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    Published on: April 17, 2019

    Tom Furphy and I found ourselves yet again in the same place at the same time - at the recent Home Delivery World expo, in Philadelphia - and so we were able to conduct the Innovation Conversation “live” on tape, having an actual conversation on-camera instead of via email.

    While the venue was focusing on home delivery, being a little contrarian, we decided to focus on stores - specifically what we can expect from the new chain of supermarkets that broad and widely accepted speculation suggests that Amazon plans to begin opening later this year.

    You can see the video at left.


    KC's View:

    Published on: April 17, 2019

    by Kevin Coupe

    Cool story from Atlanta Inno about how ride-hailing app Lyft “has partnered with the City of Atlanta to launch Access AgLanta, a six-month pilot ‘food desert’ program.”

    According to the story, “Lyft will provide 300 families in Atlanta living in low income neighborhoods with limited access to groceries, with subsidized rides to and from grocery stores and farmers markets. For the pilot, Lyft will work with some community partners to identify the 300 families. Then, using geofencing technology, they’ll bring them to participating grocery stores. The goal is to give families better access to healthier foods.”

    The project isn’t a total outlier. The story points out that “the Atlanta pilot program was inspired by Lyft’s recent fresh food access initiative in Washington, D.C.” But I think it is a good demonstration about what can happen when companies think about problems in different ways and come up with fresh approaches … it can result in connections that can sustain both companies and communities.

    It is an Eye-Opener.
    KC's View:

    Published on: April 17, 2019

    Business Insider has a profile of Yael Cosset, 45, head of digital at Kroger and soon to become the company’s chief information offer, who is "tasked with helping Kroger fend off” threats from the likes of Amazon, Whole Foods, Aldi, Lidl and pretty much everybody in between.

    Cosset tells Business Insider that “Kroger was positioned to win the battle for shoppers' grocery spending because of a key advantage over its competitors: nearly two decades' worth of data on its customers' shopping behavior … That data, along with Kroger's network of 2,800 stores and a new partnership with the UK technology firm Ocado, is powering a transformation that Cosset said would set Kroger on a path to success.”

    This data, Cosset says, allows Kroger to “execute a massive transformation.”

    According to the story, Kroger’s relationship with Ocado, allowing it to build “automated warehouses capable of fulfilling a 50-item order within minutes,” gives it a significant advantage. "We're going to be able to fulfill these orders in a way nobody else can," Cosset says. "There is no equivalent in the industry today in the US market.”

    The story quotes Cosset as saying that “once the Ocado warehouses were open, Kroger would use all its physical assets — including stores, distribution centers, and Ocado sheds — to fulfill orders in a way its competitors couldn't match.

    "We know what the trends are in terms of specific choices for products or food or flavors," he says. "We know more about the next yogurt trend or ice-cream trend than many of our competitors just because of the volume of interactions we have with our customers and our commitment to listening to what they tell us."
    KC's View:
    I have to admit that I love this quote from Cosset…

    "The role of technology, in general, will expand well beyond what's been most visible in the past five or six years in the industry around digital and e-commerce. The role of technology will change how we work and interact with our customers. At the core of everything we do is going to be how we take advantage of data and inject it into everything.”

    I’d like to think that this has been the message here at MNB for more years than I can count.

    Published on: April 17, 2019

    Reuters reports that private equity group Apollo Global Management is acquiring Smart & Final Stores for $1.1 billion, making it the second time that it has owned the Southern California-based retailer.

    The story points out that “the deal comes after Apollo sold Smart & Final to Ares Management Corp, another buyout firm, in 2012 for $975 million, including debt. It is Apollo's latest bet on the brick-and-mortar grocery sector, even after its last acquisition in the space, its $1.4 billion leveraged buyout of Fresh Market Inc in 2016, has soured amid increasing competition.”

    Smart & Final, which operates more than 300 stores in the western US, went public in 2012 while it was owned by Ares “at a price of $12 per share,” Reuters writes. “The shares have lost close to half their value since then, as the company struggled in a tough environment for brick-and-mortar retailers. Ares now owns close to 60 percent of the company.”
    KC's View:
    I’ve always been a big fan of the Smart & Final business model, and am not quite sure why its differentiated approach to retailing has not been able to break through the retail clutter to a greater extent.

    The question is whether its story simply is resonating with customers, or just not being told effectively enough. Hopefully Apollo will provide it with the resources to answer this question effectively.

    Published on: April 17, 2019

    Consumer Reports is out with its annual appraisal of the nation’s favorite supermarket chains, reporting that “five regional grocers shared top marks for customer satisfaction. They are Texas-based Central Market; mid-Atlantic brand Wegmans; Heinen’s, located in Ohio and Chicagoland; Southern California-based Gelson’s Markets; and Market Basket (Northeast) … Trader Joe’s is the only national chain to earn our top overall satisfaction score.”

    According to the report, “Our members told us their top reason for shopping at a grocer was low prices. Among members who quit shopping at a particular store because they were dissatisfied, one of the most common reasons stated was that it was too expensive.

    “Trader Joe’s and Market Basket (Northeast), both among the top six highest-rated markets, gleaned top marks on competitive pricing … Despite being rated favorably in nearly every category—and getting a top mark for meats and poultry quality—Whole Foods earned a mediocre score for overall satisfaction. The reason? Perceived high prices.”

    At the same time, the report says, “our members told us they prized low prices, they placed several chains with higher-than-average prices at the top of our ratings.

    “Gelson’s Markets, a 27-store California-based chain, for instance, was given our lowest mark for overall price competitiveness, and had a disappointing score for prices on organic options. Yet it was among the top-rated markets.”

    The report goes on: “After price, produce quality and the variety of goods a store carried were among the most important reasons members chose to shop where they do. Central Market and Wegmans were the only stores in the ratings to excel not only in produce quality, but also in produce variety, selection of healthy options, selection of locally produced products, and variety of international products or multicultural foods.”

    In a related study, Consumer Reports also looked at grocery delivery services:

    “Shipt, the online grocery delivery service owned by retailing giant Target, sits at the top of Consumer Reports' new ratings of online grocery-delivery services. Amazon Prime Now—the same-day service that delivers groceries from Whole Foods and other markets in dozens of cities—is another favorite.

    “Both services were rated highly overall by the Consumer Reports members we surveyed. Members gave Shipt top marks for hours of delivery, timeliness, communications about delivery status, packaging, and text-based customer service. Amazon Prime Now got commendable marks for delivery hours, timeliness, and communication about delivery status.

    “Both services got better-than-average scores for the quality and freshness of their delivered groceries.”

    The report goes on: “Consumer Reports members generally were pleased with the quality of the food from the delivery services they used. Shipt, Amazon Prime Now, and Instacart received favorable marks for quality and freshness of food. Peapod, FreshDirect, and Amazon Fresh received mediocre scores.

    “In our ratings, a major differentiator was price. Results from our members earned FreshDirect, Instacart, and AmazonFresh our second-to-lowest score—an orange chevron—for prices of delivered groceries. In comparison, Shipt, Amazon Prime Now, and Peapod were middling in this category.

    “Along with Instacart, AmazonFresh was among the worst for cost of the subscription service and delivery.”
    KC's View:
    I always think that these kinds of surveys have to be taken with a grain of salt … they are a snapshot, not a complete picture. It is incredibly instructive that both Market Basket and Gelson’s can get strong ratings - they are in very different markets, with very different approaches, targeting very different customers. And, apparently, succeeding.

    The key word is “different.”

    Published on: April 17, 2019

    Bloomberg has a story about the tough road that meal kit companies continue to face, even as many of them have migrated from an exclusively subscription-based model to one that also includes a presence in bricks-and-mortar stores.

    The story suggests that while meal kits are getting some trial in stores, they may not be getting repeat usage enough to gain any sort of real market traction. There remain a number of hindrances for shoppers - concerns about costs, excess packaging, and products that may not be particularly appealing to them.

    “Companies are already second-guessing the brick-and-mortar model,” Bloomberg writes. “Costco dropped Blue Apron to make space for seasonal products, and Albertsons, which only started selling Plated meals at Safeway and Shaw’s last year, earlier this month scaled back the rollout and fired 10 percent of its New York staff.

    “For meal-kit companies looking for a killer app, the answer may lie in picking niches rather than trying to be all things to all people. Sun Basket Inc., which is preparing for an IPO and recently sold a stake to Unilever, is targeting consumers looking for gluten-free, paleo-diet and vegetarian meals. It still operates as an online subscription. Marley Spoon, which has teamed up with Martha Stewart in the U.S., sells more affordable meal kits aimed at families who already cook rather than trying to persuade newbies to pick up a chef knife and spatula. The Berlin-based company recently rolled out a sub-brand called Dinnerly that sells for $4.99 per serving (plus $8.99 in shipping).”
    KC's View:
    I think there is an underlying premise in the meal kit business that appeals to shoppers, and while the national subscription model in this case may not be the killer app that some expected it to be, there are other ways to slice and dice the concept that will make sense to consumers and build business for retailers.

    Published on: April 17, 2019

    Digiday has a story about the continuing march of the robots into the retail environment.

    “On Monday, grocery retailer Giant Eagle rolled out Tally, a device developed by Simbe Robotics that roves around stores, monitors inventory and transmits data back to in-store teams that restock shelves. It’s currently live in three stores, and the company said it’s exploring scaling the tool to more locations. And last week, Walmart announced it was rolling out a series of robot deployments to support associates serving customers in-store as well as online orders. Both retailers would not comment on how much these robots cost, but Walmart said it was part of a bigger $11 billion investment for store makeovers, customer service and supply chain upgrades.” And, “other large retailers, including Target and Lowe’s, are testing the technology, but analysts say retailers are still at an early stage of deploying it, and they’re primarily being used to remove some of the more mundane day-to-day tasks of associates.”
    KC's View:
    As companies do this, the story suggests, they will be able to move employees from mundane tasks to jobs that are more focused on building customer relationships. I think that’s critical … the temptation will be to use technology to replace people, in part because of labor shortages and in part because of costs. Sometimes that will be necessary, but retailers have to be careful not to depersonalize their stores to the point that there are no human connections.

    That could be a fatal mistake.

    Published on: April 17, 2019

    The New York Post reports that Martha Stewart’s brand has been sold by Sequential Brands Group to Marquee Brands for $215 million.

    Sequential probably didn’t see it as a victory: It acquired the Martha Stewart brand four years ago for $355 million.

    That would be a loss of $140 million.

    The reason for the sale, the Post writes, is Martha Stewart’s age. (She’s 77.)

    “A source close to the situation likewise said Sequential took the painful markdown on Stewart’s brand ‘rather than waiting several years at the risk of her age’,” the Post writes. “Indeed, 77-year-old Stewart’s contract with Sequential included specific language about her death, requiring the firm to pay her 3.5 percent of gross licensing revenues of her brand for the remainder of her life — and to pay her estate for a ‘minimum of 5 years of payments’ if she dies before Dec. 31, 2030, according to securities filings.”

    Stewart is not a cheap date. She “was paid a whopping $6.6 million by Sequential 2017, including $406,941 for ‘non-business’ travel, $114,620 for ‘utilities and telecommunication services’ and $146,880 tied to ‘personal fitness, wellness, beauty and wardrobe,’ according to regulatory filings,” the Post reports.
    KC's View:

    Published on: April 17, 2019

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

    CNBC reports that “Italy’s competition authority announced on Tuesday it will begin a preliminary investigation into whether Amazon abused its dominance in e-commerce and logistics services.

    “The watchdog said it will investigate five companies of the Amazon group: Amazon Services Europe, Amazon Europe Core, Amazon EU, Amazon Italia Services and Amazon Italia Logistica … the Italian authority said it was specifically considering whether Amazon granted third-party vendors that participated in its own logistics service an advantage over other sellers not involved in the service.”

    I must confess to having a problem understanding the whole premise behind this probe and a number of complaints against Amazon - isn’t the whole point in a business venture to create differential advantages? It seems to me that in many ways, Amazon is being penalized for its success in doing just that. Of course the companies aligned with Amazon have advantages that others do not have - that’s the whole freakin’ point.

    TechCrunch reports that “smart speakers’ global installed base is on track to top 200 million by the end of this year, according to a report out today from analysts at Canalys. Specifically, the firm forecasts the installed base will grow by 82.4 percent, from 114 million units in 2018 to 207.9 million in 2019. The U.S. will continue to lead in terms of smart speaker adoption, but a good portion of this year’s growth will also come from East Asian markets —  particularly China, the report says.”
    KC's View:

    Published on: April 17, 2019

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

    • The Houston Chronicle reports that “Kroger, in partnership with California robotics company Nuro, has officially launched its autonomous grocery delivery service in Houston. Residents in ZIP codes 77401 and 77096 will be able to shop online at their local Kroger at 10306 South Post Oak and have their groceries delivered home via an autonomous Prius vehicle, modified with LIDAR, cameras and sensors.”

