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    Published on: September 19, 2019

    MNB Channel on YouTube.

    Hi, Kevin Coupe here and this is FaceTime with the Content Guy.

    I've been doing this a long time … more than 30 years. But apparently, I'm a slow learner.

    I came to that realization this summer, when, while living and teaching in Portland, Oregon, Mrs. Content Guy and I did a lot more food shopping and cooking that we have in the past, largely because the building where we rent an apartment during the summer had remodeled the common patio and installed some terrific grills. So, we loved the idea of sitting outside, listening to the sounds of the city, sip some good wine, maybe read a book, and cook up some steaks, burgers or seafood when we felt like it.

    The store that I found myself patronizing for these essentials - and yes, I consider good wine to be an essential, was Zupan's, a three store independent that is highly invested in the celebration of great food.

    And what I learned this summer, in a way that simply hadn't occurred to me before, is the degree to which a really great food store can change your life, can make your life better in tangible and intangible ways. Now, maybe one of the reasons that it hit me this year was that it was just us … no kids, no dogs, and somehow things just seemed more relaxed. (It probably helped that I took a little extra time off this summer.) We were open to having our lives changed. (And I remembered it the other day when I was back in Portland on business, which made me want to share it with you.)

    I also think it helps that Zupan's seems to want to change its customers' lives … and I think that this is precisely the right attitude that food retailers should bring to the competitive wars.

    An example: We would eat one of Zupan's signature boneless rib eye steaks, seasoned with a little Jacobsen's salt and private label olive oil, cooked on the grill using precise directions provided by one of Zupan's terrific meat guys. It would be accompanied by this amazing spinach and feta cold pasta salad (that I now have to figure out how to make), and some amazing wines. There were a lot of other items that Mrs. Content Guy fell in love with - maybe the most impactful was this hand-rolled butter that she felt was the best butter she'd ever had in her life.

    Now that we're back home, and the closest Zupan's is a 2,937-mile / 43-hour drive from our garage (trust me, we've checked), the phrase I tend to hear a lot from Mrs. Content Guy is this: "It's good, but it isn't Zupan's."

    Now, there are other stores that celebrate food like Zupan's does. Dorothy Lane Market, for example, or Westborn Market. (Dayton and Detroit are a lot closer than Portland. Hmmm…?) But lest you think that the celebration of food is only the province of these admittedly upscale stores, I'd like to suggest that this isn't true - a great meatloaf or burger is as worthy of celebration as a rib eye steak, and there are a ton of under $10 wines that
    are eminently affordable and can make meals immeasurably better. Deliciousness, as someone really smart once said, becomes the ultimate differentiator.

    In so many ways, this is what food stores have to do if they want to compete in an environment where there are a) tons of options, and b) a lot of people are doing a lot of shopping online.

    Walk into Zupan's and there is lots of theater, lots of energy, lots of highly engaged and committed employees, and plenty of products that are almost impossible to find anyplace else. This last part is critical, because success is found in the places where you are different, not where you are the same.

    Zupan's becomes not just a store you want to go to, but a store you have to go to, because it is so off-the-charts great.

    Anyway, that is what is on m y mind this morning, and as always, I want to hear what is on your mind.

    KC's View:

    Published on: September 19, 2019

    Walmart and Capital One announced that they have teamed up to introduce two new credit cards that will be tied into the Capital One Walmart Rewards Credit Card Program.

    According to the announcement, "The program's signature co-branded card, the Capital One Walmart Rewards Mastercard, and the private-label card exclusively for Walmart purchases, the Walmart Rewards Card, will be available beginning September 24 … Current Walmart cardholders will be converted to the Capital One Walmart Rewards Mastercard or the Walmart Rewards Card and will start earning these new rewards starting October 11, with updated cards arriving in the mail beginning in November."

    The companies say that the rewards will include "5% back on purchases at, inclusive of Walmart Grocery Pickup and Delivery … 5% back on in-store purchases when using Walmart Pay for the first 12 months after approval as a special introductory offer … 2% back on Walmart purchases in stores outside of the introductory offer … 2% back on restaurants and travel … (and) 1% percent back everywhere else." There are no annual fees for cardholders.

    MarketWatch reports that the announcement was met with some skepticism, that "some experts are concerned that people with riskier credit histories may be more likely to take out the card. Research has also shown that retail cards are used by a higher number of people with lower credit scores, and these consumers are more likely to go into default on their credit-card debt."
    KC's View:
    I have to wonder if the real benefit to Walmart in this arrangement will be better - meaning more specific - customer purchase data than it has had in the past. Especially when it comes to purchases made in its stores by people using these cards, Walmart ought to be able to generate more actionable data that it can overlay with data generated through e-commerce sales, and be more responsive to its shoppers and anticipatory about their behavior. Which is sort of the point.

    Published on: September 19, 2019

    Farmstead, a west coast pure play online grocer that MNB talked about earlier this year, announced this week that it is "expanding to the Carolinas after inking a first-of-its-kind partnership with Southeast grocery company Alex Lee – parent company of grocer Lowes Foods and grocery distributor Merchants Distributors (MDI). The partnership enables Farmstead and Alex Lee to expand their reach in complementary markets without the need to open any physical stores."

    According to the announcement, "In the Carolinas – Farmstead’s first expansion market – the company will open multiple microhubs, which greatly ease entry into new geographies, reduce food waste by 3-4x and help eliminate food deserts by making fast, inexpensive delivery available to a wider area. Most of all, they meet customers’ desire for perfect orders with no stockouts, delivered free, with no markups. With Farmstead, customers can get all of their groceries – high-quality local brands, national brands and fresh meats, dairy and produce – from one place.

    "Physical supermarkets can cost up to $10M to build, take 18-24 months to construct, and typically serve a five-mile radius. A Farmstead microhub, by contrast can be constructed in under 8 weeks for just $100,000, and can serve a fifty-mile delivery radius."

    “When we learned about Farmstead’s microhub approach, we recognized it would be a great model for expanding into new geographies where we don’t have physical stores,” said Kimberly George, Alex Lee's vice president, communications and corporate citizenship. “This partnership will help improve the reach of Alex Lee in the Carolinas, and boost revenue with little risk. We’re excited to be the first to partner with Farmstead on this innovative approach to grocery.”
    KC's View:
    This is interesting in all sorts of ways.

    First, it illustrates the ways in which retailers can come to market these days without actually having to open markets. This can allow retailers to both go wider in terms of geographic presence and go deeper in terms of geographic density … both are important these days when working to be competitive.

    Second, it illustrates what could be a really interesting partnership - Farmstead is a startup that I think a lot of, and I've always respected the Alex Lee approach to the business. I hope they'll be happy together.

    Finally, I'll be looking forward top seeing how the business model evolves. When I did the Farmstead piece earlier this year, here is one of the things I found most interesting:

    Instead of offering a so-called “long tail,” which a lot of e-commerce companies try to do, Farmstead has an exceedingly short tail: between 1,500 and 3,000 items, depending on the time of year. Much of the focus is on fresh, with Pradeep saying that their highly edited selection is targeted at having the best item in a category at several different price points, with the goal of always being cheaper than the local supermarket.

    What really intrigues me about this is the fact that Farmstead is using AI to keep the selection tight, which also means that there is a minimum of waste and shrink. Combine that with the fact that they are operating out of a small warehouse of about 3,000 square feet, with a relatively small corporate and warehouse support staff, and you have a model that seems like it could be expandable without enormous cost, especially as the machines keep learning and the algorithms keep being sharpened.

    It sounds like there are ways in which Farmstead's tail will be lengthening a bit, especially when they talk about providing "all of their groceries." But, I suspect that by using shopper data effectively, these microhubs will be able to effectively edit their item selection, and then use Alex Lee's capabilities to expand on that when necessary.

    A very interesting development, with lots of potential implications.

    Published on: September 19, 2019

    Bloomberg has a story about how Amazon's entry into the pharmacy business has not been smooth, despite its $753 million acquisition of mail order business PillPack, which sells packaged, presorted medicines.

    PillPack, the story says, "has run into stiff opposition, from chains like CVS with thousands of stores to family-owned operations with a single shop. Having seen their business of selling shampoo and razor blades chipped away by online sellers, the drugstores are trying to keep Amazon from wresting away their piece of the $333 billion U.S. prescription-drug industry."

    One of the ways that companies are fighting back against Amazon and PillPack is by insisting - not unreasonably, some would argue - on patient confirmations of prescription transfers to the PillPack system.

    Here's how Bloomberg frames the story:

    "When PillPack was new, there was rarely a problem getting prescriptions transferred, according to interviews with three former PillPack pharmacy technicians, who requested anonymity to discuss sensitive information. But once it hit the radar screen of the big chains, transfers became harder as drugstores increasingly insisted on direct confirmation from the patients, they said.

    "Patients who take multiple medicines are a huge and lucrative market because pharmacies are typically paid a fee or markup on each prescription. An estimated 23.1% of the U.S. population — more than 70 million people — takes three or more prescription drugs per month, and 11.9% take five or more drugs each month, according to the U.S. Centers for Disease Control and Prevention.

    "Those are the users PillPack wants, but they’re also customers that CVS Health Corp., Walgreens Boots Alliance Inc. and Rite Aid Corp. want to keep. And the chains, which together operate more than 20,000 drugstores in the U.S., aren’t giving in without a fight."

    The story goes on: "CVS and other drugstores say any delays in the process are because they’re trying to make sure their customers are aware that they had agreed to have their prescriptions transferred. PillPack, on the other hand, maintains that it always gets consent and that the chains are purposely stonewalling to hang on to an outdated, inefficient retail model.

    "PillPack is aggressively trying to work around any stall tactics. Its workers are following up faxed transfer requests with phone calls to make sure they aren’t ignored. They are increasingly contacting patients' doctors to write new prescriptions as an alternative to getting existing ones transferred. And the company is carefully tracking pharmacies that it believes have been uncooperative. While laws vary, states generally require pharmacies to fulfill valid prescription-transfer requests."

    PillPack is said to be growing "steadily since joining the Amazon stable," and is currently "exploring deals with health plans and insurers."
    KC's View:
    As a patient, I think that my highest priority would be doing business with companies that have my best interests at heart. I'm a little surprised that rather than slow-walking these transfers, companies like CVS have not looked for a compelling competitive response to the PillPack business model.

    Just offering resistance in this case won't be enough, I suspect.

    Published on: September 19, 2019

    BuzzFeed News has a relevant story about the Appel Store, the first of which was opened in 2001 and the latest of which is scheduled to open next week - a "grand reopening of Apple’s Fifth Avenue flagship store in New York."

    The story says that "the company faces the same challenge with its stores as it does with its products — how to keep pace once its cutting-edge ideas have become standard … The opening of its flagship store comes in a period of accelerated innovation in retail and technology — and heightened competition. Thanks to Amazon, consumers expect affordable items at their doorsteps within one or two days, an expectation that has created havoc on city streets. People are amazed by its Amazon Go cashierless checkout technology, which allows customers to grab an item off a shelf and walk out without paying for it at a register."

    You can read the story here.

    The piece notes, by the way, that while Apple does not break out its store sales, "a 2017 CoStar analysis of retail industry data found that Apple led retail store sales at $5,546 per square foot, outselling luxury retailer Tiffany & Co., which reported sales of $2,951 per square foot, and athleisure company Lululemon, which reported sales of $1,560 per square foot.
    KC's View:
    There's no question that the Apple Stores have lost a bit of their mojo, and I have to wonder if this is in part because of a misguided effort to make them more about fashion than accessible technology. (That's what happens when you hire a Burberry exec to run the business.) And Apple's inability to come up with that next big thing, the way Steve Jobs used to, probably has added to the sense of stagnation.

    That said, I walked by an Apple Store yesterday, and it was fairly crowded for a Tuesday afternoon. Not far away, I walked by a Microsoft Store, and it wasn't. And for the most part, I've continued to find my Apple Store experiences to be satisfactory and rewarding - the people who work there are generally friendly and smart and highly competent.

    That ain't nothing.

    Published on: September 19, 2019

    Axios reports on a new Business Roundtable survey concluding that "confidence among the nation's top CEOs saw the biggest quarter-over-quarter drop in 7 years and hit a level not seen since the 4th quarter of 2016 … The BRT's economic outlook index has declined for 6 consecutive quarters."

    According to the story, "At 79.2, this quarter's reading came in above the 50-point level that would indicate the onset of a recession, but the reading 'suggests some moderation in the pace of economic growth going forward,' the lobbying group noted in the release. 20% of CEOs surveyed expect their company's sales to decrease in the next 6 months - a notable jump from the 9% that said the same last quarter."
    KC's View:

    Published on: September 19, 2019

    • Amazon announced yesterday that it is launching Amazon PayCode in the US, describing it as a way of "giving customers who prefer to pay in cash another option to enjoy the convenience and benefits of shopping on Amazon."

    The announcement describes the new offering this way:

    "Amazon PayCode, already available in 19 countries around the world, launches today in the U.S. and allows customers to choose Amazon PayCode at checkout and then pay for their purchase in cash at one of 15,000 Western Union locations. Items ship once customers pay for their purchase in person at a participating Western Union location … With over 15,000 eligible locations, 80 percent of Americans live within five miles of a participating Western Union agent location making this a convenient solution for customers paying with cash."

    Separately, the company says, "Amazon Cash, which enables customers to load cash into their Amazon Balance for making online Amazon purchases, is now available in over 100,000 cash-loading locations nationwide."

    Reuters reports that British online supermarket Ocado says that it "could start home deliveries of the full Marks & Spencer range before next September, ahead of their joint venture’s original deadline." According to the story, "Ocado and M&S completed the 1.5 billion pound joint venture deal in August, creating Ocado Retail and signalling the end of Ocado’s supply contract with upmarket supermarket chain Waitrose in September 2020."

    • Amazon said yesterday that "since announcing Career Day last week the company has received more than 208,000 job applications online for roles in the U.S. Yesterday, Amazon held Career Day events in Arlington, Va., Boston, Nashville, Dallas, Chicago, and Seattle to help candidates learn more about opportunities at Amazon … Amazon recruiters conducted more than 4,500 interview-training sessions with candidates and reviewed over 7,000 resumes on site providing tips to candidates on how to best highlight their experience and skills."

    Amazon has said it currently is in the process of hiring for some 30,000 new jobs - from software engineers to warehouse workers - around the country, including some 10,000 jobs in the Seattle area to be filled next year.
    KC's View:

    Published on: September 19, 2019

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

    • Kroger announced that it will be making Apeel avocados available in more than 1,100 of its stores nationwide, as well as introducing two new produce categories, Apeel asparagus and Apeel limes, through a pilot in its Cincinnati market this fall.

    And why is this worth mentioning?

    Apeel has developed what Kroger calls an "innovative food-based solution (that) has proven to extend the life of perishable produce, reducing food waste in transport, in our retail stores and in our customers’ homes.”

    The company's solution is based on a process that, according to Apeel's site, "adds a layer of plant-derived protection to the surface of fresh produce to slow water loss and oxidation — the factors that cause spoilage."

    The companies note that "today, 40 percent of the food produced is thrown away, yet 1 in 8 Americans struggle with hunger. Redirecting even one-third of this food would help feed everyone in need. Additionally, food waste contributes roughly 8% of annual greenhouse gas emissions and is considered a top cause of climate change."

    I met these folks last summer at the always-excellent Organic Produce Summit (OPS), and was very impressed by their technology. But since I know very little about this stuff and am easy to impress, what was even more important that it seems to impress my friend Karen Caplan of Frieda's, who introduced me to Apeel's CEO, James Rogers. So I am not surprised to see that Apeel is making real progress.
    KC's View:

    Published on: September 19, 2019

    • Sander Vanocur, who covered everything from the White House to the Vietnam War to national political conventions from both NBC News and ABC News, with stops along the way at the New York Times and the Washington Post, becoming one of the most respected broadcast journalists of the sixties and seventies, passed away this week at age 91. The cause was said to be complications of dementia.
    KC's View:

    Published on: September 19, 2019

    Responding to our story about how Chipotle figured that if people were going to steal its small bottles of Tabasco from its stores, it might as well find ways to embrace it as customer love, MNB reader Howard Schneider wrote:

    My first thought about this (which, admittedly, tells you something about me) was that this is “the Grateful Dead approach.” Decades before streaming changed the music business forever, touring bands jealously policed their concerts, forbidding fans from recording, let alone sharing, their work via “bootleg” recordings. The Dead, however, recognized the marketing value of letting fans record and share their concerts without restriction. They even actively encouraged “taping.” Over the years, the band’s popularity was spread and enhanced by the existence of this early example of a “sharing economy.” Chipotle has figured out the same marketing lesson. And I’m sure the ethos of “sharing” will resonate with Millennials and Gen Z, just as it did years ago with the Dead’s target audience.

    We also had a story the other day about Walmart investing in expanded healthcare facilities in its stores, prompting MNB reader Beth Thieme to write:

    The focus on making a one-stop shop where consumers can buy their groceries and get health care needs met doesn’t appeal to me. Does anyone want to buy fresh produce in a place where people who are sick, visit a health professional and then might shop to pick up a few things? Public places are a breeding ground for germs and to attract more people who are not feeling well into a grocery store doesn’t make sense.

    Regarding the lawsuit accusing retailers of selling counterfeit Kona coffee, MNB reader Jeff Folloder wrote:

    Those that know coffee are quite aware of the sham that is Kona coffee.

    Unfortunately, not many folks really know coffee.  Kona has been and will be a marketing gimmick that preys upon the unsuspecting.  Mostly those who are hoping that a bit of the island charm of the southernmost part of the US will bring joy to their morning cup.  It's mostly placebo effect.  The mental image bolsters your perception of the flavor as the caffeine from the rest of the coffee wakes you up.  Sure, the label should be accurate and transparent.  The consumer should absolutely know how much of the coffee isn't what the front label touts.  Kona sales will suffer.

    Responding to our piece about artisanal toilet paper coming on the market, MNB reader Gene Beaudoin wrote:

    I don't comment often but love your articles.

    You missed a key point the world of toilet paper. The Grove Collective with whom I am not associated, makes their toilet paper out of bamboo. Bamboo can be harvested in as few as three years. Trees for toilet paper take 25-50 years.

    Easy switch, major change. Having been a supermarket exec for a long time and a developer after that, I have been a trend watcher like you. Plastic bags in supermarkets will be gone in three years. Long time in coming. I recall Ira Waldbaum used to get irate when he see a plastic bag in a tree. And, why cut down forests for toilet paper? Think climate change for starts.

    Michael Sansolo's "Final Straw" column prompted this response:

    From MNB reader Deborah Faragher:

    Thanks, Mike, just ordered my Final Straw! Living on Hilton Head, I believe in what’s going on with straws but do prefer using one and hate the paper ones that shred before you finish your drink! So I appreciate your recommendation because I had never heard of it nor would I have gone looking for one. What a cool idea!

    Regarding our story about Crate & Barrel expanding its instore restaurant concept, MNB reader Janis Raye wrote:

    The Crate and Barrel idea of having a restaurant that showcases products it sells is an idea that Simon Pearce in Vermont has been doing for many years. It’s a lovely restaurant with a beautiful view of a waterfall, and you eat and drink using its gorgeous pottery dishes and its handblown glassware. Afterward (or before, if you have a wait before your table is ready), you go into the store and see those products and many more. It’s a lovely dining experience with a fun retail twist. Next time you’re in Vermont we’ll take you!


    And finally, I took note of a holiday yesterday, but one MNB reader was disappointed:

    It’s National Cheeseburger Day, and no reference to Jimmy Buffett.

    Parrothead card officially revoked!

    Fair point. But I don't need a membership card. I've got shorts, flip flops, a ragtop, and even a bit of a schoolboy heart.
    KC's View:

    Published on: September 19, 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: