business news in context, analysis with attitude

Published on: August 8, 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, reporting to you this morning from the Stacked Sandwich Shop, on the east side of Portland, Oregon.

One of the things we talk a lot about here on MNB is how important it is for retailers to be really, really good at one thing - at least one thing that proves to be a differential advantage that gives people a reason to get out of the house and visit a bricks-and-mortar location. (It is like what Jack Palance says in City Slickers.)

Stacked Sandwich Shop is just that. As one might expect, they’re really, really good at making sandwiches. Great sandwiches. They make a Cubano that is just a killer, made with mojo pork, house smoked ham, pickles, dijon, pineapple jalapeño relish, and Swiss cheese. Mrs. Content Guy instantly became a big fan of the Shrimp Roll, made with Oregon bay shrimp, a citrus emulsion, celery, shaved radish and asparagus, and a lemon vinaigrette. And - be still my heart - the Grilled Cheese Sandwich reminded me of the one from Chef, made with truffle pecorino, cheddar, and provolone.

Getting hungry just thinking about them. And getting thirsty thinking about the lager from the local Pono Brewing Company that we drank to wash them down.

Stacked is a family-run establishment, and it is its own entity … it isn’t like there are dozens of them arounds the city. Which, I think, adds to its allure. I also was impressed by the degree of knowledge shown by the folks working at Stacked - the ones I spoke with clearly are immersed in food culture, which, go figure, is sort of an advantage if you are in the food business.

Great place, great food, great beer, great experience. Of course I’m willing to go out of my way to go there.

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

Published on: August 8, 2019

Bloomberg reports that FedEx said yesterday that its “ground-delivery contract with Amazon won’t be renewed when it expires at the end of this month,” which the story suggests is yet more recognition that Amazon is emerging as “a competitor by building its own shipping network.”

The move follows the FedEx decision two months ago not to extend an express air shipping agreement with Amazon.

For the time being, at least, FedEx will continue delivering Amazon products outside the US.

Some analysts say that they expect that while FedEx will experience some short-term pain, the shipping company is playing a long-game - and that Wednesday’s announcement was a not-so-veiled message to Walmart that FedEx would like to be in business with it.

The New York Times writes that “FedEx is joining a number of other large companies — Microsoft and Google are two others — that have formed strategic alliances with Walmart to challenge Amazon in areas like cashier-less stores and voice-activated shopping. Walmart said in March 2018 that it would open FedEx locations in 500 of its stores in the United States.”

In its statement, FedEx said that the “change is consistent with our strategy to focus on the broader e-commerce market.”

Bloomberg writes that “FedEx is reducing its dependence on Amazon as the online retailer builds out a logistics network with hundreds of fulfillment centers and adds next-day air capacity with leased jets. Amazon is also starting a home-delivery service modeled after the contractor-based ground unit at FedEx, which flagged the competitive risk in its latest annual report to U.S. regulators.”

Amazon responded to the FedEx announcement this way: “We are constantly innovating to improve the carrier experience and sometimes that means reevaluating our carrier relationships … FedEx has been a great partner over the years and we appreciate all their work delivering packages to our customers.”

The Bloomberg story notes that “Amazon can still rely on United Parcel Service Inc., the U.S. Postal Service, regional carriers and its own growing network to deliver packages … UPS, the largest U.S. courier, is taking a different tack by continuing its relationship with Amazon. Analysts have estimated that the retailer’s pledge to expand overnight deliveries fueled a 30% spike in UPS’s domestic next-day volume in the second quarter.

“UPS hasn’t said how much revenue it generates from Amazon, but if the total were more than 10%, the courier would be obligated to disclose the information in regulatory filings. The amount is probably close to that threshold, according to analyst estimates.”

In its story, the Wall Street Journal offers its own context about Amazon’s ambitions, saying that they “extend beyond its own site. The company has sought to haul and deliver packages for other retailers and consumers, encroaching on the carriers’ turf. Last year, the company started the “Shipping with Amazon” service to first serve the company’s independent merchants with the aim to expand to outside businesses on a national scale. But Amazon faces a steep climb if it wants to match FedEx or UPS in shipping prowess. Analysts have estimated it would need tens of billions of dollars in investment, thousands of trucks, hundreds of planes and thousands of sorting centers to handle the billions of packages it ships each year.”

Published on: August 8, 2019

Business Insider reports that Kroger and Visa have settled a 2016 lawsuit that was filed by the retailer, charging that “Visa attempted to influence its plans for how to handle EMV debit card payments.”

However, Kroger reportedly still is not accepting Visa cards at 21 Foods Co stores and 250 Smith’s Food & Drug stores, a result of a dispute over what the retailer says are too-high interchange fees.

Some context on the settlement from Business Insider:

Kroger reportedly complained in its suit that “Visa approved its new EMV point-of-sale (POS) terminals that would request a PIN rather than a signature from consumers, but later threatened fines and the possibility of removing Kroger's ability to accept Visa's debit cards to make it change its plans because the new terminals would route payments away from Visa's network. Kroger was likely opposed to the change because chip-and-PIN transactions can be more secure and cheaper than chip-and-signature transactions. Visa denied the allegations, and now the two firms have entered into an undisclosed settlement agreement and the case has been dismissed.”

Published on: August 8, 2019

The Washington Post reports that some 40 Northern California white-collar Walmart employees staged a brief walk-out yesterday afternoon to protest the retailer’s decision to continue selling guns in about half of its 4,750 US stores. “In San Bruno, about 40 employees stood outside Walmart’s building there for 15 minutes in a circle. They hung their heads in silence briefly and then asked anyone to speak out. Only a handful did so.”

A similar protest was staged at Walmart e-commerce offices in Portland, Oregon, and Brooklyn, New York, who called both for a change in policy as well as the halting of any donations to politicians who also receive funding from the National Rifle Association (NRA).

In addition, the Post writes, “Organizers also started a Change.org petition to call on company executives to stop selling firearms. As of Wednesday evening, it had more than 38,000 signatures.”

The demands from activists in the wake of the killing of 22 people in one of Walmart’s stores in El Paso, Texas, carried out by what is being described as a white nationalist domestic terrorist. The El Paso shootings actually were the third gun-related incident at a Walmart in recent weeks, with other shootings taking place in Auburn, Maine, and Southaven, Mississippi.

And, in breaking news, CBS News reports that “a man was discovered shot to death after a violent confrontation between transients early Wednesday morning in the parking lot of a Livermore Walmart store, authorities said.”

Organizers in Northern California said they were concerned that they could be laid off for their efforts, and said that the company temporarily cut off their access to the company email system. Walmart said that no discipline was planned, though it also said that there were more effective and appropriate ways for the employees to air their opinions.

While the company has said that it planned no changes in its gun sales policies, CEO Doug McMillon went on social media to say that the retailer will be “thoughtful and deliberate” in its decision-making process.

The Post notes that “in recent years, a growing wave of workers has pushed back against the corporate policies at some of the nation’s largest tech and retail firms.” For example, “Employees at Amazon, Google and Microsoft have called on management to stop selling facial recognition technology and other services to law enforcement agencies and U.S. Immigration and Customs Enforcement.”

Published on: August 8, 2019

The Boston Business Journal reports that when Ahold Delhaize posted its Q2 sales figures, it conceded that an 11-day strike at its Stop & Shop division in New England resulted in the loss of $345 million in sales, “with more than a third of the losses coming after employees ended their strike and returned to work.” And, the company said that it appears that even now, not all customers have returned to Stop & Shop, though it said it was “committed to winning back our customers and we expect no significant impact from the strike in the second half of the year.”

Stop & Shop’s parent company, Ahold Delhaize USA, said that its Q3 net sales were $10.99 billion, up 0.2 percent from the same period a year earlier; same-store sales were down 0.2 percent, though once fuel was excluded, they were said to be up 2.2 percent.

Online sales at Ahold Delhaize USA were up 14.4 percent to $249 million.

Published on: August 8, 2019

The Hill reports that “bulletproof backpacks are reportedly rising in popularity as shootings increase across the nation and in the wake of two weekend massacres that left more than 30 people dead … The shields, which can cost up to $200, started becoming more in-demand after the Parkland, Fla., school shooting in 2018. After the El Paso, Texas, and Dayton, Ohio, shootings over the weekend, the products are back in the spotlight — especially as many students are days and weeks away from the new school year.”

There are numerous companies manufacturing and marketing the backpacks and they reportedly are being sold at retailers that include Kmart and OfficeMax/Office Depot.

Published on: August 8, 2019

The Boston Globe has an interview with Niraj Shah, cofounder/CEO of e0-commerce retailer Wayfair, in which he says that the company has been “building supply-chain infrastructure to speed up shipping and compete with Amazon.”

“Today, we have over 14 million square feet of logistics space, and we continue to expand that aggressively . . . A meaningful portion of what comes out of those buildings is next-day delivery,” he said. “And then the rest is basically two-day delivery. And so we have a very fast network, and as we grow, it automatically becomes faster and faster. Each incremental location we open gets us closer to customers”

Shah also talks about the company’s 2011 decision to merge more than 250 virtual storefronts into a single brand - Wayfair.

“The reason it was risky is that building those 250 different websites had led to the successful outcome where we were that $500 million business,” Shah says. “But what we also had come to the conclusion was that there was a huge opportunity to be the leading, winning platform for home. But we knew to do that it required building a brand — even though we were putting the existing model we had at risk.”

Published on: August 8, 2019

• Modern Retail has a story about how Microsoft, with its acquisition of marketing technology platform PromoteIQ, “continues its competitive trudge with Amazon in the retail space.”

According to the story, “Over the last few years it’s garnered individual partnerships with retailers, which has laid the groundwork for marketers to see it as a potential alternative to the Jeff Bezos behemoth. Still, Microsoft has a ways to go: Amazon has a solid leg up on both advertising (which brought in $3 billion this past quarter) and cloud storage (which hit $8.38 billion in Q2 of this year). Adding PromoteIQ — which has clients that include Overstock.com, Office Depot and Kohl’s — indicates that Microsoft is strategizing about how to quietly expand and undercut the competition.”

Published on: August 8, 2019

• Axios reports that the US Food and Drug Administration (FDA) “is investigating 127 cases of people, particularly children and young adults, who experienced seizures after using e-cigarettes … The FDA began this investigation in spring, but has recently received about 92 new reports of seizures after vaping. The agency says the evidence has has not established if e-cigarettes directly caused the seizures, and stressed that the 127 cases occurred over 10 years.”

Published on: August 8, 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

Published on: August 8, 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 … we are getting together tonight, 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.

See you tonight!

Published on: August 8, 2019

Yesterday MNB took note of a Financial Post story about how American restaurateur/chef David Chang “wants the ethnic food aisle to die.” Chang argued that the notion of an ethnic food aisle is ”out of date and doomed … because it puts ‘all the places in the world that are not White America’ in one aisle.”

The Post wrote that Chang “urged supermarkets to mix it all up instead, putting sauces with sauces and spices with spices, regardless of where they came from. That format would fit better in the ‘hodgepodge’ of modern cuisine, he said, where diners and home cooks know enough about food not to think of it in terms of ethnic or mainstream.”

Chang said, “I’m not saying it’s straight racist, that’s not what I’m trying to say. But it is pretty close to it — because it’s values of how we ate years ago.”

I commented:

It is, I think, a provocative notion, not to mention a timely one. We all have different ethnic makeups, and yet Chang’s position is well-taken - “ethnic food” is a description generally - though not always - reserved for foods that emanate from cultures that are non-white.

I’m honestly not sure how I feel about this. It is nice to know where to find stuff that is seen as exotic. But we are in different territory now, and companies have to be sensitive about issues that never seemed to be controversial.

MNB reader Louis A. Scudere responded:

As a general rule I like to think that I am a person who is pretty opened minded and, at 65, I continue to be willing to accept that times they are a changing and we must change with them. However, I am unaware of a "sauce" section in a traditional supermarket unless one is speaking of condiments. Is a pasta section with spaghetti sauce denigrating Italians? (my ancestry) Is the salad dressing section disparaging of vegetarians? The fact of the matter is that the traditional North American supermarket has always been merchandised/organized for optimal operational efficiency and has rarely been organized in a way that facilitates truly solving the consumer's meal solution problems.

Consumers for the most part think in meal segments: typically breakfast, lunch, dinner, snacks and beverages. So, if we are going to truly reorganize a supermarket why not have a breakfast boutique or a dinner division or a snack segment (and, for that matter in this day and time how does one define a snack or breakfast versus dinner?)? Simple, because it would be confusing and inefficient. For example I have a deconstructed lasagna that I make, the original recipe calls for sambal oleck, an Indonesian chili paste...way too hot in my opinion so I use a sweet Thai chili sauce....under the chef's recommendation where would I find either of these items? Would there be a "paste" section as well as a "sauce" section? My guess is that the chef makes his own sauces therefore rarely has the conundrum of the typical supermarket consumer of "ok, where the hell do they (the supermarket) keep (name your unique item here)?”

Having lived my adult life as an Italian Catholic in the South I have from time to time been referred to in pejorative terms by people who had no clue that they were doing so. That is not in any way equivalent to the discrimination suffered by others, it is just to say that I am not oblivious to the bigotry which is endemic in our society at a personal level. I am all for giving those who have been marginalized over the decades the freedom to express themselves in a manner which they feel allows them their proper voice within society. And when one contemplates this concept a little further, in some ways doing what the chef says could achieve a certain level of equality given that no one, regardless of ethnicity, could find anything. But honestly, in my opinion, a well intended, but misguided, solution to a problem that does not exist within the four walls of the supermarket.

Another reader chimed in:

I've been in Food Retail my entire working career and this question has been tossed around for tens of years.  "Why not put the Ethnic, Specialty, and Natural products with their respective mainline category groups?"  The most common argument for it is to give the normally segregated products more exposure/more traffic.  But the reasons against are worth considering.  When the products are segregated they are more protected.  They are allowed to live in the space they are given and are not immediately in jeopardy when a major mainline manufacturer comes out with a hot new product.  If a category manager needs to cull his/her assortment to make way for new items, the first metric to look at is almost always unit movement, and in that view, Ethnic, Specialty, and Natural don't usually rank in top 80%.

At retailers, Ethnic, Specialty, and Natural are usually managed by someone other than the mainline commodity category managers.  That operating model allows for increased expertise in those niche areas, which I believe is a valuable qualification. 

If retailers were to integrate all those niche products and maintain the aforementioned operating model, multiple category managers would be fighting for the same shelf space.

MNB reader Joy E. Williams wrote:

“Ethnic food” is a description generally - though not always - reserved for foods that emanate from cultures that are non-white.
 
So what?  Why is that bad? (and how is that racist?) It helps direct the shopper on how to find what they are looking for – which I view as a good thing.

From another reader:

I have mixed feelings on this as well. For convenience, I'd like a store layout that puts all sauces in one area. But I still think in terms of Mexican, Chinese, or Italian food when I go to a restaurant. Maybe the issue is with labeling? If it's "ethnic", it does sound a bit provincial - after all, we're all of one ethnicity or another. Perhaps calling a section "foods from around the world" would be better? 

For the retailer it probably comes down to what works best for their shoppers. Of the 2 large chains near me, one serves a very ethnically diverse community and the other is more homogenous (primarily Western European). The store in the ethnically mixed area has their food stocked by category, as Chang suggests, while the store in the homogenous area has aisles dedicated to food around the world. Both stores are well-run, all the aisles are busy, and there are a variety of SKUs I can't find elsewhere.

Trader Joe's has an interesting approach. They vary their brand labels based on the item (e.g. Trader José brand for traditionally Mexican staples, Trader Giotto for Italian). It gives a nod (and a wink) to a food's heritage, while also recognizing that when we're looking for sauce, most of us would like them all in the same aisle.

And from another:

I understand the thought behind redefining the category. It will take a huge amount of education to retrain the consumer to look for picante sauce next to BBQ Sauce. On the other hand it could help when you are looking for something out of the ordinary and aren’t sure where you should look. Interesting perspective that will require a rethinking of food categories.

MNB reader Susan Kemp wrote:

This issue never crossed my mind, but he makes a valid point. As a consumer, I would welcome having like ingredients placed together. Seeing all would pique my curiosity and I might try something new. Currently, unless I specifically need something from the global aisle, I bypass it completely, so I may be missing out on many options.

MNB reader Kelly Dean Wiseman wrote:

It’s not difficult to make the transition away from using the term “ethnic”.
Just use identifiers like “Asian”, “Mexican”, and so on.

This actually serves the shoppers better as folks looking for Asian foods are often not the same people looking for the entirely different Mexican cuisine.
 
We’ll all know we’ve gone a bit too far, maybe, when we start seeing “Canadian” signage in the aisles.

MNB reader Mary Schroeder wrote:

I agree.  Drives me crazy when my grocer decides something is a ‘specialty’ item and I don’t.  C’mon, when you mix it with ketchup, mayo, potato chips, aioli and popcorn (as they have with sriracha) it’s no longer a specialty food. 

And, still another MNB reader wrote:

I am all for mixing in products In regardless of their “ethnicity.” But “not saying it’s straight racist” “but it is pretty close” is not true.

Hey it was not too long ago Italian products were in the so called ethnic aisle by cuisine not by racial makeup.

I have had customers who had entire aisles devoted to Goya products It made it easier for their very diverse customer base to find what they needed.

Many retailers have labeled those aisles food from around the world.

Before Chang pressures retailers to change perhaps what is not broken they need to survey the shoppers and ask if that is how they want those products merchandised. It may surprise him.

Let’s keep political views out of the aisle and embrace that people are more open to a wide range of cuisine.

I fear it may be too late to take politics out of the supermarket aisle. I get criticism occasionally about even running these kinds of stories on MNB; the argument is that I should not let a site about business get into politics, though my response is that I only do it because the world of politics keeps invading my world.

(Also, considering the biggest retailer in the world is right at the center of one highly charged political issue, it would be irresponsible of me not to write about it … though that clearly is the decision made by other sites in this space.)

As for the ethnic food question, I guess I think that if that kind of segregation of product is communicating something negative to some customers, then it is up to retailers to think about it in different terms than in the past.



On a related subject, I got the following note from MNB reader Amy Longsworth:

I’m not sure why you titled the recent piece “Walmart CEO clarifies position on guns”.  McMillon actually didn’t clarify anything, and you had to refer to a Walmart spokesperson several graphs down to get the fact across that they plan to do nothing.  McMillon calls Walmart “a learning organization.” I would call them slow learners.  If he were to read — or even just look at the pictures (infographics) — of any of the dozens of national and international studies correlating gun availability to deaths by shooting, he would instantly learn what the problem is.

MNB reader Rich Heiland wrote:

Let’s cut to the chase. We do not have to wait on government to stop assault-type weapon sales. Walmart, Academy, Bass Pro et al could announce tomorrow that they will be pulling those from the shelf. They do not have to stop ALL gun sales. I could still buy my deer rifle, my bird shotgun. Will they? Dunno. And I concede that unless all major gun retailers take the action it would be tough for one to do it.

Then again, does anyone really think solving this epidemic is going to come without sacrifice, pain and a certain amount of inconvenience?



And, MNB reader Karen M. Alley wrote:

I just wanted to say I appreciate all you said on Monday morning, your editorial on the El Paso shootings. What happened in El Paso is not the fault of Walmart, by any means. People are looking for someone or something to blame, other than themselves, but maybe it's time we all start taking action and doing something. It's hard to know what to do, but maybe just not blaming others is the first step.



On another subject, MNB reader Howard Schneider wrote:

Thanks for the brief but important item recognizing the obvious: Amazon is indeed a player in logistics. The Motley Fool quote validates my anecdotal observation: at some U.S. airports, I have counted more cargo planes in Prime livery than FedEx or UPS.

My pleasure … who knew that we’d have another Amazon-FedEx story less than 24 hours later?



And another note from MNB reader Monte Stowell:

Kudos to Publix supermarkets for outstanding financial results. Maybe Kroger, Albertsons/Safeway, and other large supermarket chains should spend sometime in Florida and other markets where Publix has stores analyzing what makes Publix results so outstanding. Walmart still has better retail pricing throughout the aisles versus these traditional chains, so it is not a pricing issue. It is about the people working in the stores and the overall shopping experience that gives Publix such favorable high ratings with their customers.



And finally, from another reader:

Just wanted to share that while looking forward to MNB everyday, I now really enjoy reading the "Your Views" section the most.

It's heartening to see people exchanging a diverse range of ideas in a civil fashion, especially in light of current society. Healthy discourse is important, but not while trying to shout someone down just because they have a different opinion.

I for one am pleased to be part of your readership that seems to be filled with amazing people who have a lot of street cred and you had better not be planning to retire anytime soon.

I’ll take that last part under advisement.

Published on: August 8, 2019

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