    The story notes that “Kroger's new service is the latest salvo in Houston's competitive grocery market, which has seen major grocers H-E-B, Walmart and Amazon-Whole Foods investing heavily in new technologies to offer more convenience services to customers, such as home delivery and curbside pickup.”

    • The Washington Post reports that the Conference Board Global Consumer Confidence Survey, conducted in collaboration with Nielsen in some 64 countries, suggests that consumers in more than half of them “said they expect economic conditions to worsen in the coming year … Uncertainty over international trade negotiations, as well as Brexit and whatever President Trump might do or say next have taken a toll on how much people plan to spend, particularly in North America and Europe … Overall, the Global Consumer Confidence Index slipped one point to 106 in the first quarter of 2019.”

    While the survey showed that “shoppers said they have cut back on clothing and entertainment costs in the past year, and have taken measures to save on gas and electricity,” there also is a dichotomy, because “they remained largely optimistic about job prospects and personal finances in the coming year. Nearly 60 percent of those surveyed said they felt ‘excellent’ or ‘good’ about their employment situation, while 63 percent said they had a positive view of their personal finances.”

    • Netflix said that in the just-completed first quarter, it added 9.6 million new customers, “ but only 1.7 million in its domestic market, fewer than it added in the U.S. a year ago,” the Wall Street Journal reports. “And the company, which recently raised prices, forecast slower gains in the second quarter in the U.S. and abroad. Despite the second-quarter forecast, Netflix said it still expects record subscriber growth for the full year … Netflix ended March with 148.9 million paying subscribers around the globe, surpassing its forecast of 148.2 million for the period. By that tally, it tops other subscription video services such as HBO and Hulu.”

    The story notes that “for the latest quarter, Netflix reported profit rose to $344 million from $290 million a year earlier. Revenue rose 22% to $4.52 billion.”

    Only going to get tougher for Netflix, which shortly will be facing off against new streaming entries from Apple and Disney, in addition to everyone else in the game. But I wouldn’t bet against Netflix, which has shown itself to be both resilient and persistently innovative.
    KC's View:

    Published on: April 17, 2019

    • Publix said yesterday that its stockholders elected Jennifer Jenkins to the the company board of directors, as Barney Barnett, Jane Finley and Charlie Jenkins Jr. all retired from the board. The board also named Barnett as Vice Chairman Emeritus.

    Barnett has served on the board for 34 years, and Finley has served for 10 years. Jenkins Jr. is Chairman Emeritus and has served on the board for 45 years.

    Jennifer Jenkins is Clinical Professor of Law and Director of the Center for the Study of the Public Domain at Duke University Law School, where she has worked since 2002.
    KC's View:

    Published on: April 17, 2019

    • On Friday, the inevitable will happen - the start of a rollout of Coral Reefer-branded cannabis products, part of a new partnership between singer Jimmy Buffett and Surterra Wellness, which describes itself as “one of the nation's fastest growing health and wellness companies.”

    According to the two companies, the new brand “will initially be exclusively distributed through the more than 20 Surterra Wellness Centers located in most major cities throughout Florida, and will roll-out in other states, including California and Nevada, by mid-summer 2019 … Coral Reefer vaporizer formulas have four different CBD-to-THC ratios that range from mild to high intensity (Low Tide, Mid Tide, High Tide and Tsunami) and were developed to provide tailored benefits for adults seeking pain relief, mood management, or total body relaxation.”

    The announcement says that “the new Coral Reefer cannabis brand aims to enhance peoples' lives while representing the carefree, relaxed roots of Key West. The launch of Coral Reefer represents a new approach of bringing cannabis and lifestyle products to consumers through an exclusive collaboration with an established, iconic, global brand.”
    KC's View:
    No doubt the usage of Coral Reefer brand cannabis will prompt people to sing the same familiar songs over and over and over. (Just kidding … I love Buffett.)

    Published on: April 17, 2019

    Yesterday we took note of a Boston Globe story about how the strike by members of the United Food and Commercial Workers (UFCW) against Ahold Delhaize-owned Stop & Shop - now in its sixth day - could be “a last stand for unionized grocery workers, whose stores are under attack by a host of competitors, all looking to grab a piece of the supermarket bounty.”

    The Globe wrote that Stop & Shop is “one of the last remaining union shops in the industry,” and quoted Burt Flickinger of the Strategic Resource Group as saying that “the cost of benefits can be difficult to convey to union workers. ‘It really becomes a challenge to communicate to the team members at the stores that while the compensation could be going up 5 to 8 percent,’ other factors, like filling the hole in an unfunded pension plan, providing a robust health insurance package, and accommodating new minimum wage laws, hurt profit margins.”

    I commented, in part:

    I’m sympathetic to the UFCW in this case, but mostly that’s because I think that organized labor hasn’t yet figured out a way to pivot to a new role in the management-labor construct. Too often, I think, the negotiations and tensions are focused around arrangements that make labor part of the problem, not part of the solution. Now, to be fair, I’m not sure that traditional corporate interests always allow for this … the two sides have been in opposition to each other for so long that it may be hard to find another way.

    I must admit that I wonder if, at the beginning of the negotiations between Stop & Shop and the UFCW, the labor folks looked at management and said, “Tell us about your problems, and tell us how you think we can help solve them.” And if management looked at the labor representatives and said, “Tell us about your problems and how you think we can help solve them.”

    Do you think that they discussed each other’s problems as opposed to their negotiating positions?

    MNB reader Michael Blackburn wrote:

    The problems are the same: non-unionized competition.  As these competitors grew over the last few decades, in order to stay competitive, unionized shops were forced to curb pension contributions, leading to the current funding issues, despite very strong capital markets.  And now, after consumers have become “addicted” to low prices, we can’t go back to a world of strong pensions and healthcare benefits. 
    Side note: it’s interesting we have the same pension/healthcare cost issues with public unions (teachers), where the price (tax) has certainly not been kept low, especially here in the Northeast.  Perhaps the real issue then is, our prior private company executives and public sector administrators provided too generous of a benefit package to their employees, and the current generation is paying the price.

    On another subject, from MNB reader Doug Galli:

    Kevin, reading your view about the FDA going after Wal-Mart and Kroger seemed rather flippant. It assumes that these retailers are not responsible and aren’t doing enough to keep age-restricted sales out of the hands of minors. As the individual responsible for 83 convenience store locations we take the following steps to train and reinforce positive behaviors with our associates:

    During orientation a  state-mandated and state-sanctioned training on both tobacco and alcohol (In New York State our people have to be re-trained on tobacco every three years.)

    When starting a shift they have to sign off that they understand our policy which is we proof everyone for alcohol and anyone that appears to be under 40 for tobacco (which includes e-cigarettes).

    A monthly sign off sheet stating that they understand our policies.

    We hire a third party to conduct monthly checks for both tobacco and alcohol and recognize and reward those that follow our policy.

    A store manager’s bonus is impacted if any of their associates fail a sting.

    If a store fails a sting the District Manager has to conduct a training class for all of the associates.

    We have to enter the birthdate for any age-restricted sale into our POS.
    In spite of all this, we still do on occasion fail a government sting. I’m sure that larger companies have programs equal to or greater than what we are doing. Seeing everything we do, the law should change and the individual employee that violates the law should be fined, not the responsible retailer that is doing everything possible to prevent this.
    I can assure you that we take this very seriously and don’t consider it the cost of doing business as the FDA assumes.

    I only meant to be flippant about companies that don’t take it seriously. You clearly do, and I applaud your efforts.

    Finally, regarding yesterday’s piece rhapsodizing about baseball caps (yes, there was a business lesson), MNNB reader Lance Hollis McMillan wrote:

    When The Los Angeles Dodgers won the World Series in ’88, I bought a brand new cap with the idea that I would only buy a new cap when the Dodgers won another World Series. 30 years on and I’m still going strong, but my cap is not – even the dog avoids it. Maybe this year…

    I find rotation is the key. And probably avoiding unreasonable expectations.
    KC's View:

    Published on: April 17, 2019

    Hooray for Hollywood! This podcast comes to you from GMDC’s 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.”

    You can listen to the podcast here, or on iTunes ands Google Play.

    Pictured, from left to right:

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

    KC's View: