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    Published on: April 11, 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.

    I’m coming to you this week from the Dreamscape Experience, located in the Westfield Century City Mall, in Los Angeles, which essentially is a 3-D virtual reality experience that, quite appropriately, refers to itself as “immersive.”

    There are three different experiences - one in which you go into the “Deep Blu,” going undersea to rescue a family of whales … another in which you go on an Indiana Jones-style adventure to “break an ancient curse and find (a) lost pearl” … and the one on which I embarked, journeying “to a wildlife refuge in space and encounter the galaxy's most endangered species.”

    One gets equipped with all sorts of goggles and sensors, and the experience is pretty realistic - which isn’t surprising when you find out that Steven Spielberg is an investor. You can reach out and practically touch things; when you go up, anyone with a trepidation about heights (I would be one of those people) ends up feeling a tightening in the stomach, and when monsters come after you, you flinch.

    It is all lots of fun - a 21st century experience.

    But there is, of course, a business lesson in all this.

    It seems to me that this is the stuff that retailers have to think about - creating immersive experiences for their shoppers. Not necessarily 3-D virtual reality experiences (though that certainly may happen down the road), but certainly immersive in the sense that retailers tell their story, create a narrative, and formulate an experiential approach to various departments. This is critical, I think, in departments that merit it, especially because there are so many departments in the store where - because there is little product differentiation - it is difficult for retailers to distinguish themselves.

    Not everybody has to do the same thing, certainly, but there will be retailers out there that will raise the bar … and technology itself will raise the bar on what consumers expect and want. Retailers will have to beet that challenge…24 hours a day…seven days a week…365 days a year.

    There is no option.

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

    KC's View:

    Published on: April 11, 2019

    by Kevin Coupe

    Fascinating story in Forbes the other day about how REI, the outdoor gear and clothing retailer and cooperative, “is ‘significantly’ expanding its rental and used gear sales programs and trade-in options.”

    According to the story, REI “has historically hosted in-store ‘garage’ sales a few times a year to resell gently used products that customers have returned. But now the company is going year-round with the initiative, dramatically expanding its rental service in terms of both stores and products.

    Forbes writes that “REI decided over a year ago to make rentals and what it described as ‘re-commerce’ in used gear sales a key business focus to give customers a more affordable option to buy outdoor gear and allow those with growing children or little storage space to trade in or trade up. But perhaps the most critical driver behind these initiatives is Millennial shoppers, who make up a third of the company’s rental customers.”

    What REI seems to be confronting - rather successfully, based on the numbers - is the notion that Millennials have different purchase patterns than their elders. Not only do they want to keep the stuff they own longer than earlier generations, but, as we know from other studies and surveys, there are a lot of young people out there who may not want to own things that they can borrow, rent or lease. Like cars. Or homes.

    It seems to me that these kinds of attitudinal shifts have to be factored by marketers into their approaches to wide range of categories. They’re not going to rent food or pharmaceuticals, of course, but their relationships with traditional retailers may be affected by how they view matters of ownership and possession.

    We see this with other retailers - Ikea, for example, which also is getting into the rentals business, catering to people who would rather rent furniture than own it. And Ikea, of course, is, at the same time as it invests in the rental business, also investing in smaller stores that will serve as pick-up locations as well as offering consulting services.

    It seems simplistic to suggest that everything is changing, and retailers need to figure out if they are going to be able to ride the wave, or be swamped by it.

    Except that the reality seems to be that everything is changing, and retailers need to figure out if they are going to be able to ride the wave, or be swamped by it.

    Eyes shut. Or Eyes Open. Your choice.
    KC's View:

    Published on: April 11, 2019

    The Washington Post quotes from a new report from investment firm UBS predicting that “an estimated 75,000 stores that sell clothing, electronics and furniture will close by 2026, when online shopping is expected to make up 25 percent of retail sales.”

    The Post goes on: “Already this year, retailers have announced plans to close thousands of stores as they keep up with changing consumer habits. Payless ShoeSource, which filed for Chapter 11 bankruptcy protection in February, is closing all 2,100 of its U.S. stores, while Gymboree is shuttering its 800 locations. Sears, which has closed 1,300 Kmart and Sears stores since 2013, is scrapping an additional 80 locations. A number of other retailers, including Gap, have hinted that store closures are on the horizon … Overall, retailers have closed more than 15,000 stores since 2017, according to UBS. Among them: Radio Shack (which closed 1,470 stores), Toys R Us (735 stores), and Mattress Firm and GNC (700 stores each).”
    KC's View:
    This all is complicated, and not exactly a straight line … even as these closures take place, we know that some online-only brands - ranging from Amazon to Wayfair - actually are investing, to various degrees, in bricks-and-mortar locations.

    I know that this study doesn’t specifically refer to food stores … but if I were in that category, I wouldn’t get complacent.

    A couple of observations, if I may.

    First, this all takes place in a consumer environment where, in most retail categories, the landscape is way, way over-stored. So some of this is necessary erosion.

    Second, it doesn’t mean that bricks-and-mortar stores are dead - just the ones that don’t have a story, don’t offer an experience, and don’t focus on a differential advantage. And, to be clear, if these stores perish, it is suicide, not homicide.

    Published on: April 11, 2019

    CBS News reports on a new study from the Organization for Economic Cooperation and Development (OECD) concluding that “the global middle class is witnessing a historic hollowing out, with younger generations struggling to find their financial foothold in many wealthier countries around the world, including the U.S.  Only 6 of 10 millennials earn enough to be considered middle class, compared with 7 of 10 baby boomers at the same age … . Younger generations are bearing the brunt of the middle-class decline, with each subsequent generation less likely to achieve financial stability compared with the boomers.”

    Among the factors shrinking the middle class are “the rising cost of housing, education and health care. As a result, half of all middle-income households in wealthier countries now struggle to make ends meet, the OECD found.”

    Here’s some more context from the story:

    “Earning between 75 percent to 200 percent of the median national income is considered middle class -- in the U.S. that translates to between $23,416 and $62,442 for a single worker, according to the OECD. (Other organizations have slightly different yardsticks for the middle class, such as Pew's income range of about $26,000 to $78,000 for a single U.S. worker.)

    “Middle-class income hasn't kept up with the growth in income enjoyed by wealthier people, the OECD said. Since the recession, the annual rate of growth of real median incomes across the group's member countries was a meager 0.3 percent, compared with 1.6 percent between the mid-1990s and mid-2000.”
    KC's View:
    The reason that the decline of the middle class is being felt more in developed countries, especially the US, is that these countries traditionally had larger middle class populations. This shrinking percentage has to be considered by not just by retailers and suppliers that have largely catered to this group, but also by the marketers that have thrived when people in the middle class aspired to move into the upper middle class. It is a lot further leap when you haven’t been able to maintain a middle class existence, and a lot of companies are going to have to think hard about their strategies and tactics.

    Published on: April 11, 2019

    CNBC reports that checkout-free Amazon Go stores will begin taking cash, “amid intensifying criticism that the company is discriminating against the unbanked.”

    The shift will require what Amazon calls “additional payment mechanisms” still to be installed; Amazon already has created some new payment systems for its e-commerce site, including “a pilot that accepts government subsidized SNAP benefits and a new program called Amazon Cash, which lets users add cash to their digital accounts by bringing money to a local store like 7-Eleven or CVS.”

    CNBC notes that “Philadelphia last month became the first major U.S. city to ban cashless stores despite Amazon’s reported attempt to block the law. The state of New Jersey followed a couple weeks later, and cities like New York, San Francisco and Chicago are considering similar laws. Massachusetts has had a law in place for decades requiring stores to accept cash.”
    KC's View:
    The story points out that there have been reports - though I might be more inclined to call it speculation - that Amazon would like to have as many as 3,000 Go stores. If so, it has to figure out a way to deal with this situation … there are some real issues at work here, as well as some perception issues.

    Published on: April 11, 2019

    CNBC reports that financial services provider BMO Capital Markets is telling its clients that “it estimates Amazon, with Whole Foods, could be interested in filling as many as 110 old Sears and Kmart stores, based on the surrounding demographics of those department stores and the fact that they don’t have another Whole Foods store already within a three-mile radius.”

    The observation seems keyed to several facts - Sears has been closing lots of locations, Amazon-owned Whole Foods is in an expansionist mode, and Amazon itself is said to be planning the opening of a new, separate chain of supermarkets (format, size and locations yet to be revealed).

    “Sears emerged from bankruptcy in February,” the story notes. “Although it has been closing stores for years, it arguably has held on to some of the best retail real estate in the country. As hundreds of its stores have gone dark over the years, the more unprofitable ones have been the first to go. But now, even some of the stronger locations are going back on the market.”

    BMO analyst Brandon Cheatham writes that “there aren’t many developers that are building additional, ground up, retail space, so if Amazon, or others, is looking to grow somewhat rapidly this would be a quick and likely cheap(er) way to expand.”
    KC's View:
    I’m not buying this. Not yet.

    Every time there is real estate available because some company is in trouble - if it isn’t Sears, it is Radio Shack, for example - analysts clamor to get ink from various media outlets with their “predictions” about Amazon buying the companies or the real estate.

    I’m only mentioning it here - at the risk of falling into the analysts’ trap - because I want to urge caution. Amazon hasn’t bought more things that it has been rumored to be interested in buying a lot more than it has bought anything.

    Anything is possible. But I tend to think that when Amazon makes a move, it will be a move we don’t see coming, not one predicted by pundits and analysts.

    The boxing writer and novelist Katherine Dunn once said that “it is the punch that you don’t see coming that knocks you out.”

    She added, by the way: “In the wider world, the reality we ignore or deny is the one that weakens our most impassioned efforts toward improvement.”

    Published on: April 11, 2019

    Bloomberg Businessweek has a story about Wegmans - a company that it describes as one that “punches well above its weight, combining the product breadth of a Walmart, the quality of a Whole Foods, and the quirkiness of a Trader Joe’s” - and how it will open its first New York City store this fall.

    If you can make it there…

    The 74,000-square-foot store “at the Brooklyn Navy Yard, in a long-ignored tract of the former military base called Admiral’s Row … will be a big test of whether Wegmans can duplicate the phenomenal success it’s had in smaller locales in the crowded New York market.”

    An excerpt:

    “Brooklyn presents a huge opportunity for Wegmans: the 2.8 million people who live within 5 miles of the Navy Yard, with an average household income well above $100,000. But there are serious challenges, too. Big, crowded cities aren’t conducive to Wegmans’s sprawling stores. The Navy Yard is isolated, a food desert abutting a public-housing project, and is cut off from most of the borough by the Brooklyn-Queens Expressway. And New York City’s grocery scene is a hyper-competitive mix ranging from bodegas and street-corner produce stands to local chains … that have more experience with the hefty and rising operating costs that have eaten away at area grocers’ margins.”

    You can read the entire story here.
    KC's View:

    Published on: April 11, 2019

    Bloomberg reports that Walmart “will offer reusable shopping totes at the checkout counters of all its U.S. stores for the first time as the world’s largest retailer starts to move away from the use of environmentally-unfriendly plastic bags.”

    Each bag - there are 10 different designs - will cost 98 cents.

    “The bags are part of a broader rollout of sustainable business initiatives” from Walmart, the story says, with the centerpiece being “Walmart’s 2017 pledge to remove a billion metric tons of greenhouse gas emissions from its supply chain by 2030, equivalent to taking 211 million passenger vehicles off the road for a year.”

    Bloomberg notes that Walmart, for the time being, still will offer single use bags.
    KC's View:

    Published on: April 11, 2019

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

    • “U.S. consumers who use shopping apps turn to them frequently: More than one-third of people (35%) use shopping apps between two and five times a week, while 28% use them at least once a day,” according to new survey data released by portfolio website Visual Objects.

    The survey also found that “nearly 80% of people (79%) use shopping apps when they are at home instead of on the go or in another store, Visual Objects' survey found.” And, “when people use shopping apps, they're most likely to use an app from mass merchant retailers like Target, Walmart, or Costco (81%), pure online retailers like Amazon or Overstock (77%), or apparel retailers (79%).”

    TechCrunch reports that Amazon is acquiring Canvas Technology, a Boulder, Colorado-based company described as a “warehouse robotics startup.”

    Among the technologies that Canvas has developed is “a fully autonomous cart system that positions the startup as a direct competitor with the likes of Bay Area-based Fetch.” TechCrunch writes that “ the deal makes a lot of sense from the outside, adding another important piece to Amazon Robotics’ growing portfolio of fulfillment center machines.”

    Terms of the deal were not disclosed.

    Seems to me that if you own a robotics company with any sort of chops, the odds are pretty good that some behemoth is going to come calling, checkbook in hand.
    KC's View:

    Published on: April 11, 2019

    • The Financial Times reports that “Walmart is planning to refit another 500 of its stores across the US this year, investing hundreds of millions of dollars to keep bricks and mortar retail relevant in the age of ecommerce.

    “Brighter lighting, wider aisles and self checkouts are to be rolled out under the plan, which will bring to 1,000 the number of stores Walmart has upgraded over two years. Electronics and pharmacy departments will receive particular attention. The biggest US retailer divulged individual plans for upgrades in 36 states to local media this week, including a $265 million investment plan for Texas, $173 million for Florida and $145 million for California.”
    KC's View:

    Published on: April 11, 2019

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

    • The Atlanta Journal-Constitution reports that Aldi has “announced a series of commitments to ensure 100% sustainable packaging by 2025 … the company is promising reusable, recyclable or compostable packaging and a 15% reduction in overall packaging material.”

    The company is promising that by 2020, “all of Aldi-exclusive consumable packaging will include a standardized How2Recycle label … Aldi will implement an initiative to make private-label product packaging easier for customers to reuse.”

    Reuters reports that Tesco appears to have solidly emerged from the financial scandals that roiled its operations and management several years ago, posting operating profit that was up 34 percent to the equivalent of $2.89 billion (US), and group sales that were up 11.5 percent to the equivalent of $74.5 billion (US).

    The story notes that “Tesco recorded its 13th quarter of like-for-like sales growth in its main UK market with a 1.7 percent rise in the final quarter,” while maintaining its “leading 27.4 percent share of Britain’s grocery market.”

    The Washington Post reports that outdoor clothing and gear retailer Patagonia is suing Anheuser-Busch InBev for trademark infringement.

    A-B has released a new beer called Patagonia, the name. logo and marketing of which, the lawsuit says “deliberately has attempted to take advantage of the hard-earned reputation that Patagonia has built over the last 40 years as a company dedicated to environmental conservation” … The question at hand, according to legal experts, is whether consumers were led to mistakenly believe that Patagonia was somehow connected to, or collaborating on, Anheuser-Busch’s Patagonia beer.”

    The logos look pretty close to me … and just based on that, I’d be inclined to agree with Patagonia the outdoor company. I’m not a lawyer, though, so I have no idea how this will play out … but I do think that Patagonia is right to throw down the gauntlet. The only question is whether the region of South America that also bears the name will come looking for supplies of vests, and maybe beer.
    KC's View:

    Published on: April 11, 2019

    Got the following email from an MNB reader:

    Your story about Millennials and Gen Z (expecting) pay increases occurs often and we've tried to manage expectations by identifying a clear performance plan the employee can self-manage, to make the compensation discussion more fact-based.

    One particular experience brought back a memory I've tried to forget regarding expectations about pay and promotions. My story differs slightly in that its about a (meddling) Parent's expectations for their child, who fit into this younger worker category.

    To recap: I was handed a message by my assistant who advised I needed to call one of our employee’s parents. I thought something had happened to them so picked up the phone and called immediately, only to be asked about how pay increases were determined, because the parent didn't think their child was earning enough.  I asked what was informing their opinion and was told by the parent they had spent far to much on their child's education, only to earn as little as we were paying them. The parent went on to say that their child (our employee) enjoyed working at the company, felt that they were learning a lot, and being challenged to grow.... but.... (the parent informed me) they were going to need to be paid more to stay with us.

    Reeling from this comment, I asked if the parent would like to know how we manage compensation. "Yes, I'd love to know", I was told. I laid out that we had job profiles, reviews and then identified that raise/s were based on job grades for that particular role. Nothing concrete was shared numerically. The parent then asked where their child ranked and their performance, to which I replied that I couldn't share that with them - they would have to get that information from their child. "Your approach seems fair" the parent said, adding that their child would likely resign soon for a job making more money. I told the parent that it was our policy to take a resignation letter from our employees directly, not through their parents. Again, the parent said that this was a reasonable request, then thanked me for calling them back.

    In over 30 years of internationally-based management roles, I'd never encountered that one. I learned not to underestimate the parents influence with younger workers.  

    PS. In case you're wondering how the story ended... the employee resigned about 8 weeks later. During the discussion, the employee asked me if I had received a call from their parents, to which I replied "Yes, because you weren't in the office the day the call came in, I called because we were concerned about your safety."  The reply was "Oh, I wish my Mother would quit meddling in my business.”

    You spent a lot more time with that parent than I would’ve, but maybe it was like watching a car wreck - it was awful, but hard to turn away from.

    On the subject of restaurateur Danny Meyer’s comments about not taking cash in some of his establishments, one MNB reader wrote:

    I remember reading a few years ago that welfare, food stamps, rent subsidies etc. were being paid with debit cards primarily for safety. I believe California was doing it and was surprised that the cards were being used in the top casinos in Las Vegas as well as the Four Seasons Resort on the Big Island of HI. I guess the point is, very few folks don’t have access to plastic. And even the recently bankrupt can get loaded debit cards ( OK they have to do the loading). And Danny is right . In certain neighborhoods flashing a lot of cash is an invitation to disaster. Maybe the jurisdictions mandating cash should use plastic for their benefit payments.

    MNB reader Howard Schneider chimed in:

    I agree with your view re: embracing rather than resisting the future. But cashless stores in the U.S. could be one more driver of inequality. Not EVERY customer has a smart phone wallet or payment app; many less affluent customers still rely on the cash or coins in their pocket.

    Regarding Amazon’s ambitions to be a third-part shipping provider, MNB reader Adam Koenigsberg wrote:

    Here in Columbus, about 100 miles from Amazon Air’s main hub near Cincinnati, I think the future for Amazon’s shipping is already here. There are Amazon semis and delivery vehicles everywhere, at least half the packages I get from Amazon are actually fulfilled by Amazon, and when they are, it’s very often next day – Product “ships” in the AM and I get it by bedtime. Even my Subscribe and Save stuff is arriving the day it ships, delivered via Amazon.

    Got several emails regarding Kate McMahon’s column yesterday dissecting the new Whole Foods discounts promotion.

    One MNB reader wrote:

    The timing of your piece was funny as I just had my bubble popped on this also.  I am looking into opportunities at Whole Foods and I just learned that all of these “Prime Discounts” are all funded by suppliers and are no different than running a scan or TPR promotion at another retailer.   As a Prime member I felt let down and disappointed in learning this -  I feel like Amazon is taking credit for the membership discount (and taking the money for it) but having it paid by manufacturers.    The perception is that it’s on the entire shopping trip, so many people are feeling let down at the register.
    Interesting to see how they adapt and change over the next couple of years.

    MNB reader Ron Coleman added:

    I liked your article and I share your sentiments.

    Whole Foods, under Amazon leadership, is losing its way.

    The natural and organic food movement (industry) is built on new, exciting
    breakthrough products and selection. Ever gone to the natural expo in Anaheim?
    Thousands of products; beautiful, tasty products and new approaches to merchandising. Whole Foods no longer leads the way in moving those items into their stores.

    Amazon/Whole Foods has slashed the number of SKU offerings probably by about 30 to 40%.

    I now go to the local area independents to get these products.

    Combine that with your point of pathetic discounts (ya, I am a Prime member too), very slow checkout lines (they cut labor at the front end); unimaginative and tasteless bakery and deli items, uninformed peripheral team members who stand around and talk to each other and check out each others latest tattoos, and I am going less and less to Whole Foods.

    KC's View:

    Published on: April 11, 2019

    Hooray for Hollywood! This podcast comes to you from the Retail Tomorrow Immersion conference in Los Angeles, which may have more storytellers per capita than any other place on earth. With visits to Google’s new campus in Playa Vista, in the converted hangar where Howard Hughes’ Spruce Goose once resided, and to some of the most interesting and experiential retail spaces in the city, this conference also featured several sessions that, now as podcasts, bring this fascinating content to you.

    First up - a discussion of disruptive storytelling - told through stores, pop-ups and, coming soon, AI and VR - that is changing the way marketers connect with and influence existing and potential customers.

    Our guests:

    • Cody Rapp, CEO of Calmist, a fascinating and growth-focused retail concept recently featured on MorningNewsBeat.

    • Lori Schwartz, founder of Tech Cat, which helps marketers shape their narratives in a fast-evolving environment.

    • Amanda Solosky, co-founder/CEO at Rival Theory, which is developing game-changing AI capabilities that definitely will impact the relationship marketers have with shoppers.

    • And Mariya Zorotovich, director of Responsive Retail Strategy and Incubation, at Intel Corporation, which helps to make all this possible.

    The host: Kevin Coupe, MorningNewsBeat’s “Content Guy.”

    Pictured, from left to right:

    Kevin Coupe, Mariya Zorotovich, Amanda Solosky, Cody Rapp, Lori Schwartz.

    KC's View: