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    Published on: September 18, 2019

    Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

    This week, we talk about the importance of differentiation, the high cost of customer service (or lack of it), and how AI can help death take a holiday.

    And now, the Conversation continues…

    KC: Tom, this week I thought I’d bring up three different kinds of innovations that I’ve seen recently, and just get your reaction to them…

    I was intrigued by the announcement by Nordstrom that at its new Local stores being opened in New York City, they’ll actually be accepting returns of online purchases made from other retailers. In other words, if I buy something online from Amazon or Walmart or Wayfair or Kohl’s, they’ll actually process that return for me. On the one hand, I think this is brilliant, and certainly on-brand for a company about which the urban legend has it that one of their salespeople took back tires that Nordstrom never sold. But I also wonder about the wisdom of making shopping at nominal competitors more convenient … it would almost be like Ford being willing to fix Chevys for nothing - sure, it makes Ford’s service looks good, but takes away one of the reasons to buy a Ford.

    Tom Furphy:
    It does seem a little over the top at first blush. I love that Nordstrom is willing to go to all lengths to serve their customers. I’ve always espoused that retailers need to intensively focus on their customers and solve real needs for them. If online returns are a significant customer pain point, and Nordstrom feels like they can solve that well for them, and that customers will reward them with more loyalty in “return” for the returns, then it could be a good call. I’m just not convinced that online returns are all that painful. Most sites allow you to print a label or code, slap it on the original package and drop it off at a UPS or FedEx store. Doesn’t seem that difficult to me, but perhaps I’m atypical.

    I would expect that Nordstrom has or is working on deals with the other retailers that enable them to process and be reimbursed for the merchandise value. If not, it would be a very expensive trip driver or customer acquisition cost.

    I’d think a good, sensible policy could be for Nordstrom to take returns for any brand that they carry. They could cut reimbursement deals with the brands and be able to re-sell and upsell those customers once in the store. That would solve for customers that they want to serve and would weed out those customers that are more price sensitive and less premium brand driven. If that’s too restrictive, maybe they could require a customer to be a member of the Nordy Club to return a brand they don’t carry.

    KC: I’ve also been noticing a bunch of press releases lately for a company called Dog Spot, which essentially puts little dog kennels in front of retailers, and allows consumers who are members to use a membership card to unlock the door to give your dog a place to safely rest until you get back from shopping, at which point you use your card to retrieve your dog. (The card is unique to each member, so nobody can steal your dog.) You can even make reservations via an online app.

    My question is this (and I’m honestly not turning this into an Instacart metaphor): does it make sense for different retailers in the same market to have the same offering? For example, in Seattle where you live, the Dog Spots are at QFC, and soon will be at both New Seasons and Central Coop. I guess I just wonder if you think the differential advantage goes away if it isn’t really different … and if you think there is a line somewhere that retailers should not cross, lest them become commoditized?

    In my opinion, the line for which services a retailer should own versus which they can outsource is drawn around what they consider core and differentiating. When defining a value proposition, retailers should focus on what they can do well and uniquely for their customers. The more critical customer need that a service addresses, the more important it is to own it and uniquely win with it.

    In the case of dog kennels, I don’t think food retailers should sweat owning them. I suppose if the pet category was strategically important and they wanted to deeply engage pet owners as part of the offering, then perhaps they should own it. But short of that, as long as Dog Spot does a nice job with the service, with clean and safe kennels, I think it’s fine to outsource it to them.

    I think the same for delivery. If a partner is professional, delivers on time and the product is of top quality, it’s fine for a retailer to outsource delivery. I don’t think they should outsource customer stewardship and cede the relationship with the customer. They need to own that. However, relying on an expert, with a delivery system that is well-funded and self-sustainable, and that delivers a good customer experience, can be more economical for the retailer while enabling them to control the overall customer relationship and value proposition.

    KC: Finally, I’m wondering what your reaction was to the new business model that we wrong about the other day, creating technologies that allow people to interact with their descendants for years, maybe even decades and centuries, after they’ve passed away. It all seems tied into the fast-evolving world of AI and machine learning, which when combined with Alexa-type technology, is going to stimulate whole new levels of technological integration into our lives, which probably will be good in some ways and bad in others. What do you think of this stuff? Is it real, or is it just smoke?

    Part of me feels like I would be more at peace knowing that some elements of my being would live on digitally beyond my time here. I think it would be really cool to interact with my grandparents and my dad who are now gone. I think it would also be cool to interact with their parents and grandparents.

    If I was comfortable that my digital avatar would be an accurate representation of me and what I would say, I would love for my descendants to be able to interact with me. If I could help them through a difficult time, maybe tell a joke, tell them I love them or recount a story, that would be pretty slick. I would want there to be some tight controls and standards around how “I’m” used, which I would have to approve.

    I think this stuff is real. In your piece, you had mentioned Amanda Solosky at Rival Theory who we met at the Retail Tomorrow event in Los Angeles. They say, “Our mission is to evoke the best in humanity through AI Persona: virtual beings that combine the knowledge, strategies, values, and beliefs of a real person with machine learning and machine cognition.” It’s pretty cool, albeit some may think creepy. As it continues to improve, I can see this tech applying to tele-doctors, nutritionists and pharmacists. I can also see it with chefs and cooking instructions. This will happen at scale in retail in the coming years.

    Wouldn’t it be cool if grandma’s recipes could be passed down over the generations? Not just a written recipe, but also the experience of grandma sharing her special techniques that she uses to make it taste just right.

    Commerce can be embedded in all of this but need to be done so thoughtfully. I think it’s important that when commerce is embedded in services and experiences it provides value. If this is all a bunch of noise, then commerce could be as annoying as it is helpful.

    The Conversation will continue…

    KC's View:

    Published on: September 18, 2019

    by Kevin Coupe

    Now, even the water we drink may be connected to the Internet.

    The Washington Post has a story about a new “electronic smart bottle called LifeFuels that he hopes will do for hydration what Fitbit has done for walking.”

    LifeFuels, the story says, “uses cartridges to shoot peach, citrus or blackberry-acai flavoring, as well as vitamins and minerals, into its smart water bottle. The bottle syncs to an iPhone app to enable you to record your intake of fluids and nutrients such as potassium and sodium.”


    The story says that “LifeFuels comes nicely packaged in a box that includes the 16.9-ounce bottle, a rechargeable base, an electric charger and an initial supply of three flavored fuel pods. There’s also a series of slick online videos with instructions.” It is being sold direct-to-consumer for the moment, and the company believes that “the key to its success will be selling subscriptions to people so that they buy the pods on autopilot — at $9.99 a pod, or about 33 cents a serving — thus creating a stream of recurring revenue.”

    The concept, the company argues, will appeal to people who want more data about how they live their lives as well as interested in sustainability: “At $179 a bottle, you aren’t going to cast the LifeFuels vessel into the trash. It should last for years and appeal to anyone who is against single-use plastic stuff.”

    I’m not sure I’m ready to buy this thing, but I never say never … because when I do, that’s when I get proven wrong by an Eye-Opener.
    KC's View:

    Published on: September 18, 2019

    Reuters reports that the US Equal Employment Opportunity Commission (EEOC) has found that Walmart “likely discriminated against 178 female workers by paying them less, denying them promotions or both, because of their gender.”

    The EEOC has urged the women and Walmart “to come to a ‘just resolution,’ which could include a settlement and changes to Walmart's employment practices.”

    Walmart has responded to the findings by saying that while it was willing to be “conciliatory” in dealing with the women, it believed that the conclusions were both "vague and non-specific,” and, because they were more than 15 years old, "not representative of the positive experiences millions of women have had working at Walmart.”

    However, according to Reuters, “Joseph Sellers, a lawyer for the women, said there were at least 1,600 similar complaints pending at the EEOC, accusing Walmart of discriminating against women in pay and promotions between 1999 and 2011. About 150 lawsuits against Walmart, covering the same time period, were pending in federal courts across the country, he said.”
    KC's View:
    While 15 years is a long time, and Walmart doesn’t have the same management today that it did then, last time I checked, bias against women was as wrong then as it is now, and so sometimes you have to take your medicine. I know that Walmart has to be careful about being too conciliatory because it sets legal and financial precedents, but I do think that it needs to accept responsibility, do what needs to be done, and then move on … making clear to everyone who works at the company that this kind of treatment of women - or any kind of discriminatory behavior - simply will not be tolerated. Not ever.

    Published on: September 18, 2019

    Food & Wine has a story about how McDonald’s tested what it called a “Better McDonald’s” store in Germany for 10 days last June, but the approach had more to do with accoutrements than the food.

    “The Better McDonald's Store was completely plastic-free,” the story says, “which allowed the company to test out some alternatives to single-use plastics and to receive customer feedback on each of those items. In addition to paper straws, wooden cutlery, and grass-paper burger cartons, condiments and dipping sauces were served in edible waffle cups, and Chicken McNuggets were handed out in paper bags instead of cardboard cartons.”

    While the format does not appear to have been tested yet in the US, Food & Wine says that “Canadian versions of the Better McDonald's Store are being tested in Ontario and British Columbia.”

    The story notes that this wasn’t McDonald’s first flirtation with sustainability initiatives: “Earlier this year, McDonald's replaced the plastic straws in its U.K. locations with paper straws, and they weren't exactly well-received: more than 53,000 people have signed a petition asking McDonald's to bring back the plastic … After customers complained that the straws disintegrated in sodas and milkshakes, the company attempted to improve them — but that caused an even bigger headache, because the new-and-improved versions can't currently be recycled.”
    KC's View:
    Well, maybe not completely plastics-free. They do have the same food…

    Published on: September 18, 2019

    Inc., in its identification of the “100 Women Building America's Most Innovative and Ambitious Businesses,” has named Lisa Sedlar, CEO of Portland, Oregon-based Green Zebra Grocery, to the list.

    Green Zebra, as the story says, is “named after an heirloom tomato” and “was built to make healthy food accessible and convenient for everybody. There are three Green Zebras in Portland - a fourth opens this fall - and Sedlar is about to close a $10 million Series B funding round as she explores potential locations in Seattle, L.A., and the Bay Area.”

    You can check out the whole list here.
    KC's View:
    Congrats to Lisa, who has become a friend over the years as I’ve watched Green Zebra’s development. I’ve also become a regular customer of its store on the campus of Portland State University during my summer adjunctivities, and I’m not the only person who thinks the format is one definition of what Retail Tomorrow looks like.

    Published on: September 18, 2019

    • The New York Times reports that Amazon has introduced “ new subscription level of its streaming music service, offering millions of songs at high resolution — the first time a major streaming outlet has delved into a market long considered an audiophile niche.

    “Even the price of the new subscription tier, Amazon Music HD, is a statement. It costs $15 a month, or $13 for members of Amazon’s Prime program — less than the $20 to $25 a month that is the norm from smaller outlets like Tidal, Deezer and Qobuz … Amazon HD customers have access to some 50 million songs in what the company calls HD audio, or the equivalent of CD quality — 16-bit files with sampling rates of 44.1 kilohertz. A subset of ‘millions’ of those songs … are available at the “Ultra HD” level — up to 24-bit and 192 kHz, the highest resolution files that record companies typically produce.”

    The Times story notes that “the need for improved audio quality has been a frequent complaint since the early days of the MP3, in the 1990s — or even earlier, for those, like Neil Young, who argue that CDs were a step down from vinyl records.

    “Even Mr. Young endorsed Amazon’s move. ‘This will be the biggest thing to happen to music since the introduction of digital audio 40 years ago,’ he said.”
    KC's View:

    Published on: September 18, 2019

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

    Fortune reports that Crate & Barrel plans to expand its test of full-service in-store restaurants, from one that has been operating in Oak Brook, Illinois, to 15 locations around the country.

    The story says that the restaurant, called The Table at the Crate, is designed “to show off its dining, kitchen, and design products. Almost all of the items in the restaurant are available for purchase on the storefront side of business.”

    A timeline for the expansion has not been disclosed.

    I’ve always loved the notion of selling products by placing them in context. It works so much better than just putting them on display in a vacuum, and certainly gains in relevance when a bricks-and-mortar store is trying to compete against e-commerce companies.

    • The Los Angeles Times reports that Halo Top ice cream, known for being a high protein, low sugar, low calorie dessert, is being acquired by Wells Enterprises Inc., which makes Blue Bunny ice cream. Terms of the deal were not disclosed.

    • The Wall Street Journal reports that New York State’s Public Health and Health Planning Council has approved “an emergency regulation temporarily banning the sale of flavored e-cigarettes and nicotine e-liquids,” attributing the decision to the “rash of pulmonary illnesses and several deaths in the U.S. linked to vaping and e-cigarette usage.”

    According to the story, “The ban went into effect immediately and is expected to last 90 days, with the expectation that it will be renewed absent a permanent legislative ban … Retailers will have until Oct. 4 before the state begins enforcing the new regulation. Retailers who violate the ban on sales will face fines of up to $2,000 per violation.”

    Michigan has also banned the sale of flavored e-cigarettes, and the Trump administration has made some noise about some sort of federal action.

    The move is seen by some as controversial, since there are some people who believe that vaping helps some people quit smoking. In addition, it could put some vaping stores out of business.

    • Today Is National Cheeseburger Day.

    Time to celebrate. I’m thinking a double-double, animal style. Be still, my heart.
    KC's View:

    Published on: September 18, 2019

    • Walmart CIO Clay Johnson is leaving the retailer to join Yum Brands as chief digital and technology officer, a newly created position.

    The Wall Street Journal writes that Johnson “is leaving Walmart after bolstering its use of cloud computing. His departure comes a few months after Walmart merged its consumer-facing and internal technology teams under a new role held by Suresh Kumar, a former executive at Inc. and Alphabet Inc. ’s Google. That restructuring came as Walmart continues to ramp up its efforts to better compete with Amazon and as it uses more technology for previously manual tasks like tracking which products aren’t available on store shelves.”
    KC's View:

    Published on: September 18, 2019

    • Cokie Roberts, who brought her considerable journalistic talents to National Public Radio, Public Television, and ABC News over a four-decade career, has passed away after a battle with breast cancer. She was 75.
    KC's View:
    I actually met Cokie Roberts a long time ago, when I was living a vastly different life doing public relations for the Public Broadcasting Service (PBS). She was part of an anchor team launching a new program called “The Lawmakers,” which was designed to focus on the legislative process, and my job was to shadow her for a few days to gather grist that could be used in our PR efforts. I was barely more than a kid, and I remember her being kind and patient with me, which made me a fan throughout her career. From all reports, she was an enormous influence on a lot of young journalists, mentoring them and encouraging them and pushing them to higher and better standards.

    Published on: September 18, 2019

    …will return.
    KC's View:

    Published on: September 18, 2019

    This special podcast, recorded in front of a live audience at the recent Retail Tomorrow Immersion conference in Boston, goes inside the evolving world of LL Bean, the iconic catalog business that has engineered a dramatic and highly successful shift into omnichannel retailing through transformational leadership and a willingness to disrupt from within.

    Our special guest is CEO Stephen Smith, the first outsider to ever run the company, who offered a unique perspective on how a legacy retailer - founded in 1912 - has been transformed into a model of 21st century marketing savvy.

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

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

    This edition of the Retail Tomorrow podcast is brought to you by the Global Market Development Center (GMDC), connecting people & companies to opportunities for growth.

    Pictured, left to right: Kevin Coupe, Stephen Smith

    KC's View: