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    Published on: September 3, 2019

    by Michael Sansolo

    It’s the cliche plot in countless horror movies: the enemy is inside the house.

    During the brief MNB hiatus I was on a family trip to Vienna, Austria, where I saw something similar. Vienna is encircled by a wide boulevard, the Ringstrasse. Apparently in the mid-1800s the Austro-Hungarian emperor decided to tear down the protective wall around the city and replace it with the boulevard.

    His reasoning was simple. At the time, Europe was aflame with internal revolts from peasants sick of the income and life inequalities of their monarchies. The wall was designed to defend against external enemies, but did nothing to address internal problems; the Vienna Ring Road symbolically created a greater sense of inclusion (and in fact did enable smoother traffic and more efficient commerce).

    The metaphor for business today is pretty clear. We all focus laser-like on the external problems of new competitors and technologies, but too often we overlook the problems within that can be incredibly corrosive and just as fatal as those outside.

    Start with complacency, an issue found in too many businesses. Company leadership talks of the need to play at a whole new level, but honestly, does front line staff have the same message and purpose. If they don’t, the best strategy never works.

    Then there’s inertia, the desire to keep doing things the way we’ve always done them. It’s equally fatal at a time when changing tools and needs are requiring companies to step up to a new level. The past is past, it’s time to move on.

    But the last problem is succession, which I fear is frequently overlooked. With so many of us boomers hitting, passing or closing in on retirement, the issue is especially critical now. Who is going to take over? Have the key decisions been made?

    I thought of this because of an article in the New York Times about the incredible challenges family businesses face thanks to poor succession planning. The Times article highlighted how families whose businesses didn’t survive lost their cohesion and purpose, and struggle on a personal level.

    Sadly, I have known too many family businesses where the difficult decisions of succession caused enormous business challenges. Great companies fell apart and, possible worse, families fell apart in bickering and arguing.

    But the problem, I think, goes far further than that and isn’t limited to privately held family firms. Given the simple demographics of so many aging boomers occupying so many critical management slots, it seems an existential necessity to ensure succession plans at every level of an organization.

    These are difficult decisions that always create the risk of new forms of dissension, but the risk of doing nothing seems even greater. Sadly, none of us know the exact date when we will no longer operate at full capacity for our companies, teams or whomever. Better to have a plan in place ahead of time than run the risk of chaos in the wake of whatever happens.

    Sure, there are countless problems outside the walls of our companies and we cannot ignore those. But certainly we can address the problems inside the walls and do it proactively while we have time. After all, time is the enemy even emperors couldn’t ever conquer or avoid.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

    KC's View:

    Published on: September 3, 2019

    by Kevin Coupe

    There seems to be a lot of debate these days about whether there is a recession on the horizon, which strikes me as kind of spurious. There’s always a recession on the horizon … what nobody knows is how far away the horizon is, and how serious the recession will be.

    But it is coming. Best be prepared.

    I thought about this when I read a story in the Wall Street Journal about how the film business - despite a series of summer releases that were expected to do enormous, maybe even record-setting business - finds itself lagging last year’s performance, with nobody quite able to figure out why.

    Now, I’d argue that maybe people are getting tired of superhero movies and sequels. My favorite movies this summer - like Yesterday and Blinded By The Light - fit into neither category. But there also is a sense that maybe “moviegoing has become too expensive - concessions, tickets, babysitters - especially given the growing array of low-priced at-home entertainment options that are often already part of a household’s budget.”

    The Journal points out that the same disappointments are being felt in other entertainment-away-from-home categories. Analysts say that “some other leisure businesses — Disney theme parks, Major League Baseball games — also had a soft summer.”

    Now, I think that these businesses may share some of the same problems with the motion picture business. After all, taking a couple of kids to a Major League Baseball game can be a considerable investment, and taking a couple of kids to a Disney theme park can require a second mortgage. At some point, I think that the economic realities of such experiences simply put them out of reach for a lot of people, and they could become a refuge for a privileged few, not the mass audiences on which they traditionally have depended. They’re too expensive, and maybe not even sufficiently special.

    These shifting realities also have to be factored into business plans created by retailers, I think, as they look forward to times when customers may have less disposable income. Are you special enough? Unique enough? Are you combining these qualities with an offering within reach for your customers?

    The horizon is there … and it may be closer than we’d like.

    Better to prepare for what can happen than for what you think will happen, or would like to happen.

    Eyes Open.
    KC's View:

    Published on: September 3, 2019

    National Public Radio reports that Target has informed its suppliers that “they’ll have to bear the cost of President Trump’s trade war with China alone from now on,” and expect that vendors “will develop the appropriate contingency plans so that we don’t have to pass price increases along to our guests.”

    According to the story, “The letter lays bare the tension and uncertainty the president’s trade war with China has created for the business community. Target wants to shield customers from price increases and remain a retailing powerhouse. It appears to be using its extraordinary buying power to try to preserve a world that is basically BLT – Before Latest Tariffs.”

    The Wall Street Journal reports that “the U.S. previously imposed tariffs of 25% on about $250 billion of Chinese imports, largely on items used by businesses, and those tariffs are set to rise to 30% in a month. Mr. Trump has characterized them as a penalty on China, but they are paid by importers in the U.S. Chinese retaliatory measures also went into effect on Sunday, with more to come on Dec. 15. The biggest categories of American exports to be hit with extra tariffs Sunday include $3.2 billion in annual soybean shipments, $2.55 billion in crude oil and $1.16 billion in pharmaceuticals, according to Panjiva Research.”

    In addition, US tariffs “on tools, apparel items, some footwear and many electronics will be charged on imports valued at $111 billion last year, according to an analysis by The Wall Street Journal. Additional tariffs of 15% on $156 billion of smartphones, laptops, toys, video games and other products have been postponed until Dec. 15, after the period when goods are typically imported for the holiday season.”
    KC's View:
    Wow. So much for being all in this together.

    I completely understand Target wanting to make sure that the tariffs have little or no impact on its customers, but I’m not sure how the math works. I’m also not sure that this approach engenders the kind of broad and sustained cooperation between vendors and retailer that will bear long-term benefits.

    The tariffs at some point will be lifted. (Right?) But is there a possibility that vendors will be more inclined to do business with retailers that were willing to share the pain?

    Just asking.

    Published on: September 3, 2019

    The Seattle Times reports that “three Democratic senators asked Amazon CEO Jeff Bezos on Thursday to explain what the company is doing to prevent third-party sellers from selling dangerous, illegal and misleading products on its platform, and called on him to undertake ‘a sweeping internal investigation of your enforcement and consumer safety policies’.”

    The senators - Richard Blumenthal (D-Connecticut), Robert Menendez (D-New Jersey) and Edward Markey (D-Massachusetts) - have asked for a response by the end of the month.

    According to the story, “The Senators cite a Wall Street Journal investigation published last week that found some 4,152 items for sale on that federal agencies have banned or deemed unsafe, or that were deceptively labeled. The newspaper’s report cited examples including an investigation by Washington state regulators that found dangerous levels of lead and cadmium in children’s jewelry and school supplies sold by third-party sellers in 2017 and 2018 … This is the latest in growing list of Congressional inquiries into the Seattle-based commerce giant, which, like other enormous tech platforms, is under increased government scrutiny.”

    Amazon has said that it “spent $400 million on product safety and compliance in 2018,” and has argued - unsuccessfully in the courts - that when third-party vendors sell products via its marketplace, it ought not be held responsible for those items.
    KC's View:
    I think this is going to be both an enormous challenge - and opportunity - for Amazon, which ought to be doing everything possible to certify the authenticity of the products sold on its site and, at the same time, assure that these are not items deemed to be unsafe. Amazon, I think, ought to be working on developing some sort of certification system that, among other things, can give it a differential advantage over its competitors.

    In a related story, Reuters reports that Amazon “plans to promote helpline phone numbers to customers who query its site about suicide … after searches on its site suggested users search for nooses and other potentially harmful products.” That strikes me as a responsible thing to do, and a step in the right direction.

    Published on: September 3, 2019

    Bloomberg has a story about how Alibaba, the China-based e-commerce giant, has opened up its platform “to U.S. sellers for the first time, allowing them to peddle to buyers around the world who seek merchandise to stock shelves or materials to make products. Alibaba says it now wants American producers to hawk their wares as well, eventually helping them tap a vast Chinese market.”

    The story points out that the move should allow US companies “to tap a multi-trillion dollar global procurement market. The initiative could generate new income and also goodwill for Alibaba in the U.S., particularly as Washington and Beijing spar over trade. The threat of rising tariffs is now encouraging businesses to source their merchandise and components locally, said John Caplan, president of Alibaba’s North American business-to-business effort.”

    Up to now, Bloomberg says, US sellers were only able to buy on Alibaba’s platform, not sell.
    KC's View:
    I have no idea if this is a kind of trial balloon to see if the temperature of the trade disputes between the US and China can be brought down a bit. If so, I hope it works.

    Published on: September 3, 2019

    CNBC reports that Beyond Meat and Impossible Foods, each of which has “grabbed headlines and fast-food deals for their plant-based burgers that imitate the taste of beef,” is turning “the environmental benefits of abstaining from meat into a key marketing tool for their products — drawing some skepticism from environmental researchers who say plant diets are healthier and less carbon emitting than producing processed plant-based products.”

    In other words, the companies that make plant-based products argue that eating them instead of meat represents behavior that is better for the long-term health of the plant at a time of climate change. But the sort-of-opposing argument seems to be that making plant-based products that imitate meat isn’t nearly as good for the plenty as just eating plants.

    Here’s how CNBC frames the story:

    “Animal agriculture is responsible for 14.5% of global greenhouse emissions, according to the United Nations’ Food and Agriculture Organization, with 65% of those emissions coming from beef and dairy cattle. Scientists warn that climate change will trigger an international food crisis unless humans change the way they produce meat and use land.

    “While companies producing imitation meat boast of the environmental benefits, some researchers point out that for people wanting to substantially lower their carbon footprint, having unprocessed plant-based diets instead of eating imitation products is healthier and better for the planet.”

    The story goes on:

    “Promoting dietary shifts can be complicated, and assessing the impact of these changes on an international scale involves making assumptions about agricultural practices, the ability to choose what you eat and market forces.

    “Still, if everyone in the U.S. were to reduce meat consumption by a quarter, and eat substitutes like plant proteins, it would save 82 million metric tons of greenhouse emissions each year, according to a new study in the journal Scientific Reports. If everyone went vegetarian, it would save 330 metric tons per year – roughly 5% saved.”
    KC's View:
    At the end of the day, it sounds like, processed foods - even plants turned into meat substitutes/imitations - simply aren’t as good as non-processed foods, like plants in their natural state.

    I get that. Call me old fashioned, but I like my spinach to be spinach, and my hamburgers to be meat. I just don’t plan to give up either.

    Published on: September 3, 2019

    The Wall Street Journal has a story about how “a growing number of companies are helping workers gain access to payroll advances and loans, reflecting concern over the impact money problems are having on productivity levels and worker retention … The aim is to help cash-strapped employees, many with damaged credit, cover unexpected expenses without resorting to high-cost debt.”

    One of the companies taking this approach: Walmart.

    According to the story, “Walmart introduced salary advances in late 2017. It has seen employees rely less on payday loans and bank overdrafts, said David Hoke, who oversees health and well-being.

    “Employees pay $6 a month to use PayActiv. It is embedded in an app called Even, which also includes a budgeting service that nudges users to save surpluses. Walmart covers the cost for one month per quarter and caps the amount workers can accelerate at 50% of pay. Of the company’s 1.4 million workers, 380,000 are frequent app users, Mr. Hoke said.

    “For those in need of larger sums, some employers offer loan services that typically advance as much as $5,000, with repayments deducted from workers’ paychecks over four months to a couple years.”

    The Journal points out that payday loans can be very expensive, especially when seen in terms of annualized percentage rates, which can come close to being usurious. In addition, “Regulators in 10 states, including New York, are investigating whether the payroll-advance services are violating state banking laws.”
    KC's View:
    An example of two simultaneous trends…

    First, how far employers are willing to do at a time of labor shortages to identify themselves as preferred places to work.

    Though it’d be nice if these employees didn’t need payday loans.

    Which leads me to the second trend … that even at a time when the economy supposedly is in such great shape, it isn’t firing on all cylinders for everybody. Lots of people still need help.

    Published on: September 3, 2019

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

    CNet reports that robotic company Starship Technologies is planning a major expansion of its service - from two universities where autonomous robots deliver food to students to “100 universities over the next two years … The expansion, which will focus mostly on the US, starts with the University of Pittsburgh on Tuesday. Purdue University is coming in early September. George Mason University and Northern Arizona University came online in January and March, respectively.”

    Starship, the story says, “is a part of the burgeoning delivery robots industry, which has already attracted corporate giants Amazon, Google and UPS, as well as a constellation of smaller players including Postmates and Workhorse. These companies see an opportunity to bring their customers things they need much faster, more cheaply or with far more convenience than current delivery options offer. And they could in some cases extend delivery times to nearly every hour of the day.”

    The thing that really impressed me about this model is how it actually changed student eating habits - when the robots would bring food to them, the students would eat breakfast to a great degree than in the past. This says a lot about the value of technology … though it also says a lot about student laziness.

    • The Washington Post reports that “Amazon has introduced a feature that pitches its own private-label brands right before customers add rival products to their shopping carts, illustrating the e-commerce giant’s power on the country’s dominant online retail site … The tactic shows the influence that Amazon can wield over what’s sold on its site, which research firm eMarketer expects to account for 37.7 percent of all e-commerce sales in the United States this year.”

    I’m sure some folks will raise antitrust issues, but isn’t this what every retailer does with shelf placement and endcaps?

    Bloomberg reports that Glovo, described as “a Barcelona-based web platform” that serves “180 cities spread across 24 countries,” is expanding its food delivery business footprint with alacrity, mimicking Uber’s expansion with its Uber Eats model. It will do so, the story says, by “betting on building a network of convenience stores to expand its business.”

    What Glovo is doing, Bloomberg writes, “is rolling-out so-called dark-supermarkets - delivery-only convenience stores - from Tbilisi to Lisbon in an attempt to tap into growing web-based demand for groceries … Glovo is targeting small baskets at speed.”

    The story says that “the company is also focusing on delivering groceries for existing supermarket chains. In May it announced a deal with Carrefour SA to handle their deliveries in under 30 minutes in four countries, and it has similar partnerships in different countries with Walmart Inc., Auchan Holding Sadir and Kaufland Stiftung & Co KG, among others.”

    The story also makes the point that Uber Eats isn’t just a model upon which Glovo would like to build. It also seems to be a company that may have some interest in acquiring Glovo … and almost certainly isn’t alone. The notion of creating darks stores that can serve customers efficiently and effectively is likely to be one that we’ll see a lot more of going forward, I think.
    KC's View:

    Published on: September 3, 2019

    CNBC reports that “Walmart is opening up a new health clinic, called Walmart Health, in Georgia … At the new clinic, the company will offer hearing tests, 60-minute counseling sessions and vision tests.”

    The move into a deeper level of healthcare reflects a commitment from the company “to making healthcare more affordable and accessible for customers in the communities we serve,” a company representative said. “The new Walmart Health center in our Dallas, Georgia, store will provide low, transparent pricing for key health services for local customers.”

    Walmart also has opened such clinics in Texas and South Carolina, as well as in Georgia.
    KC's View:

    Published on: September 3, 2019

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

    CBS News reports that Transform Holdco, the company created by former Sears CEO Eddie Lampert to take over and run Sears and Kmart stores taken out of bankruptcy protection, has proven to be spectacularly successful at one thing - transforming stores into empty buildings.

    The story says that the company has decided to close almost 100 stores before the end of the year, a decision that follows one earlier this year to close more than two dozen units.

    Liquidation sales are expected to begin later this month.

    For the record, CBS didn’t crack wise about Transform being spectacularly successful at one thing. You can blame me for that one.

    • The Dallas Business Journal reports that Kroger has gotten clearance to build another in its series of robotic warehouses - powered by Ocado - in southern Dallas, where it is expected to serve the close to 100 stores that it operates in northern Texas. Construction is expected to take about two years.

    • The Jacksonville Business Journal reports that “Southeastern Grocers Inc. and its subsidiaries BI-LO LLC and Winn-Dixie Stores Inc. have agreed to reduce emissions of potent ozone depleting gases from refrigeration equipment at 576 stores under a proposed settlement with the U.S. Department of Justice and the U.S. Environmental Protection Agency to resolve alleged violations of the Clean Air Act.

    “Under the settlement, SEG will spend an estimated $4.2 million over the next three years to reduce coolant leaks from refrigerators and other equipment and improve company-wide compliance. SEG will also pay a $300,000 civil penalty.”

    • The Minneapolis / St. Paul Business Journal reports that “Caribou Coffee Co. Inc. is preparing to launch a new small-format store concept designed for people on the go, with drive-thru and walk-up windows but no interior seating.

    “Dubbed ‘Caribou Cabins,’ the stores will be the first in the chain to serve a new line of Caribou Bou-sted drinks, including sparkling waters, sodas and juices zipped-up with coffee bean-derived caffeine. They’ll also serve … Caribou’s core menu of coffee beverages, breakfast sandwiches and baked goods.”

    The first of the 600-square-foot stores are expected to open before the end of the year.

    CNBC reported last week that department store chain Lord & Taylor is being sold by Hudson’s Bay Company to clothing rental subscription service Le Tote for $100 million.

    The deal, according to the story, “allows the department store chain to continue and potentially transform operations as its sales have fallen and it’s lost touch with today’s shoppers … Under the deal, Le Tote will acquire Lord & Taylor’s brand and intellectual property and assume operations of 38 stores, its digital channels and its inventory … Le Tote, a rental service founded in 2012 that allows subscribers to rent clothes for $79 monthly, has plans to reinvent Lord & Taylor, said its founder, Brett Northart.”
    KC's View:

    Published on: September 3, 2019

    • Walmart announced that Horacio (Haio) Barbeito, who has served as CEO of Walmart Argentina and Chile, has been named president/CEO of Walmart Canada. He succeeds Lee Tappenden, the current President and CEO, who will be departing the company at the end of the year.
    KC's View:

    Published on: September 3, 2019

    …will return.
    KC's View:

    Published on: September 3, 2019

    • Last week Amazon finalized its investment in the YES Network, in partnership with the New York Yankees and Sinclair Broadcasting, which will give it access to games and programming focused on the Yankees, the NBA’s Brooklyn Nets, and the WNBA’s New York Liberty.

    The reason: According to CNN, “Amazon wants to come out on top in the era of cord-cutting and live sports is another way for the online retailer to incentivize consumers to sign up with Amazon Prime, the yearly subscription service that gives users access to free two-day shipping and other features that are otherwise not available, including Prime Video. The company has been investing more in Prime Video, which hosts exclusive, prestige content and livestreams of football, soccer, tennis and volleyball.”

    Now, Amazon seems to be “ready to do more with live sports by taking on the biggest market in the country,” and aligning itself with the sports franchise that arguably is the biggest, most recognized and most valuable on the planet.

    • The Associated Press reports that David Glass, the 82-year-old former president/CEO of Walmart, has decided to sell the Kansas City Royals baseball franchise to an ownership group led by John Sherman, who seems to be committed to keeping the Royals in Kansas City.

    The new ownership will be just the third to run the Royals since the team was founded by Ewing Kauffman in 1969.

    Glass bought the team in 1993. It is expected that if Major League Baseball approves the sale, it will bring Glass and his family about $1 billion.
    KC's View:

    Published on: September 3, 2019

    First of all, Happy September!

    Summer is over for all practical purposes, and I know you are already starting to put your end of year plans into action. As for me, I cannot believe that in about two months I'll be celebrating MNB's 18th anniversary. (Amazing - when I started MorningNewsBeat I was 47, and I'm now just 53. Not sure how this worked out.)

    I'm writing this note to let you know that in recent weeks we detected a problem with the site that may have affected you. Somehow a filter crept into the system that was preventing some folks (many of them outside the US) from getting onto the site; instead they'd get an error message. The good folks at Webstop, which powers MNB, detected the problem and fixed it, for which I am grateful.

    I hope that if you were running into problems, you'll be patient enough to stick with us. Lots of great stuff coming up on MNB. All-new "Retail Tomorrow" podcasts, including one launching this week that features a one-on-one interview with Steve Smith, the president/CEO of LL Bean. We also have the return of "The Innovation Conversation" with Tom Furphy, all-new columns from Michael Sansolo and Kate McMahon, and, of course, MNB's usual "news in context and analysis with attitude," hand-crafted every business day.

    As always, I love hearing from you ... your take on the news and critiques of our commentaries and columns make MNB what it is. I like to write that great retail needs to be relevant and resonant, and that's my goal for MNB as well ... plus, I want it to be fun to read, with wine, food, movie, TV, theater and book reviews thrown in for good measure.

    Thanks again …

    -Kevin Coupe
    KC's View: