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    Published on: October 2, 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’s Innovation Conversation is a little different. Last week, Tom and I were in the same place at the same time - we were doing a "live" Conversation for a company - and so we decided to have a “real” conversation, on camera, instead of the email conversations that we we usually have for this column.

    (By the way, if you'd like us to do a live Innovation Conversation for your company or group, just let me know.)Our subject, in part, was Amazon's grocery business, including a discussion of the new supermarket chain that it is planning … which was timely, considering there is more news about it below.

    You can see that video at left. Enjoy.

    KC's View:

    Published on: October 2, 2019

    The Wall Street Journal reports that Amazon continues to move forward with its plans to open a chain of grocery stores in the US that will not compete directly against its Whole Foods stores, but will add new bricks-and-mortar functionality to Amazon's broader value proposition.

    The Journal says that the stores - specific details about which remain undisclosed - are likely to initially show up in Los Angeles, Chicago and Philadelphia, with the first stores likely to be in densely populated Southern California communities of Woodland Hills, Studio City and Irvine, possibly as soon as before the end of the year. The New York metropolitan area, New Jersey and Connecticut also are said to be in Amazon's early expansion plans.

    The story says Amazon has signed leases for dozens of locations, generally between 20,000 and 40,000 square feet - with many of them "outside urban cores" and catering "to middle-income consumers. Apart from prepared foods, they will stock mainstream groceries such as soda and Oreos, people familiar with the matter said."

    In Woodland Hills, California - about 22 miles north of Santa Monica - the Journal writes, "Local building and safety departments recently granted contractors hired by Amazon permits to change the facade, start electrical work on light fixtures and fire sprinklers, and to install an espresso machine and kitchen equipment at the property there. Filings show that there will be a substantial kitchen, indicating that the store will offer prepared foods.

    "The roughly 35,000 square-foot store was previously occupied by Toys R Us, and its neighbors are Citibank, Office Depot and Sharky’s Woodfired Mexican Grill. There is a Costco wholesale market half a mile away."

    The Journal notes that Amazon currently has 16 Amazon Go checkout-free stores, four Amazon 4-star stores, only carrying items ranked as having four stars or more on its website, and 18 Amazon Books stores. "Revenue from these bricks-and-mortar businesses is small but edging up," the Journal writes.
    KC's View:
    The "where" is important, but the "what" is far more so … and I continue to believe that if these are going to work, they are going to have to employ one or more of Amazon's various secret sauces … replenishment (via Subscribe & Save), loyalty (via Prime membership), or checkout-free technology (as in Amazon Go).

    Now, Tom Furphy argues - and this is part of our innovation Conversation, which you can watch above - that Amazon's secret sauce is its relentless and obsessive customer focus.

    It is going to be interesting. I think that then one thing we can count on is that Amazon will continue to push the ball forward.

    Published on: October 2, 2019

    by Kevin Coupe

    I'm just glad MNB didn't make this list.

    Morning Consult has the results of a survey that sought to determine the most polarizing and divisive brands in the US - that is, the brands about which opinions skew one way or the other politically.

    Of the top 15, 12 of them are media brands - in declining order, CNN, Fox News, the New York Times, NBC, MSNBC, FOX, ABC News, the Washington Post, CBS News, Fox Business, Fox Nation, and CNBC.

    Of the 15 most divisive brands, in fact, only three weren't media brands:

    Nike, which came in at number 15, probably as a result of its Colin Kaepernick campaign.

    Gun manufacturer Smith & Wesson, which was number 12. No explanation needed.

    And, no surprise, coming in at number one as the nation's most divisive brand - Trump Hotels.

    Morning Consult says that the results are similar to those from last year's survey … except more so.

    All of which is an Eye-Opener.
    KC's View:

    Published on: October 2, 2019

    The Federal Aviation Administration (FAA) for the first time has recognized a drone service as a commercial airline. The service is not owned by Amazon, which has gotten so much media attention for its drone plans, but by UPS.

    Brown wins.

    Wired writes that "this latest advance in the now years-old effort to put drones to work over America means the FAA has given something called Part 135 Standard certification to the logistics giant’s drone-slinging subsidiary, UPS Flight Forward. (Business jet operators and others that run on-demand, rather than scheduled, service get the same ordination.) With the certification in wing, UPS has the right to run as many drones as it likes, in as many places as it likes. And it’s already gearing up to expand its drone delivery service beyond the Wakemed hospital campus in Raleigh, North Carolina, where it’s been testing a delivery service since March."

    The story notes that "over the past six months in Raleigh, UPS has run more than 1,000 revenue-generating flights, moving blood samples and pharmaceutical supplies around the hospital campus," creating what the company calls "substantial economic value."

    Wired goes on to point out that "the company is developing a center where its operators will oversee fleets of drones," but that may not be enough to satisfy the FAA, which may want "to approve each individual flight beyond the line of sight. And if UPS wants to work something like a real airline and open its services to the folks eager to eliminate the ground-dwelling human courier, it will need broader permission to fly as it sees fit."
    KC's View:
    I feel like one of the doors to the future has been opened. The emergence of drone delivery as a viable business model has been slow; it has been six years since Amazon founder/CEO Jeff Bezos talked about it on "60 Minutes." But it appears that momentum is picking up and that, both literally and metaphorically, the sky is the limit.

    Published on: October 2, 2019

    The Wall Street Journal had a story the other day about how a growing number of consumers are using financing plans to buy small, everyday items … a marked change from how they used to use such services.

    According to the story, "Gone are the days when special financing plans were mostly reserved for big-ticket purchases like TVs and refrigerators. Now, sweaters, makeup or other everyday items can be paid for in installments with loans or other payment plans offered at checkout with thousands of merchants in the U.S., including Walmart Inc., Urban Outfitters Inc. and, soon, H&M. Some Inc. credit-card users can also sign up for these plans."

    The Journal writes that "the payment plans often resonate with young adults who are wary of carrying credit-card balances after watching their parents struggle with debt during the last recession. Financial technology companies such as Affirm, Afterpay Touch Group Ltd. and PayPal Holdings Inc. dove into these payment plans after that period, when banks pulled back on consumer lending."

    The fact is that "merchants and lenders are tapping into the financial challenges many U.S. families are facing. Despite signs of a strong economy, like low unemployment, consumers are increasingly relying on borrowing to fund their daily lives. U.S. consumer debt is higher than ever, as cars, college, housing and medical care grow more expensive but incomes stay largely stagnant."

    One difference from traditional layaway plans is that you don't have to wait until the item is paid off to get it; you make monthly payments with a fixed end date, and also pay a late fee if you are tardy.
    KC's View:
    Two things about this story.

    One, it is heartening that consumers, especially young ones, are looking to find ways to make sure they don't ring up credit card debt … though it may be a little illusory, since they are, actually, going into debt.

    And second, this story suggests that maybe the economy isn't the purring machine that some suggest … that there is a lot of financial insecurity out there.

    Retailers need to pay attention.

    Published on: October 2, 2019

    Dave Lewis, the former Unilever executive who was hired as the first outside CEO at Tesco five years ago and charged with dealing with a declining market share, insurgent German discounters Aldi and Lidl, and an accounting scandal that bruised the company's reputation, said yesterday that he is stepping down.

    Lewis will be succeeded next summer by another outsider - Ken Murphy, chief commercial officer and president of global brands at Walgreens Boots Alliance.
    KC's View:
    I think the general consensus would be that Lewis has been successful in restoring some of the luster to Tesco's reputation and momentum to its performance. He's only 54 years old, though; I wonder what the next move will be.

    As for Murphy, things won't be easy. Not only will he have to continue dealing with Ali and Lidl, but he'll also have to deal with Brexit's implications … whatever those are, and however that turns out.

    Published on: October 2, 2019

    The US Court of Appeals in Washington, DC, ruled yesterday, the New York Times writes, that the Federal Communications Commission (FCC) was within its rights when it repealed so-called net neutrality regulations, adopted during the Obama administration, that had "prohibited broadband internet providers like Comcast and AT&T from blocking websites or charging for higher-quality service or certain content." The goal of the rules was to insure a level playing field, with supporters saying that repeal would result in higher prices for consumers and higher costs for startups; the Trump-empowered FCC argued that repeal would "encourage innovation and help propel the economy."

    However, the Court also ruled that the FCC "had overstepped by broadly stopping state and local governments from writing their own rules." In making that determination, the court virtually assured that the debate will continue, as states like California establish and enforce their own net neutrality rules.

    The Times reports that the Trump administration seems to be accepting the first part of the ruling - its victory at the federal level - while saying that the FCC "was still analyzing how the opinion would affect its ability to block state and local regulations," and that it "believed the court had not curtailed its efforts outright."
    KC's View:
    I have consistently argued, pretty much from the moment that the repeal was announced, that the cable companies are like robber barons in how they approach their customers and that repeal would only give them the ability to rip off their customers even more.

    Repeal doesn't hurt big companies like Google and Netflix and Amazon and Walmart/Jet, all of which will be able to afford to pay higher fees to be in the fast lane. But if you are a smaller, entrepreneurial company that is trying to innovate but doesn’t have deep pockets, you’re probably screwed. And, because cable companies and internet providers have all the morals of Don Fabrizio Fanucci, they’ll also no doubt figure out a way to charge their consumer customers more, too. Because, in the end, they’re all about making money and providing shareholder benefits.

    John Oliver, on HBO's "Last Week Tonight," got it absolutely (and hilariously/profanely) right in his original analysis, which you can still see here.

    The FCC can continue to go after states and localities all it wants. States like California will continue to resist. And I suppose that if Trump loses in 2020, the court's decision will mean that whoever wins will be able to repeal the repeal.

    Published on: October 2, 2019

    The Chicago Tribune reports that Starbucks, having canceled the sale of print newspapers in its stores around the country, "will offer customers free digital access to several newspapers for a limited time."

    Among the newspapers being offered online via Starbucks' free Wi-Fi are the Chicago Tribune, Wall Street Journal, USA Today, Seattle Times, Baltimore Sun, Orlando Sentinel and New York Daily News, most of which ordinarily would have a paywall preventing complimentary access.

    The shift comes as "print newspaper circulation nationally has been on a steady decline as consumers increasingly read news online."
    KC's View:
    It doesn't matter to me because I have subscriptions to both, but I'm a little disappointed that Starbucks apparently did not reach agreements with the New York Times (which it used to sell in its stores nationwide) and the Washington Post. But maybe that'll be rectified down the road.

    Published on: October 2, 2019

    • Publix Super Markets said yesterday that it plans to open what will be its 12th GreenWise Market in St. Augustine, Florida, in 2021. It is the second GreenWise announced for St. Johns County.

    There currently are three GreenWise stores open, with three more slated to be opened by the end of the year.

    GreenWise Market is described by Publix as "a specialty, natural and organic store featuring items for the health-conscious and gourmet foodies. The store is divided into experience zones. EATS is a large prepared foods area that is home to gourmet pizzas, burrito bowls, chef-created sandwiches and a selection of heat and eat main courses and sides. Items are created using organic meats and cheeses, and vegan options are available. In POURS, customers can purchase beer, wine, coffee or other beverages to enjoy while they shop. CUTS is home to organic and sustainably sourced meats, including in-house smoked meats and sausages. In FINDS, customers can discover new items, great beer and wine, and gourmet options for a charcuterie platter."

    • The Wall Street Journal reports that Coca-Cola will begin selling a Coke-branded energy drink in the US beginning early next year.

    The launch follows the clearing of a legal hurdle with Monster Beverage Corp., the story says. "Coca-Cola Energy is already available in 25 countries, including Japan and Australia. Energy-drink maker Monster, which counts Coca-Cola as a distribution partner and a significant shareholder, had sought to block the sale of the energy drinks in the U.S. citing a noncompete agreement." But Coke won an arbitration battle earlier this year and now is free to bring the item - in several flavors and in both regular and diet varieties - to the US.
    KC's View:

    Published on: October 2, 2019

    Yesterday, commenting on a new study suggesting that red meat consumption may not be as bad for people as previous studies have said, I wrote:

    In the end, consumers will make the best decisions they can based on the available and understandable data, or they'll make the decisions they want to make, not because of data but because they are the decisions they want to make. (Or they'll choose only to pay attention to the data that supports their own biases.)

    MNB reader Mark Boyer wrote:

    Well-stated perspective on what types of decision consumers will make.

    Not long ago my wife quoted a study that supported a health goal she was pursuing and I told her for every study that pointed to a conclusion, one would likely find another study that supported the counter viewpoint. We picked a handful of topics and tested the theory. The results; you don’t have to look very far to find whichever viewpoint serves your goals. There are even studies that detail the positive aspects of smoking tobacco. Go figure.

    Go figure, indeed.

    MNB reader Gene Beaudoin wrote:

    Red meat has a very large environmental footprint. Methane is known issue. What is often missed that it takes 660 gallons of water to get to a 1/3 pound hamburger. And, where does all that water go?

    Where does all the water go?

    Ask Noah Cross.
    KC's View:

    Published on: October 2, 2019

    In the National League Wild Card game last night, the Washington Nationals defeated the Milwaukee Brewers 4-3, and now go on to play the Los Angeles Dodgers in a National League Divisional Series.
    KC's View:

    Published on: October 2, 2019

    The Retail Tomorrow podcast goes to GroceryShop 2019 in Las Vegas for an in-depth discussion of not just the strategies and tactics preoccupying many of the attendees, but the motivations behind the decisions they are making with regard to brand identity and technology.

    There were some three thousand attendees at GroceryShop this year, from about a thousand companies and 30 countries, all looking for a competitive edge found in innovative technologies, disruptive business models and provocative insights. Sifting through the presentations and exhibits for Retail Tomorrow, looking for nuggets of wisdom that have the potential to animate and differentiate a retailer, are:

    • Lisa Sedlar, CEO, Green Zebra Grocery.
    • Scott Moses, Managing Director at PJ Solomon.
    • Bob Perry, Director of Business Development, NBC Universal
    • Tom Furphy, CEO/Managing Director, Consumer Equity Partners.

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

    You can listen to the podcast here, as well as on iTunes and 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, below: Lisa Sedlar, Scott Moses, Tom Furphy, Bob Perry

    KC's View: