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    Published on: August 12, 2019

    by Kevin Coupe

    CNBC had an interesting story this weekend that made, I think, a conclusion that was only partly right.

    The piece suggested that Amazon seems to be at a point where it has a lot more friends than enemies. It broke up with FedEx, which no longer will be shipping Amazon packages in the US (though, to be fair, Amazon only represented 1.3 percent of its business). It is in a battle over whether its PillPack subsidiary is inappropriately accessing and using consumer data. It seems embroiled in a series of feuds with politicians ranging from President Trump to Sen. Elizabeth Warren (D-Massachusetts) about its business practices and is facing at least the possibility of tougher regulatory scrutiny.

    In fact, CNBC suggested that Amazon’s only real friends these days are on Wall Street, where there continues to be enormous enthusiasm for the stock. (At the end of last week, it was trading at 1804.40, below its 12-month high of 2053 … but still a pretty high number reflecting a market capitalization that gives it access to cheaper capital better than a lot of countries.) Wall Street analysts seem pretty uniform in their feeling that Amazon’s upside is high, though they do concede that regulatory issues and a recession could hurt its prospects.

    I would quibble with some of this in small degrees, but would also suggest that CNBC is missing one major piece of the puzzle that makes Amazon even more formidable.

    The quibbles mostly have to do with the regulatory stuff. As big a fan as I am of Amazon, I do think it needs to be careful not to breathe its own exhaust; it needs to be sensitive not just to realities, but to appearances that it has become arrogant, manipulative and anti-competitive in its actions. I’m sure it skirts close to the line … every big company does, which is how they get to be dominant and why they make enemies - but they need to be careful not to cross the line in ways that puts the entire enterprise at risk.

    I also think at times that maybe Amazon is getting too big … but its ecosystem-centric approach has been working so far, so who am I to challenge it?

    The big piece of the puzzle that CNBC is missing, I think, can be summed up in one word: Customers.

    It isn’t just Wall Street that remains enthusiastic about Amazon. It is all the customers, many of them Prime and Subscribe & Save member, who continue to drive sales and express their loyalty to the company every day.

    Amazon has changed a lot of customers’ lives. Though customer knowledge - and its peerless ability to convert knowledge into action - Amazon has become an almost indispensable part of people’s everyday existence.

    If you’re competing with Amazon, you have to deal with that. Your customers almost certainly also are Amazon’s customers. It is critical, then, to find the things that you can do better than Amazon, that are unique to your business and your (admittedly smaller) ecosystem, and work those advantages to the best of your ability while constantly seeking to define new differential advantages. Every day.

    “Never interrupt your enemy when he is making a mistake,” Napoleon Bonaparte once said. Amazon doesn’t make a lot of mistakes, and you cannot afford to either … but you also cannot afford inaction.

    It is the Eye-Opening sentiment that I’ve repeated here over and over for almost 18 years:

    Compete is a verb.
    KC's View:

    Published on: August 12, 2019

    Walmart, still reeling from the mass murder of 22 people at its El Paso, Texas, store by a man described as a white nationalist domestic terrorist, faced yet another gun-related problem last week: a man showed up at its Springfield, Missouri, store carrying a loaded rifle and wearing a bulletproof vest.

    The man said that he wanted to see if his Second Amendment rights would be respected. He ended up being arrested by police, the Springfield News-Leader writes, on “suspicion of 1st-degree making a terrorist threat.”

    Police arrested the man after the store was evacuated, but in a broader sense, as one analysis put it, the incident was part of a new reality and a “grim calculus” with which retailers have to contend these days.

    The Washington Post puts the event in context: “The subsequent scenes of panic were frighteningly familiar. In the week since two mass shootings in Texas and Ohio left 31 dead, moments including a backfiring motorcycle in Manhattan’s Times Square to a falling sign in a Utah mall have triggered pandemonium. On Tuesday, panicked customers ran from a Louisiana Walmart after men in an argument drew weapons, police said.”

    In addition to the El Paso shootings, Walmart also has had gun-related incidents to deal with in recent weeks in Maine, Mississippi, and California.

    LeMia Jenkins, Walmart's director of national media relations, released the following statement: “This was a reckless act designed to scare people, disrupt our business and it put our associates and customers at risk … We applaud the quick actions of our associates to evacuate customers from our store, and we’re thankful no one was injured.

    "This person is no longer welcome in our stores. We are working with the authorities however we can and we appreciate their quick response that prevented this situation from escalating further.”

    Greene County Prosecuting Attorney Dan Patterson said in a statement that while “Missouri protects the right of people to open carry a firearm,” that does not “allow an individual to act in a reckless and criminal manner endangering other citizens.” Patterson said that the man’s actions were akin to setting off a false fire alarm in a theater.

    In its analysis, Bloomberg writes that “Walmart has already taken steps that make it more restrictive on gun sales than federal law requires. It hasn’t sold handguns (except in Alaska) since the early 1990s and ceased selling assault-style rifles in 2015. In 2018, after the Parkland school shootings, it raised its minimum age to buy a gun to 21. But the chorus is growing louder from gun safety advocates calling for sweeping reform on this issue … It may be that Walmart will end up making it through this particular spasm of violence relatively unscathed, save for some backlash from a small group of employees and some harsh headlines. But the retail giant is just going to continue to find itself coiled in this debate. At some point, the pressure to take more forceful action won’t be so easy to escape.”

    And the Washington Post writes that while still “statistically rare, such incidents have become part of a grim calculus that retailers and other businesses are increasingly reflecting in their planning, training and risk assessments to protect their customers, their workers and their bottom lines.

    “Some companies, including the Cheesecake Factory and Del Taco, now include ‘active shooting situations’ as potential business risks in regulatory filings, alongside more typical considerations such as labor costs and extreme weather events. Others are reevaluating how and how often they train workers to respond to armed assailants as stores and malls become more frequent targets. And some insurers are now offering coverage for ‘active shooter’ incidents.”

    The Los Angeles Times reports that while Walmart has so far resisted calls to stop selling guns in its stores, it is “removing displays of violent video games and movies in its stores.

    According to the story, Walmart has mandated that its stores “cancel any in-store events promoting ‘combat style or third-person shooter games that may be scheduled’ … verify that no violent movies are playing on TVs sold in the electronics department … (and) turn off any hunting-season videos that may be playing in the sporting goods department, and remove any monitors that show the videos.”
    KC's View:
    This is all serious stuff, and then we have this moron wandering into a Walmart trying to make a point … seems to me that the only point he made is that some idiots shouldn’t have access to any sort of weapon.

    (It actually is extraordinary how many threats have been made against Walmart over the past few days. Actually, not extraordinary. Just scary how many cretins there are out there.)

    I want to reiterate something I said last week - the current situation is going to force a lot of institutions to think about issues they never had to think about before, and set in place contingency plans they never thought they’d need. There are some who think that this is just the story of the week, and that all these concerns will fade away when some other story about some other subject captures the attention of the media and the public.

    But I doubt it. It is just a matter of time - and not too much time - before there is another mass shooting, before the ugly face of white supremacy again brings domestic terrorism to our doorsteps. I hope the current moment doesn’t fade, and that we remain focused on this as a civil society. Can’t afford not to.

    Published on: August 12, 2019

    Wine Searcher has a story about Amazon is planning a new bricks-and-mortar store in San Francisco - that will be dedicated specifically to liquor.

    The story says that Amazon “has applied to the city's Board of Supervisors for a license to set up a liquor store in the Dogpatch neighborhood of the city, where Amazon already has a warehouse. The store would serve as a delivery hub for Prime Now deliveries in the area as well as operating as a traditional liquor store … The store would be open to the public from 8am to 4pm, letting people shop in person – in an actual Amazon store – for their Cabernet or Chivas Regal, with deliveries being made until midnight.”

    According to Wine Searcher, “That would see Amazon's grip on the lucrative liquor market tighten, as San Francisco would be the latest city where Amazon delivers, joining the likes of Seattle, Los Angeles, Houston, Chicago and Washington DC.”
    KC's View:
    Amazon has tried the whole booze thing several times, but never has gotten the kind of traction it has wanted. I’m not really sure how “tight” its grip on the liquor can legitimately be described to be.

    I’m sort of intrigued by this, and will be curious to see how Amazon can integrate it into the broader ecosystem. Will Prime members get better prices? Will people be able to use Subscribe and Save to replenish their Tito’s or pinot noir?

    I’d like that.

    Published on: August 12, 2019

    The Wall Street Journal reports that as FedEx cuts its ties with Amazon in the US, largely because Amazon is building out its own shipping capability to the point that it is starting to compete with delivery companies, United Parcel Service (UPS) has decided not to take a similar step.

    UPS, the story notes, “gets close to 10% of its revenue from Amazon, according to a Morgan Stanley estimate, a figure that could grow as the online retailer seeks new carriers for the packages that once went to FedEx.

    “The decision could pose risks down the road, if Amazon is able to build out its own delivery network enough that it can cast aside UPS, the U.S. Postal Service and any other regional shippers. Losing that big of a customer could hurt UPS by depriving it of a large chunk of revenue and volume to fill - and pay for - its vast package-delivery network.”

    The Journal writes that “unlike UPS, FedEx had winnowed down its exposure to Amazon to just 1.3% of overall revenue last year, or around $900 million in shipping.
    FedEx has said the decision to not renew the two contracts with Amazon reflects its strategy to partner more closely with other e-commerce shippers, from large retailers like Target Corp. and Walmart Inc. to small- and medium-size businesses.
    The carrier is betting that it can replace Amazon’s business, which is generally at a lower profit margin because of volume discounts, with more profitable business from smaller shippers.”

    Meanwhile, CNN reports that Amazon has petitioned the Federal Aviation Administration (FAA) to “excuse it from following some current rules of flight,” which would “allow the company to operate ‘a delivery system that will get packages to customers in 30 minutes or less using UAS" — an acronym for unmanned aerial systems, better known as drones.”

    According to the story, “Amazon is requesting permission to use its custom MK27 drone for deliveries before the FAA grants the aircraft a certificate of airworthiness, and an exemption from drone-specific rules, including a requirement that they only be operated when an operator can see it. The company also requested to be excused from complying with aviation regulations more commonly associated with planes, such as requirements that pilots fly above certain heights, carry extra fuel, and fly with documentation including maintenance logs aboard the aircraft.”

    The petition also says, CNN writes, that delivery drones would “fly autonomously, or without human input, but that there will be one operator for each drone in the sky at any time. Amazon would like to eventually have a lower operator to drone ratio ‘subject to FAA approval based on flights and simulations that demonstrate required levels of safety’.”
    KC's View:
    One of the things that the Journal correctly points out is that with FedEx out of the picture, UPS actually has more juice than it had before - Amazon isn’t ready to compete as a full-fledged shipper yet, and so it will need UPS to live up to its value proposition and consumer promises during the upcoming end-of-year holiday shopping season. Because the drones won’t be ready. (I think…)

    As all this shipping news was happening last week, it happens that the US Postal Service reported a decline in package volume for the first time in nine years. It is because of all the competition, not a decrease in total volume … and the Wall Street Journal notes that this isn’t just a small problem:

    “The shift among the U.S. delivery giants is depriving the Postal Service, a quasigovernmental agency, of much-needed volume, which it has relied on for revenue as the financial picture in its legacy first-class mail business deteriorates. The Postal Service warned that it might not be able to pay all of its obligations without government intervention.”

    And, the story says, the expectation is that in coming months the situation will get worse, not better.

    Published on: August 12, 2019

    We’ve had several stories on MNB recently about the so-called “sober-curious” - a growing cadre of people who are deciding not to drink alcohol for a variety of reasons (but not because they have a “drinking problem”).

    Now, Salon reports, there is a new study out about the other side of the coin - binge drinking, and it appears that one in 10 adults in the over-65 age range are binge drinking and “that binge drinking is trending with older adults, while younger ones seem to be drinking less.”

    Interestingly, the story says, “this rise in older adults drinking comes at a time when the number of alcohol drinkers in the world has decreased since 2000 by 5 percent. The Beverage Information Group has also reported that beer sales have decreased over the last five years. A Monitoring the Future Study showed that alcohol use has dropped dropped since the 1990s among young adults.”
    KC's View:
    All of which might matter to you if you happen to sell alcohol.

    Published on: August 12, 2019

    Meanwhile, Fast Company has a piece noting that as “chief executives around the globe have become increasingly vocal about social and political issues,” one question remains - what impact does this have on people in the job market.

    According to the story, “Our research with job seekers in the U.S. suggests that a CEO’s stance does have an impact—and in a surprising way. We found that people are more than 20% likely to want to work for a company where the CEO takes a humanistic stance on a political issue unrelated to their business. This effect is true regardless of the job seeker’s age, education, gender, or political orientation. And interestingly, the job seeker does not need to agree with the CEO’s views.”

    These findings “show that the positive effect of CEO activism disappears if the CEO becomes politically active to oppose humanistic values, such as when leaders speak up against same-sex marriage. People are more likely to want to work for a company with a CEO who takes no stand whatsoever than one where he or she comes out against such issues.” The reason: “A CEO who takes a humanistic stance on a hot-button issue - irrespective of whether that position is shared by the employee - will be seen as an indicator that workers will be treated humanely should they end up working for the company.”

    One other interesting point from the study - political and social activism is seen as even more of a selling point to job seekers when a woman is the CEO. Which, it concedes, could be “gender stereotyping - the expectation that a female management style is more often associated with attributes such as care or concern for others.”
    KC's View:
    See our “MNB Politics Desk section below … the story there points out the flip side. To be clear, there is a difference between political activism and social activism … though these days, the overlap is greater than it used to be, and the lines tend not to be as thick and defined.

    Published on: August 12, 2019

    GQ has a story about the bankruptcy at Barneys, which will result in the closure of all but five of its 22 stores, and how a retail format that was celebrated for its strong customer service ethic, definitive sense of style, and just general coolness, managed to lose its way.

    While this falls into “this stuff can happen to anyone” file, there are two good quotes from Gene Pressman, grandson of founder Barney Pressman and the man who made Barneys fire on all cylinders until the company was sold in 2004.

    Quote # 1 (about the store’s windows, always a trend-setter):

    “If I had a store again, I wouldn’t have windows. My windows would be looking into the store. Because I’m done with hip windows. There’s nothing else you can do. I would be thinking about the energy from within, about creating environments, seeing hot people.”

    Quote # 2:

    “Corporations try to chase cool, rather than build relevance. Because if you build relevancy, then maybe [the corporation] will become cool. Cool is the outcome. It’s not a strategy.”

    Quote # 3 (about playing the cards you’re dealt):

    “I know retailers like to blame it on the internet, but that’s like back in the day, if I were to blame it on the weather. It’s relevant, but not that relevant.”

    Good piece, and you can read it here.
    KC's View:

    Published on: August 12, 2019

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

    • Published reports say that Coborn’s has decided to step away from its home delivery service in Minneapolis and St. Paul, Minnesota, and will transition the CobornsDelivers business to UNFI-owned Cub Foods, effective later this week.

    CBS News says that “the company will continue home delivery in Elk River and St. Cloud, as well as the other cities in Minnesota, Wisconsin and the Dakotas where it has stores.”

    Coborn’s released a statement saying: “As we plan our future, we’ve decided to make some changes to better match who we are now as a grocery retailer. Our focus will shift to online ordering with curbside pick-up service leveraging our 62 stores, with some limited home delivery services from a few select store locations.”

    Coborns has been in the delivery business for more than a decade; it acquired the SimonDelivers business at that time and rebranded it. Without knowing the economics behind the decision, I will suggest that it is far better for Coborns to get out of delivery rather than en trust it, say, to the likes of Instacart, which is far more likely to subvert its value proposition than enhance it.


    CNBC reports that “Amazon launched a new program called Sold by Amazon last week, which lets the company control third-party product prices in exchange for a minimum payout to sellers … Sellers who sign up to the program give Amazon permission to cut the price of their products at will, in exchange for a guaranteed payout called Minimum Gross Proceed (MGP), to ensure the discounts don’t result in an unexpected loss for them.”

    This is one way, I suppose, of addressing the criticism that it exercises so much control over pricing that its vendors end up getting screwed - it essentially promises to make vendors whole if it reduces prices. Though, isn’t that just half the real problem being addressed? Even if vendors are being compensated despite the price cuts, am I wrong to think that reduced prices on Amazon have the potential of lowering a brand’s value proposition, which could impact the vendor over the long term? Just wondering…


    • Doughnut retailer Krispy Kreme has announced that it currently is selling doughnuts online and delivering them in 15 states, with plans to expand the program nationally by the end of the year.

    Doughnuts are only available by the dozen, the minimum order is $7.99, and delivery fees apply.
    KC's View:

    Published on: August 12, 2019

    USA Today reports that Party City is increasing by 10 the number of stores it plans to close this year - it will be 55 instead of the previously announced 45. The company says that it traditionally has closed between 10 and 15 stores a year.

    Part City also has announced that “it is selling 65 Canada stores to the Canadian Tire Corporation and is looking to increase its ‘overall distribution of party goods into the Canadian market through a long-term supply agreement’.”

    One bit of good news for Party City - it says it has dealt with a helium shortage by securing “additional helium supply.”


    Axios reports that Washington, DC, officials are taking another shot at figuring out how to get residents in low income neighborhoods to better food stores, having pretty much established that it is hard to get the supermarkets to move into those food deserts.

    According to the story, the city is offering subsidized taxi rides - up to $10 per ride - to Safeway, Giant, Harris Teeter, Whole Foods and a Martha’s Table food pantry that are in different neighborhoods.

    The story notes that “an earlier version of the Taxi-to-Rail program, which offered people east of the Anacostia River a ride to Metro in a D.C. Yellow Cab for only $3, had trouble getting riders,” perhaps because $3 couldn’t get people close enough to the stores.

    Axios says that the city has budgeted $65,000 for the pilot program.
    KC's View:

    Published on: August 12, 2019

    • Brookshire Grocery Co. announced that Suzanne Osbourn, the company’s director of employee relations, has been promoted to the role of vice president, partner relations and development.

    At the same time, Jason Cooper, the company’s director of business development, has been promoted to be vice president, corporate development and real estate.
    KC's View:

    Published on: August 12, 2019

    Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire.

    • The New York Times has a story about how retailers continue to get dragged into the world of politics, being forced to take positions whether or not they want to.

    The most recent case has to do with SoulCycle and Equinox Fitness, two fitness brands that majority-owned by a company at which a man named Stephen Ross is chairman. Not such a big deal … except that Ross hosted a fundraiser in the Hamptons for President Trump’s re-election campaign over the weekend, and patrons of those two fitness studios who oppose the Trump administration’s policies sued social media to launch a boycott of the two companies. Some people cancelled their memberships, and it was seen as serious enough that both SoulCycle and Equinox went on social media to disavow the president and say they had no connection to the fundraiser.

    The situation, the Times writes, “demonstrates the reality facing corporate leaders in the run-up to the 2020 presidential election: Any company, even one that seemingly has nothing to do with politics, could find itself in the middle of a partisan storm.”

    One crisis management expert says that ““C.E.O.s and executives are basically being treated by the general public and consumers as politicians would have been in past cycles,” and the implication is that many of them may not be ready for it.
    KC's View:
    This most recent situation happen to occur during a week that I think most people would agree was somewhat problematic for the Trump administration, which may have magnified the problem to some extent. And, to be clear, there are a lot of places where throwing in with the Trump campaign - or any one of the Democratic campaigns for that party’s 2020 presidential nomination - won’t be as problem because of how those communities lean, one way or the other.

    But I do think that there are a lot of business people out there who are going to have to be careful about the campaigns to which they write checks or the rallies that they attend, simply because in this highly polarized environment - which seems to only become more so with every passing day - there is at least the potential that you are going to be labeled as something you’re not, or will at the very least will have to face the ire of consumers who won’t want to do business with you anymore.

    Published on: August 12, 2019

    Regarding the potential of a hybrid story, MNB reader Andy Casey wrote:

    This is a concept which to me has long made sense for Walmart to try. With the huge footprint of supercenters, why not take 10-15% of the store (or the back room) out of shopper service and reconfigure it to automated fulfillment of many of the FMCG that customers order each week? That would allow those people dragging carts around the store, picking customer orders of canned goods, mayo, etc. to concentrate instead on picking the best produce or meat items for that customer’s order. I can envision that improving everything from customer service to OOS and would almost certainly be more cost effective over time.

    You’ve sold me.



    Responding to our piece about how bulletproof backpacks suddenly are a strong seller, one MNB reader wrote:

    My first knee jerk response was what a good idea! My next thought was what a shame. Think the second thought was both more relevant as well as accurate.

    Agreed.

    From another reader, who will - for obvious reasons - go unnamed:

    Do you think Walmart carries the backpacks? Good business model to make money on both sides of the equation.

    I hope you’re just kidding. But even if you, a word of advice from someone who kids around about almost everything … don’t make jokes about this.
     
    On a related subject, from MNB reader Woody Weddington:

    In the news today from California, 6 people were stabbed (four of whom died) by an assailant with a machete.  Should Walmart also stop selling machetes, knifes, axes or any other potential weapon?  Just a thought.

    I think the issue is different.

    The two women I live with - my wife and daughter - are both elementary school teachers. I’m not really worried about machetes. But I worry a lot about people with guns, and I don’t think I’m wrong about that.
    KC's View:

    Published on: August 12, 2019

    Just want to say thanks to al the folks who attended our MNBConnect event last Thursday night in Portland. It is always great to put faces to names, to hear different stories from different people, and to get a sense of the breadth and depth of the MNB community. As always, it is my pleasure and privilege to be a part of it.

    And thanks to Portland State University’s Center for Retail Leadership for sponsoring us … the beer and wine were terrific. (We’re in Oregon … how could they be otherwise?)


    KC's View: