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    Published on: July 24, 2019

    In this new Retail Tomorrow podcast, recorded at GMDC’s annual GM conference in Denver, we focus on the ways in which startups are working to disintermediate traditional retailers … how retailers can turn these innovations to their own advantage … why cultural resistance within companies can be the ultimate enemy of progress … and even brainstorm about a business model that could’ve made Toys R Us relevant again.

    You can listen to the Retail Tomorrow podcast here, or on iTunes or GooglePlay.

    The Retail Tomorrow podcast series is a production of GMDC, the Global Market Development Center.

    Our guests:

    • Patrick Fore, CEO and co-founder of Fleat.

    • Sterling Hawkins, co-founder of the Center for Advancing Retail & Technology (CART).

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

    Pictured, left to right: Patrick Fore, Kevin Coupe, Sterling Hawkins

    KC's View:

    Published on: July 24, 2019

    The US Justice Department announced yesterday that it will launch an antitrust investigation into the nation’s largest technology companies - including Amazon, Apple, Facebook and Google, though authorities did not name these companies specifically - to see if they are behaving in an anti-competitive fashion.

    This new probe joins similar investigations being conducted by the US Congress and the Federal Trade Commission (FTC), not to mention in the European Union.

    The New York Times, its analysis, writes that “the action is the clearest sign yet that the longtime arguments that helped shield the tech giants from antitrust scrutiny are eroding. Since the 1970s, a consensus in antitrust circles has been that if companies were focused on consumer welfare — for example, by offering low prices — they were not likely to attract federal intervention. Since companies like Google and Facebook largely provide free services, the thinking went, they were not subject to federal antitrust examination.

    “But that approach has evolved, pushed by scholars and others, as concerns about the clout and reach of Google, Facebook, Amazon and Apple have grown … The Justice Department’s review may not lead to full-blown investigations of the companies. But the timing of the announcement ratchets up pressure on the tech giants.”

    The Times quotes Attorney General William Barr as saying that “tech companies should stop using advanced encryption and other security measures that effectively turn devices into ‘law-free zones,’ essentially criticizing Apple and its iPhones without naming them.”

    None of the big tech companies commented on the Justice department announcement, though Apple did point reporters to a recent CBS News interview with its CEO, Tim Cook, in which he said, “I think we should be scrutinized. But if you look at any kind of measure about ‘is Apple a monopoly or not,’ I don’t think anybody reasonable is going to come to the conclusion that Apple’s a monopoly.”

    In its coverage, the Wall Street Journal writes:

    “The Justice Department will examine issues including how the most dominant tech firms have grown in size and might—and expanded their reach into additional businesses.

    “The Justice Department also is interested in how Big Tech has leveraged the powers that come with having very large networks of users, the department said.

    “There is no defined end-goal yet for the Big Tech review other than to understand whether there are antitrust problems that need addressing, but a range of options are on the table, the officials said. The inquiry could eventually lead to more focused investigations of specific company conduct, they said.”

    In a related story, Bloomberg reports that Rep. David Cicilline (D-Rhode Island) accused Amazon lawyer Nate Sutton’s recent testimony to a House of Representatives committee that Amazon “doesn’t use data it collects on sales to favor its own products over third-party sellers.”

    According to the story, “Cicilline cited a media report in which a former Amazon employee in product management claimed to have pulled ‘sellers’ data to look at what the best products were,’ according to an excerpt in the lawmaker’s letter.”

    Bloomberg writes that the lawmaker has written a letter to Amazon asking “questions about Amazon’s relationship with third parties that sell on its platform. Critics of the company have said it can use the data it collects about sales to favor its own products and squelch competition. The letter also asks about Amazon’s share of the online retail market and about its cloud-computing business.”

    In other letters, the story says, “Cicilline queried Google on whether its ‘guiding principle’ is to send users off its own sites after they conduct a search as well as an agreement with Apple Inc. for Google to be the default search engine on Apple devices. He asked Facebook about its evaluation of start-ups for acquisitions, among other issues.”
    KC's View:
    Someone wrote - and I think this is pretty accurate - that the major tech companies have managed to do something almost unimaginable in 2019.

    They’ve united Democrats and Republicans.

    Yikes. Will wonders ever cease?

    It seems clear that big tech is going to be facing a lot of legislative and regulatory challenges in the near future, and there probably will be a number of ways in which they will have to adjust their business models.

    On Monday, we had a story and commentary that outlined many of the issues with which Amazon is dealing, including probes into its business practices taking place in Europe.

    Well, yesterday MediaPost reported that “Germany agreed to drop a seven-month investigation into Amazon's merchant terms and conditions after the marketplace said it would amend its Business Services Agreement. The company plans to make the changes worldwide.

    “The new terms will take effect in August. This means Amazon will comply with Europe's liability toward business partners on its European platforms, giving merchants 30-day notice and an explanation before removing a seller from the platform.”

    Compliance. Willingness to adjust and change. Discretion, in fact, may end up yet again being the better part of valor.

    Published on: July 24, 2019

    The Wall Street Journal reports that United Parcel Service (UPS) will begin making Sunday deliveries next year, following a similar move by FedEx, a reflection of the expanding demands and opportunities created by an e-commerce economy.

    UPS has been following a six-day-a-week delivery schedule, the story says. In expanding to Sundays starting in January, the Journal writes, UPS “will be assisted in part by the U.S. Postal Service, which delivers some UPS packages to homes for the final leg of a package’s journey.”

    The story points out that “the changes illustrate a grand realignment of America’s parcel delivery apparatus as companies try to determine how best to deliver packages for insatiable online shoppers at the lowest cost possible.”

    In addition to expanding its delivery schedule, UPS will install pick-up locations in retailers that include CVS, Michael’s and Advance Auto Parts - giving it, according to the Journal, “as many as 12,000 of their stores as new drop-off points for deliveries and returns. More of these access points help lower delivery costs because its cheaper to deliver multiple packages to one location instead of singular deliveries to multiple homes.”

    In its analysis, the Washington Post writes, “Retailers and delivery services are racing to find new ways to offer fast — and secure — ways for customers to pick up their packages. Amazon offers free in-car delivery for Prime members, while Walmart’s is testing smart-lock technology that allows workers to drop off packages in residents’ homes even when they aren’t there.

    “UPS offers package pickups and drop-offs at about 9,000 neighborhood shops, banks and office buildings, as well as 5,000 of its franchised company stores. Its newest efforts would more than double its national reach.”

    “Our big goal is to be near the U.S. population,” says Kate Gutmann, chief sales officer for UPS. “And retailers see this as a win-win: It’s a way to generate revenue and increase walk-through traffic.”

    FedEx has been offering pickups at retailers such as Walgreens.
    KC's View:
    Sometimes it is just staggering how far we have come in terms of consumer expectations and how businesses turn themselves inside out to deliver on them. I’m old enough to remember when, in the town where I grew up, supermarkets weren’t even allowed to be open on Sundays. And now … there’s absolutely no reason and no excuse for why almost anything not being delivered anytime and anywhere you want it. (Except a sandwich from Chick-fil-A, of course.)

    I think this is a good thing. Retailers certainly have no choice but to meet consumer demands, and delivery businesses like FedEx and UPS have no choice but to build out their infrastructures in response.

    But it does seem like nobody, ever, will get a chance to take a deep breath and relax.

    Published on: July 24, 2019

    Even as its business model is under attack by regulators and lawmakers afraid that its ubiquity and ecosystem-driven business model has created a company that quashes legitimate competition, Amazon said yesterday that it is moving into the business of selling people’s homes.

    Sort of.

    The arrangement has Amazon creating a partnership with Realogy, described as “the nation’s largest residential real estate brokerage company and owner of Century 21, Coldwell Banker and other realtor brands.”

    Together, the two businesses are creating TurnKey, an Amazon-associated site that will pose questions to users and then provide that information to the appropriate real estate agent, who will call the buyers to follow up.

    Amazon is providing an incentive to potential homeowners: when they close on a house identified by TurnKey, they will get $5,000 in home services and smart-home technology.

    Here’s the Times analysis:

    “Amazon is now as much a search engine as it is a store, and the deal fits into the company’s effort to capitalize on its status as an online destination by making money on advertising and other services. It’s also a way to encourage people to adopt products like Alexa speakers and Ring doorbells and to promote its list of handymen, furniture assemblers and other home services … More than half of all product searches in the United States start directly on Amazon, according to the marketing analytics firm Jumpshot, and Amazon has increasingly been using customers’ searches to stimulate the sale of services that the company does not directly offer now.”

    As for Realogy, which will “pay for those benefits, the partnership is a way of using Amazon to find home buyers and help its brokers separate the closers from the lookie-loos by rebating a portion of its commission, in the form of free Amazon stuff, to anyone who actually buys a house.”
    KC's View:
    Let me get this straight. Amazon is going to have a direct pipeline for its home security technologies - which, among other things, allow Amazon to make deliveries in a more secure fashion and more efficiently replenish items that they sell to people who are buying homes - to people who are buying homes, and it doesn’t even have to pony up the five grand worth of product?

    You just have to admire the ways in which Amazon continues to build out its ecosystem. Unless, of course, you happen to be a government regulator and/or lawyer.

    Published on: July 24, 2019

    Starbucks will expand its delivery ambitions next year, bring the service - powered by UberEats - to customers all over the country.

    TechCrunch notes that “Starbucks first partnered with Uber Eats in 2018 with a pilot in Miami and expanded to cover 11 markets,” including Seattle, Boston, Chicago, New York, Washington, D.C., San Francisco, Los Angeles, Orange County, Houston and Dallas. “The partnership enables customers to place orders via the Uber Eats app and track those orders in real time.”

    As Starbucks made that announcement, the story points out, Uber said that it will begin testing “a new monthly subscription that includes unlimited free deliveries via Eats.”
    KC's View:
    I wonder if this means that Starbucks is facing the reality that there are natural limits on its “third place” strategy, since it is now willing to deliver a venti latte to one of the other two places.

    Next up … Starbucks will introduce proprietary caffeine delivery systems, so we’re constantly getting its product into our veins.

    Because, why not?

    Published on: July 24, 2019

    Inc. has a story about how Target says that its almost 100 small stores around the country, which are roughly one-third the size of its traditional units, “are the company's most productive … These outposts are working so well, the company plans to open as many as 30 per year over the next few years, in contrast to only two traditional-format stores opening this year.”

    The most productive of its small stores, the story says, is - not surprisingly - at Herald Square in New York City.

    One of the advantages of the format, the story says, is that Target has been able to fine-tune the SKU count so they are appropriate to the location - heavy on tourist-oriented merchandise in one place, but selling items appealing to college students in another, for example.

    According to the story, “Amazon has toyed with a dozen or so physical locations, and Walmart has experimented with smaller stores, but neither has worked nearly as well as Target's strategy.”
    KC's View:
    Target is a good example of what can happen when a CEO has a vision and is willing to bet the company on it. Of course, it helps that in this case leadership actually was right…

    Published on: July 24, 2019

    The Washington Post has the unique and sad tale of Larry Ely Murillo-Moncada, a 25-year-old employee at a No Frills Supermarket in the Council Bluffs, Iowa, market, who disappeared on November 28, 2009.

    This week, almost a decade after he vanished, Murillo-Moncada’s body was found - behinds the coolers of the supermarket where he worked. The store had been closed since 2016, and the decaying body was found when workers came in to dismantle the long-abandoned equipment.

    According to the Post, “A day before Murillo-Moncada disappeared, his mother, Ana, told the Daily Nonpareil through an interpreter that her son had come home after a Thanksgiving shift at the supermarket and seemed disoriented. She took him to a doctor and he was prescribed an antidepressant, but the medication didn’t appear to help, the newspaper reported. The feeling of confusion persisted and Murillo-Moncada started to hear voices, Ana said. Then came the hallucinations … At 6:15 p.m. on that frigid November evening, Murillo-Moncada rushed out the door wearing no shoes or socks, dressed only in a navy blue hoodie and light blue pants, according to the Daily Nonpareil,” leaving behind his keys and car.

    It appears that Murillo-Moncada “went to the store after leaving his house and scaled the coolers before falling about 12 feet into the space between the units and the wall.” His death is being treated as accidental by police.
    KC's View:

    Published on: July 24, 2019

    Reuters reports that “Chinese e-commerce giant Alibaba Group Holdings Ltd will allow small U.S. businesses to sell on, the company said on Tuesday, as it seeks to tap into the business-to-business e-commerce market and fend off rivals like Amazon.”

    The story says that “the change will open up markets to U.S. merchants in countries served by Alibaba, including India, Brazil and Canada. U.S. merchants, previously able to only buy on, can now also sell to other U.S.-based businesses on the marketplace.

    “Roughly one-third of buyers on are U.S.-based. More than 95% of sellers come from China.”

    The Reuters story goes on: “Alibaba’s pitch to U.S. small businesses comes as the company faces lean e-commerce revenue growth, which has been further threatened by the U.S.-China trade spat and a growing number of rivals such as recently listed Pinduoduo Inc. Alibaba, which does not sell inventory of its own, hopes to attract local U.S. businesses as their marketplace platform of choice by offering small- and medium-sized businesses global selling power.”
    KC's View:

    Published on: July 24, 2019

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

    • The Ithaca Journal reports that at the end of the month, “Wegmans will stop providing plastic bags at its stores in Ithaca and Corning as the company heads in the direction of removing plastic bags from all of its locations in New York state. Wegmans announced in April that it will eliminate plastic bags from all its New York stores ahead of the state ban that will take effect on March 1, 2020.

    “The grocer's goal is to convert all customers to reusable bags. Paper bags will continue to be available at 5 cents for each bag. All money collected from the pilot program will go to the Food Bank of the Southern Tier.”

    • The Associated Press reports that in about a month, LL Bean will open its first store in Canada, just outside Toronto, in a partnership with Toronto-based Jaytex Group. The iconic retailer launched a Canada-specific website last month.

    According to the story, “L.L. Bean already owns 28 stores, a call center and a distribution center in Japan, where it has operated since 1992.”

    I did a new Retail Tomorrow podcast taping the other day with Steve Smith, the CEO of LL Bean, and we’ll be posting it here in a few weeks … I think you’ll really like it, and will find it enormously illuminating. Stay tuned.

    • The New York Times reports on what some might’ve seen as an unlikely scenario - the resurgence of Chipotle, which just a few years ago was suffering through a series of food safety problems that threatened to bring down the entire brand.

    “In announcing its second-quarter earnings on Tuesday,” the Times writes, “Chipotle reported same-store sales growth of 10 percent, beating analysts’ estimates and continuing its momentum from the last five quarters. Its stock price surged in after-hours trading, though some analysts have cautioned that there could be a drop in the coming months.”

    Given full credit is CEO Brian Niccol, who came from Taco Bell in 2018 and was charged with saving what appeared to be a sinking ship.

    Niccol, the story says, “has presided over a resurgence in sales driven by a revamped advertising strategy and the growth of the chain’s delivery business … As chief executive, Mr. Niccol said he has tried to keep the chain’s management focused on a few key projects, including the chain’s digital presence. Last year, Chipotle started a partnership with DoorDash, one of the leading third-party food-delivery apps; delivery services are now available at 95 percent of the chain’s locations. Some restaurants brands have struggled to monetize the growing online delivery market, but Chipotle saw its digital sales nearly double over the past quarter.”

    The piece notes that “one factor that has helped Chipotle’s delivery business is the densely packed structure of its signature burrito, which tends to stay fresh while it’s being transported. But perhaps more important, the chain has also found an efficient way to prepare food for customers who order online, installing separate assembly-line stations in nearly 2,000 of its kitchens.”

    I must admit that I have not been to a Chipotle since 2018. Hard for me to get past all the problems … but maybe, one of these days, I’ll have to get past my hesitation.
    KC's View:

    Published on: July 24, 2019

    • Online wholesale retailer Boxed announced that its has hired Prentis Wilson, described as the former “Vice President and General Manager of Amazon Business, a global division he created and grew to over $10 billion in annual sales in less than four years,” as its new and first-ever President.

    CNBC reports that eBay has hired Peter Thompson, former vice president of Amazon’s Alexa Voice Services, as its new senior vice president and chief product officer. According to the story, “In his new role, Thompson will oversee eBay’s product experience, the company said. He’s expected to focus on simplifying how users shop on the site, including how they discover products and receive recommendations.”
    KC's View:
    I’m not all that bright, but I think I may detect a pattern here…

    Published on: July 24, 2019

    I’ve gotten some emails from Portland, Oregon-area MNB readers wondering if I am going to have one of those casual get-togethers that we've done here the past few years.

    The answer is yes … let's get together Thursday night, August 8, at 5 pm, at Nel Centro, located at 1408 SW 6th Ave, in Portland. I'll plan on being there for a couple of hours, hopefully on the outside patio - and I hope that any MNB readers who'd like to stop by will do so.

    Once again, I’m thrilled that our get-together will be sponsored by Portland State University’s Center for Retail Leadership.

    Put it on your calendar.
    KC's View:

    Published on: July 24, 2019

    Got the following email responding to an exchange in this space yesterday:

    I read the other comments from the minimum wage story and there is one thing that rang through for me, and that is that the individual that spoke directly to what they paid folks for entry level positions was what they felt was right…not what the government said they must pay, to which I say bravo! I don’t know about you, but I was always taught, and experience has proven right; that a rising tide lifts all boats. When demand is high and supply is low, then prices rise, and that’s true for commodities as well as wages. But the level of price, or level of wage just has to follow demand. Time will tell if such proves true relative to the price of produce from California.

    As far as your statement here: “If one accepts all of your statements about the broad costs of an increase in the minimum wage, it still, I think, leaves a lot of questions about the people who are working in the fields, breaking their backs to enrich their employers and keep fresh produce in supermarkets while having trouble feeding their own families, clothing their children, paying for housing and putting their kids through school”.

    Sounds like a line from John Steinbeck’s “Grapes of Wrath.” Breaking their backs to enrich their employers? Really? Many, and I mean many farming operations here in California are still family owned; generational ownership in many cases. They honor the land they farm as well as the people that bring forth the products they produce, it’s part of what makes them and what they do special. Farming is back breaking work by definition, but it’s not difficult to find an owner of any one of these operations hands on right in the middle of it. I’ll tell you what, my friend, having to work hard beats the hell out of not being able to work at all. A lesson that unfortunately, way too many folks seem to have forgotten, or maybe never learned.

    Three things.

    One, a rising tide doesn’t, in fact, raise all boats. Some boats get swamped. Never the big ones, but sometimes the little ones.

    Two, I would never denigrate the work of farmers. But I still worry about some people who work dawn to dusk and still are unable to support their families because of low minimum wages.

    Three, this is likely the only time I will be mentioned in the same breath as John Steinbeck. So thanks.

    On the subject of ongoing centralization-decentralization debates at Ahold Delhaize, MNB reader Donna P. Burns wrote:

    Reminds me of Organics. Integration one year, segregation the next.

    Some debates are fated never to be resolved, I fear.

    And finally, from MNB reader Bryan Silbermann:

    Regarding your piece this morning on just what the world doesn’t need - an internet connected diaper…

    As a retiree loving every Friday when we babysit our 19-month old old granddaughter, I have to agree 100% with your comment questioning the wisdom of outsourcing the responsibility of monitoring a baby’s bodily functions: “It is part of being a parent … it takes you outside yourself and makes you realize this little person’s needs are more important than yours.”

    Some might say that’s easy for this retiree to say, but I watch the kids being parents and their little girl’s needs bring them out of their 24/7 smartphone-centered lives in a way that nothing else can or should. Mom-Mom and Oupa can be ignored when we ask questions and get no answer because the smartphone rules, but when CoCo needs changing, they are reminded of the way in which their lives are truly connected to this little person.

    Remember John Naisbitt’s “Megatrends”? High Tech, High Touch in particular. The more our lives rely on technology, the more we crave and need high touch, human relationships. The diaper connection gets to the core of that.

    Nothing like having to change a dirty diaper for bringing one back to earth.
    KC's View: