released the 14th annual Power of Meat study, concluding that “food retailers and their meat supplier partners should align their thinking with the shopper who considers his/her meat purchase as a meal occasion and not necessarily relegated to one area of the store.
“Consumers increasingly shop across the full meat offering, from the meat case and counter, to the frozen aisle and deli. Across all departments, convenience-focused meat and poultry saw robust growth in 2018, including value-added (+5.1 percent), fully-cooked (+2.5 percent) and frozen (+2.2 percent).
“The report urges retailers and suppliers to consider new ways to help shoppers plan multiple meal meat purchases.”
The study goes on: “Shoppers are increasingly turning to food to help manage health and well-being. They seek to understand what is in their food, who made it and how it was produced, and meat is no exception. In the meat department, two thirds of shoppers look for better-for-me items and around three in 10 look for products that are better for the planet, farmers, workers or animals.”
- KC's View:
Published on: March 4, 2019• Interesting piece in the New York Times about how a major priority for Amazon was to make its Alexa-powered smart speaker assistants more empathetic, especially with the growth of AI and machine learning technology.
Dave Limp, Amazon’s senior vice president for devices and services, puts it in very human terms: ““If you’re an adult and you say you’re depressed or suicidal, or you’re potentially a victim of domestic abuse and you’re talking to Alexa in that way, we’ve talked to experts about what we should do in those situations. Alexa would try to connect you to a suicide hotline or domestic abuse hotlines.”
Limp goes on: “Do we need to make her more conversational and less transactional over time? Yes … We have thousands of people working on that right now. The goal would be that an assistant of your choice would have exactly the kind of conversation that we’re having right now.”
The story notes that “Amazon announced recently that it had sold more than 100 million Alexa devices … Last year Amazon Echo accounted for 70 percent of installed smart speakers in the United States, while Google Home made up 24 percent and Apple HomePod 6 percent, according to a recent survey by Consumer Intelligence Research Partners.”
- KC's View:
Published on: March 4, 2019• Reuters reports that France’s Carrefour, continuing to focus on cost-cutting, says that it will “step up plans to downsize its hypermarket stores,” open convenience stores, and put “a greater focus on organic products and private labels.”
Facing weakness in its home market, Carrefour is said to aim to “boost profits and sales and tackle growing competition from U.S. online retail giant Amazon.”
Bloomberg writes that “the company plans to reduce store space by around 10 percent of its current hypermarket portfolio and pledged to trim annual costs by 2.8 billion euros ($3.2 billion) by 2020, versus 2 billion euros in a previous plan … Carrefour is getting more aggressive about scaling back suburban stores that have struggled to cope with competition from e-commerce and specialty retailers. While shrinking so-called hypermarkets, it’s opening 3,000 more convenience stores.”
- KC's View:
Published on: March 4, 2019Got the following email from an MNB reader:
I love technology, Kevin, I think I was the first to switch to cassettes (from 8 track) and then to CDs (there I go dating myself).
I even adopted Beta format video tapes early too (big mistake).
However, as many retailers are focused on incorporating hi tech on the sales floor they should be glancing at 2 of my most popular shops, Trader Joes and Costco. Is that too simple? They both have well trained, accessible people that augment the shopping experience in a positive way. The result, the shopping trip is quicker and I have a more enjoyable experience. Yes, even Costco. The lines may be long but they move. In addition, nearly 100% of the time I am greeted by a generally happy person at the register and at the exit. Other retailers need to notice since AI is still a ways away in scale and you still have people in your store today (you are the lucky one) that are just a choice away from switching to someone who cares more about them.
MNB reader Dan Jones wrote:
The vast majority of AI applications will not be directly customer facing. As an example: AI will be used for better forecasting (by SKU by Store) which will lead to better Warehouse and Store fulfillment. This will drive a much better customer experience due to better in-stocks, but this AI success will not be apparent to the consumers.
Regarding the new robotic pizza delivery system that is going to be tested by FedEx, MNB reader Carol Schnabel wrote:
FedEx better deliver pizza faster than its packages and no handing off to the post office.
Finally, we had a story last week about how an academic study from the University of Nevada Las Vegas (UNLV) said that “the quality of fruits and vegetables at dollar stores is just as good as regular grocery store produce.”
According to the study, “The findings are especially good news for the 17.3 million people nationwide who live in low-income areas more than one mile from grocery stores — areas referred to as food deserts by the U.S. Department of Agriculture. Dollar discount stores may exist in these areas and be an alternative for residents who currently access fast food or sugary and savory nutrient-deficient snacks found at gas stations which can lead to obesity or other health problems … While there was slightly less variety of produce at dollar stores (for example, none of the dollar stores carried pears), there was no significant difference in quality.”
If I were a dollar store, I’d make this study a centerpiece of my marketing efforts. I’m not sure that what the study describes is a national phenomenon - I’ve generally found that the farther west you go, the better the produce tends to be (though I’m sure I’ll get some blowback on that one) - but I’d take these results and run with them.
This prompted one MNB reader to write:
Just how many dollar store executives read your daily news? I think you just love thinking that any new or different concept will put experienced supermarket operators out of business. You might want to think about supporting the base that supports you.
First of all, I don’t think I suggested that dollar stores would put traditional supermarkets out of business. What I did was a) quote an academic study, and b) suggest that if that segment were smart, it would make the study a marketing centerpiece.
This wasn’t meant to “support” the dollar store segment over the supermarket segment. It was to recognize a possible reality … which, by the way, ought to energize the supermarket segment to get better in categories that used to differentiate them.
Same goes for other business models that represent a threat to the traditional supermarket business. I’ve never argued that new business models will put the old model out of business … just that mediocre, undifferentiated stores that do not adapt to new realities are likely to find themselves facing obsolescence.
This seems like a perfectly defensible position to me.
I’ve never seen my job as being supportive, but rather to be provocative, and to get people to think about their businesses within the context of possible tomorrows.
- KC's View: