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    Published on: June 10, 2019

    by Kevin Coupe

    Fast Company has a piece about how, in a time when “near-record-low unemployment has companies fumbling to find the best ways to recruit and retain workers,” the best way for companies to score is to “give them a real stake” and share “some of the profits and even ownership with the men and women who are fundamental to their companies’ success.”

    The piece goes on to point out that “a recent government survey found that vast majorities of respondents across the political spectrum prefer to work for an employee-owned company than an investor- or state-controlled business.”

    It is worth reading the story,
    which notes that “sharing the fruits of a company’s success with workers makes the latter happier while helping - or at the very least not hurting - the former’s profitability.” Companies that shared their success with employees through a variety of ways, ranging from employee stock ownership to profit sharing, tended to perform “statistically better than the others on a variety of measures.”

    Now, to be fair, the article’s authors have a vested interest - two of three have roles at Rutgers University’s Institute for the Study of Employee Ownership and Profit Sharing. (If they’d come up with the opposite conclusion, that;’s be the real surprise.)

    And, in the interest of full disclosure, one of the reasons I liked the story is that it does reinforce my own opinion - that companies and business leaders need to be more cognizant and rewarding of the people on the front lines … the people who actually make the stores work.

    When that start happens on an even broader scale that it does now … well, that’ll be an Eye-Opener.
    KC's View:

    Published on: June 10, 2019

    Ahold Delhaize-owned Stop & Shop announced that it now is offering same-day pickup of groceries - ordered through its Peapod e-commerce service - at 20 of its stores in Massachusetts (10 stores), Rhode Island (8) and one each in Connecticut and New York.

    The company says that pickup will be available in as little as four hours from the time an order is placed, and that the service costs $2.95 per order.

    The Boston Globe writes that “a Stop & Shop worker will bring the items out and put them in the customer’s car, according to the release. Each of the stores will have four to six parking spaces designated for pick-up.”

    The Globe story also quotes Stop & Shop President Mark McGowan as saying, “As we continue to improve the omnichannel experience for our customers, we plan to roll out 175 of these ‘click-and-collect’ locations by the end of the year … We’re excited to offer our customers the convenience of shopping online for the all the products available at their local store, which they can now pick-up in just a few hours.”
    KC's View:
    I have three different reactions to this announcement.

    First, I think the more that Ahold Delhaize-owned chains can integrate Peapod to a greater extent into their everyday operations and weaponize the service as a way to compete in the digital realm, the better.

    Second, I also have to point out that Stop & Shop is announcing same-day pickup, in as little as four orders after an order is placed, in the same week as Amazon announced that it’ll be shortly be using drones for same-day delivery and Walmart plans to have its employees actually putting groceries in the refrigerators of smart-technology-enabled homes in four cities. It just sounds, on the face of it, that Amazon and Walmart (and others) are setting the innovation bar very high, and Ahold Delhaize-owned stores may have to learn to jump higher in order to keep up. (Pickup sounds good, but we’ll shortly be at the point where customers will be ordering from their cars and will want to have their orders waiting for them in 14 minutes not four hours.)

    Third … it is entirely possible that in the short term, Stop & Shop is offering a service that is going to be highly relevant to today’s customers … and that it can worry about drones and in-home refrigerator deliveries tomorrow or next week.

    Published on: June 10, 2019

    Barnes & Noble, the bookselling chain that has fallen on tough times as Amazon’s business model has ascended, is being sold to a hedge fund controlled by Elliott Management Corp., an investment firm led by billionaire Paul Singer.

    The cost: $683 million, including debt, which the Washington Post points out is “a 33% premium to Barnes & Noble’s average closing price over the last 20 trading sessions.”

    NPR notes that “the move marks Elliott's second major splash in the world of books in the span of a year. Last June the New York-based hedge fund acquired Waterstones, which, with more than 280 bookshops, is the largest retail bookseller in the U.K.”

    Barnes & Noble traces its roots back to the Great Depression, when a single store operated in New York; now it has more than 600 stores around the country and is described as the country’s largest operator of bookstores, though the Washington Post points out that this is “a title that means little today.”
    KC's View:
    The good news for Barnes & Noble is that the sale means it no longer will operate as a public company, which gives it room to maneuver away from the pressures of the stock market and broader investment class. It remains to be seen whether being owned by a hedge fund will be a good thing, though at least the hedge fund isn’t controlled by Eddie Lampert (who has done little but screw up Sears since he bought it).

    It also is an open question whether consolidating Barnes & Noble’s and Waterstones’ management is going to be flexible enough to address the competitive issues that they face. While Barnes & Noble has suffered at the hands of Amazon, independent booksellers - which have been nimble in their ability to find and exploit competitive advantages - have fared better.

    Published on: June 10, 2019

    FedEx announced on Friday that it will not renew an express shipping service contract it has with Amazon, saying that this is a its “strategic decision” designed to allow it to serve “the broader e-commerce market” since it has the capacity “to serve thousands of retailers in the e-commerce space, including brands such as Target, Walgreens and Walmart.”

    In its analysis, the New York Times writes:

    “Friday’s move … reflects how Amazon has gone from simply a sought-after customer to a direct competitor of FedEx. As Amazon has built its own delivery capacity through a fleet of airplanes and same-day couriers, the internet giant has been able to ship more of its products on its own and control its costs. That has put FedEx in an untenable position of essentially competing with Amazon for Amazon’s own business.

    “FedEx is betting on other retailers, which are expanding their e-commerce businesses but still need shipping companies to help them fulfill their express orders. FedEx said e-commerce was expected to double to 100 million packages a day in the United States by 2026.”

    And in its story, TechCrunch writes:

    “The change would not affect other existing contracts with Amazon or international services. FedEx Express only impacts air services. FedEx will still serve as a carrier for Amazon for last-mile deliveries.” Furthermore, it writes, “FedEx tempered the news by stating that Amazon is not its largest customer. The percentage of total FedEx revenue attributable to represented less than 1.3% of total FedEx revenue for the 12-month period ended December 31, 2018, according to FedEx.”

    The Times story points out that the Walmart reference in the FedEx announcement is a kind of shot across Amazon’s bow, since “Walmart has become a particularly large FedEx customer … and the move not to renew the contract shows how the shipping company is deepening ties with Amazon’s biggest rival.”

    Amazon released a statement saying that it respects the FedEx decision.
    KC's View:
    I suspect that Amazon customers won’t notice any of this, but it is clear that FedEx, while it has said in the past that it wasn’t worried about Amazon becoming a shipping competitor, is creating a little distance between the two companies. That makes sense from the FedEx perspective, and I think we’re going to see more of it.

    Published on: June 10, 2019

    The Washington Post has a story about how Walmart’s embrace of technology and automation - “the nation’s largest private employer has unleashed an army of robots into more than 1,500 of its jumbo stores, with thousands of automated shelf-scanners, box-unloaders, artificial-intelligence cameras and other machines doing the jobs once left to human employees” - is having a perhaps unexpected impact on human employees.

    “Walmart executives have promised the all-hours robot workhorses will let employees endure less drudgery and enjoy ‘more satisfying jobs,’ while also ensuring shoppers see cleaner stores, fuller shelves and faster checkouts,” the story says.

    “But the rise of the machines has had an unexpected side effect: Their jobs, some workers said, have never felt more robotic. By incentivizing hyper-efficiency, the machines have deprived the employees of tasks they used to find enjoyable. Some also feel like their most important assignment now is to train and babysit their often inscrutable robot colleagues.”

    Plus, as humans train robots to do what used to be their jobs, “this awkward interplay of man vs. machine could become one of the defining tensions of the modern workplace as more stores, hotels, restaurants and other businesses roll in robots that could boost company reliability and trim labor costs.

    “Many Walmart workers said they had long feared robots would one day take their jobs. But they had not expected this strange transition era in which they are working alongside machines that can be as brittle, clumsy and easily baffled by the messy realities of big-box retail as a human worker can be.”
    KC's View:
    This is a sticky wicket in so many ways … there is, of course, the almost irresistible temptation to make references to Terminator or , though the folks at Walmart would prefer references to the cute droids of Star Wars.

    A couple of things that grab my attention. One is that the story quotes Walmart president-CEO Doug McMillon says that “the machines were an important part of how the company, which has annual revenue of $500 billion, could trim waste and ‘operate with discipline’.” That sounds a lot more like efficiency than effectiveness to me, and I always worry when companies think that way.

    But what really would concern me is the story’s reference to the Auto-C self-driving floor scrubber that operates in a Georgia Walmart supercenter; the piece says that shoppers are not always sure how to interact with it, and that an employee at the store says that “a man fell asleep on top of the machine as it whirred obediently down a toy aisle.

    “Walmart executives said they are skeptical that happened, because the Auto-C is designed to stop if someone interferes with its work.”

    I get a little worried when executives go on the record as doubting the word of an employee. It says something about the relationship between management and labor, and it is’t good.

    Published on: June 10, 2019

    CNBC has a story suggesting that as Amazon-founder Jeff Bezos - long the sole face on the company’s culture and ambitions - has “an ever-growing portfolio of ambitious projects outside of Amazon to occupy his time and energy,” we’re starting to see and hear from other senior executives at the company.

    Among them - Jeff Wilke, the CEO of Amazon’s worldwide consumer business … Dave Limp, Amazon’s devices chief … and Jeff Blackburn, who oversees Amazon’s video and advertising businesses.

    The story says that “the changing approach at Amazon comes as its expansion reaches unprecedented levels. Beyond online shopping, the company is engaged in everything from physical retail and shipping to drone delivery, voice technology and movie production. It’s the second most valuable publicly-traded company in the world, behind only Microsoft.”

    Bezos, the story points out, “is spending more of his time outside of Amazon. He invests roughly $1 billion every year on his spaceship company Blue Origin, and has been more engaged with the venture of late. He also owns The Washington Post, which he bought for $250 million in 2013, and remains an active start-up investor, having backed Uber, Airbnb, Nextdoor and dozens of others.”
    KC's View:
    It must be pointed out that Amazon hasn’t completely kept its executives out of the spotlight. Gianna Puerini, the vice president of Amazon Go, was very much the face and voice of that operation when it started opening.

    In a broader sense, it makes sense to share the spotlight … if only to reassure investors that Amazon has the kind of bench strength that would survive a loss of Bezos.

    Published on: June 10, 2019

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

    Fox Business has a story about why Walmart has decided to offer fewer items (about 220,000 SKUs) for next-day delivery than Amazon (millions of SKUs):

    “Despite the large difference, it seems like Walmart isn’t rushing to match Amazon’s next-day delivery. Walmart e-commerce CEO Marc Lore said Friday at the company’s annual shareholders meeting in Bentonville, Arkansas that it would be too expensive to offer next-day delivery for all of its products.”

    “Certainly we think the breadth of assortment is critical,” Lore said in response to a question. “…We think that offering now the 200,000, but growing to hundreds of thousands more represents a really high percentage of sales done. And if we can offer that next-day experience in a consistent way with no membership fees we think that’s a very compelling value proposition … After you get past the top, let's say, hundreds of thousands, or top million SKUs, with overnight or next-day delivery, it gets exponentially more expensive … There’s a limited pool of dollars and you have to decide where to invest in the value prop … Do you invest beyond the top 80 percent of sales? Do you go for speed there? Or do you take those dollars and put it into same-day delivery of grocery?”

    However, Lore also said that Walmart plans to add hundreds of thousands of items to the next-day-delivery program in the future.

    TechCrunch writes that Walmart is saying that one-year after it launched its startup Jetblack personal shopping service in New York City, “two-thirds of customers engage with the service on a weekly basis, and spend an average of $1,500 per month on JetBlack purchases.”

    The story points out that this “doesn’t mean the customers are only buying products from Walmart or its subsidiaries like — JetBlack is a standalone e-commerce business incubated by Walmart, and will deliver products from other retailers as well. In fact, the only things it won’t deliver are fresh groceries, alcohol, CBD-related products, tobacco and prescription medications and lenses.”

    Yahoo Finance has an interview with Walmart CEO Doug McMillon in which he “shared three tips for associates who might one day want his job at the helm of the world's largest retailer.”

    Those three tips are “don't forget your short-term objectives” (and remain focused on getting today’s job done well) … “be a great teammate … Helping other people develops your leadership skills, and people start to see you as a natural leader” … and “take on a challenge or task that isn't getting done,” because these “are great learning opportunities, and occasionally you can really change something there, and people tend to notice it.”

    McMillon, of course, started at Walmart almost three decades ago as an hourly associate.

    He should’ve offered a fourth tip - pray that senior execs with names like Lore and McKenna and Foran, who may be hoping to get McMillon’s job someday, get hit by a bus.
    KC's View:

    Published on: June 10, 2019

    • IRI is out with its latest IRI Consumer Connect survey, concluding that while “food inflation softened in Q1 2019 to 1.7% compared to 2.2% in 2018 … not everyone is freely opening their wallets. Younger millennials (born 1990+) are outspending older generations in food dollars, while older cohorts are more likely to be using a number of money-saving tactics to keep food bills manageable … In fact, younger millennials’ edible dollar sales grew by 21.5% for March compared to a year ago. And edible dollars sales for retirees and senior is down by 3.8% for March compared to a year ago.”

    • The Wall Street Journal this morning reports that the iconic New York City restaurant The Four Seasons will close down on Tuesday, a victim of high debt, rising rents, increased labor costs, and, perhaps most critically, the fact that the high-end “white-tablecloth, prim-and-proper model is falling out of favor with younger consumers who prefer more casual options. The whole idea of the ‘power lunch,’ a concept closely associated with the Four Seasons, may have lost its meaning in an era when even high-powered professionals eat at their desks or opt for fast-casual meals, experts say.”

    The Four Seasons, which has been around for six decades, actually moved locations last year, but rather than saving the establishment the $40 million relocation costs appear to have crippled it.
    KC's View:

    Published on: June 10, 2019

    Wakefern Food Corp. and ShopRite announced the passing of Rocco ‘Rocky’ Cingari, 89, a lifelong resident of Stamford, Conn., and the longtime president/CEO of Grade A Market, Inc., which owns 11 ShopRite stores in Connecticut. Cingari served as president/CEO of Grade A Market for nearly 40 years until last January, when his nephew, Tom Cingari, Sr., succeeded him at the helm of the family company.
    KC's View:

    Published on: June 10, 2019

    The other day, we took note of a Washington Post report about how Walmart executives and Sen. Bernie Sanders (I-Vermont), who is running for the 2020 Democratic presidential nomination, found common ground yesterday - that America needs a higher minimum wage.

    They did not, however, agree on how much higher. And not on much else.

    Walmart CEO Doug McMillon said at Walmart’s annual shareholders meeting that Congress should raise the $7.25/hour federal minimum wage, saying that it is “lagging behind” Walmart’s national minimum of $11/hour. “It’s clear by our actions and those of other companies that the federal minimum wage is . . . too low,” McMillon said. “It’s time for Congress to put a thoughtful plan in place to increase the minimum wage.”

    Sanders, who was invited to the meeting by Walmart employees hoping to advance a proposal that would give them a seat on Walmart’s board, argued that Walmart ought to raise its minimum wage of $15/hour, which he said already is being paid by the likes of Costco and Amazon.

    I commented, in part:

    This story certainly is a reminder of the fact that Walmart will continue to be a lightning rod for politicians of a certain stripe. The extent of the examination that Walmart will get - cursory or proctological - all depends on how elections go.

    While I do think that retailers traditionally have undervalued the importance of front line employees who often determine the effectiveness of a shopping environment, and should pay them more, I cannot imagine that there many out there who are spending $7.25/hour on workers. There are a lot of states with higher minimums, plus the high demand and low supply of workers mean if you want employees, you have to pay more. (If you’re paying your store employees $7.25/hour, you probably have crappy customer service and you’re whining about how unfair competition is.)

    While I understand why Walmart wouldn’t want someone from the rank and file on the board, I think it might be well-served to have such a person in on the decision-making process. It might get a different perspective, and maybe some understanding from labor about the issues with which it deals on a daily basis.

    One MNB reader, however, took issue with my comments:

    I'm a huge fan of Morning News Beat and have read your content for years. You are always timely and spot on with regard to the retail industry's trends and news.

    However, I have to take issue with your comments regarding Wal-Mart and Bernie Sanders' entreaty for a board member devoted to workers compensation as way off the mark.

    Doug McMillon's call for Congress to increase the federal minimum wage was, at best, disingenuous. How a person making 1000X more than his average worker could suggest that some other entity (in this case Congress) is responsible for low wages is laughable. The sad truth is that Mr. McMillon is in charge of his own destiny and it is completely within his purview to raise workers' wages to a livable amount. I would argue that $20.00 / hour is closer to "livable" than $15.00, but I digress.

    In today's hyper competitive retail industry, wouldn't it be an advantage to fairly compensate your front line workers? Case in point is Costco, who pays their workers fairly and, by all measures, out performs its competitors, each and every day. Most industry pundits, yourself included, tout the store experience and the critical role front line workers play. So, it seems to me that Mr. McMillon and Wal-Mart would benefit from a little fairness. 

    I think you are missing a huge shift in the world today, which disconcerts me, as you are usually laser focused on shifting trends in the marketplace. The concentration of wealth in our country (in the hands of the 1/2 of 1%) has resulted in the disappearance of the middle class. History shows that this form of society never excels. In fact, a strong middle class has resulted in most of our major achievements and we are in danger of continuing to decline, if this continues. 

    Like climate change, we need bold measures to rebuild the middle class in order to reverse this disturbing trend in our country. We ignore it at our peril, just like climate change. Half measures, such as your suggestion of having a person in Wal-Mart devoted to workers compensation, simply aren't enough. A board member is appropriate although I wonder if even that will be enough. It's time for action if we are to leave our children and grandchildren a world where they can thrive and achieve, just like climate change.

    Finally, as I was once told  "You pretend to pay me, I pretend to work here". I note this anecdote is from a friend who emigrated from the former Soviet Union, where this was a common refrain. They remember standing in line for toilet paper. I don't want our great country to descend into this type of society. I hope you don't either.  Let's turn it around while we still can.

    On another subject, referring to a recommendation I made a few weeks ago, an MNB reader wrote:

    I was in LA this week visiting my son and, based on your article, we visited the Dreamscape Experience in the Westfield Century City Mall.  We had an awesome time.  Thanks for the referral.

    My pleasure. I’m glad I can please some of the people some of the time.
    KC's View:

    Published on: June 10, 2019

    In game six of the NHL Stanley Cup finals, the Boston Bruins defeated the St. Louis Blues 5-1, tying the best-of-seven series at 3-3 and sending it to a seventh and deciding game.

    In the French Open men’s singles championship this weekend, Rafael Nadal won his 12th French Open title, defeating Dominic Thiem, 6-3, 5-7, 6-1, 6-1.

    And, in the women’s singles championship, Ashleigh Barty defeated Marketa Vondrousova 6-1, 6-3.
    KC's View: