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    Published on: October 8, 2019

    by Michael Sansolo

    As any long-time readers of MNB know, we cite movies frequently for business lessons and possibly no movie as often as Jaws and the memorable line, “We’re going to need a bigger boat.”

    Let's be clear. Standing on the deck of a small boat in the middle of the ocean with a shark swimming laps is not the time to make that statement. It should happen back on shore, but as Jaws shows us, arrogance and denial go before a shark attack.

    Businesses should heed that lesson more than ever because the speed in which the sharks swim up on us these days is faster than ever and they have really, really big teeth. That’s a reason why I was so impressed with some of the discussions held last week at the annual convention of the National Association of Convenience Stores.

    As I wrote here last week, one of the most interesting speeches at the meeting came from an ex-European c-store executive who urged the crowd to start planning for a future when traditional fuel diminishes. In other words, plan for the shark attack now before the ocean is filled with them.

    It was hardly the only such discussion at the event. For example, in another session, Shane Flynn, the managing director of food services and facilities for Aramark in Ireland, detailed how his company is employing food truck to help c-store clients build a brand image for food and tie-in to events. In other words, they take the store and the brand to shoppers rather than wait for shoppers to come to them.

    As Flynn explained, the outreach helps build an entirely new image for traditional c-stores and, in turn, builds new sales, profits and shopper loyalty.

    NACS president Hank Armour built on that theme with his annual Ideas 2 Go presentation showing creative marketing approaches from around the globe. Among the approaches Armour showed were retailers moving into healthier food offerings, environmentally friendly marketing, linking to e-commerce, food trucks and store sizes getting either larger or much, much smaller. (Armour highlighted a successful 400-square-foot store in New York City, where real estate prices make this type of solution important.)

    Years ago it would have been hard to imagine convenience stores being spotlighted for brand image with specific food items, but that is becoming increasingly common.

    Likewise there was clearly more emphasis on bringing the convenience store to shoppers in food trucks or in some of the creative formats Kevin Coupe highlighted in a presentation to last year’s NACS convention. As we’ve seen, it’s now possible to bring food (fresh and shelf-stable), fuel and even tires to shoppers instead of having them come to you.

    As Charles Darwin might have told us had he cared to study retail, it’s not the biggest or strongest store that thrives and survives. It’s the one most able to adapt to the times.

    And that in turn may keep us from needing a bigger boat at all.

    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: October 8, 2019

    by Kevin Coupe

    Longtime MNB readers know that Michael and I are passionate "Star Trek" fans … we engage in constant debates over who is the best captain with the greatest leadership skills portrayed in the various series, and drill down on business lessons that can be garnered from the shows' episodes and plot points. And I know, from all the email and conversations I've had over the years, that many MNB readers share this passion.

    Which is one of the reasons that we are so thrilled with the coming show, "Star Trek: Picard," which is going to chronicle the late-in-life adventures of Captain Jean-Luc Picard, portrayed by Sir Patrick Stewart, who was first seen in "Star Trek: The Next Generation," which debuted back in 1987.

    This new series is scheduled to premiere on CBS All Access on January 23, 2020, and as that date approaches, the producers are parceling out bits of information to keep everybody interested and anticipatory. The latest - a trailer for the series that debuted at a recent ComicCon in New York City, and that gave us a sense of the series' scope and themes.

    And so, as a point of personal privilege, I'm making the trailer this morning's Eye-Opener, which you can see above, left. It has an elegiac quality to it, but with plenty of action … and some visits from old friends that, if you are anything like me, will melt your heart a little bit.


    KC's View:

    Published on: October 8, 2019

    CNBC reports that both Kroger and Walgreen announced yesterday that they will be ending the sale of electronic cigarettes as soon as current stocks have sold through, joining the ranks of companies like Walmart and Rite Aid making such decisions.

    According to the story, Kroger said the move was due “to the mounting questions and increasingly-complex regulatory environment" surrounding vaping products that have "have come under regulatory and public scrutiny as a mysterious, deadly vaping illness continues to claim lives.

    "The Centers for Disease Control and Prevention has identified at least 18 confirmed deaths and 1,080 probable cases across 48 states and the U.S. Virgin Islands as of last Tuesday. Most patients identified vaped THC, the active ingredient in marijuana, according to the CDC. Seventeen percent said they exclusively used nicotine."

    Walgreen said that "it made the decision 'as the CDC, FDA and other health officials continue to examine the issue.' A spokesperson for the grocer added that the decision is 'reflective of developing regulations in a growing number of states and municipalities'."
    KC's View:
    There would appear to be no upside for any retailer continuing to sell this crap, and so I'm glad we are seeing all these retailers not even waiting for municipalities to decide to ban vaping products.

    One other thing, and this is just an observation, not a criticism. But I was interested to see a story yesterday about how Dick's Sporting Goods did not decide to sell through its inventory of assault style rifles after announcing (after the mass shootings at Marjory Stoneman Douglas High School in Parkland, Fla.) that it would no longer sell them because of concerns about the epidemic of gun violence in this country. No, Dick's actually destroyed more than $5 million worth of assault-style weapons … preferring, as it were, to bite the economic bullet rather than feel complicit in future mass shootings.

    Published on: October 8, 2019

    The Wall Street Journal reports that Walmart, which bought men's clothing e-retailer Bonobos in 2017 for $310 million, yesterday said it would begin laying off "a few dozen" of the some 600 people who work there.

    The move comes as Walmart tries to stanch some of the red ink associated with its various e-commerce businesses, especially the non-core businesses that it has acquired over the past few years as a way of spreading around its bets.

    The story points out that "Walmart has said losses in its e-commerce division, which includes Bonobos, will be higher this fiscal year than last. The company has been spending heavily to ramp up its e-commerce operations, including grocery delivery. Most of Walmart’s profits still come from its traditional U.S. stores."

    Last Friday, Walmart said it is selling ModCloth, another of the e-commerce businesses during that spurt of acquisitiveness. There also have been reports that it would like to either sell or take on a partner for its Jetblack concierge service in New York City.
    KC's View:
    This just illustrates something that we've long talked about here on MNB - the cultural dissonance at Walmart that could prevent it from being a full-fledged e-commerce competitor to Amazon. There are so many legacy systems and tradition-bound approaches at Walmart, which always is going to be a stores-based organization, that it is hard to color too far outside the lines.

    Now, to be fair, this isn't a big percentage of people being laid off at Bonobos. But based on various conversations I've had, there seems little question that many of the investments it made in non-core businesses over the past few years will be sold off or reduced … that Jet eventually will be completely absorbed by Walmart … that Jetblack will either get a partner or a new owner … and that Marc Lore, who has been engineering the e-policies at Walmart since it bought Jet, at some point in the not-too-distant future will decide to leave the company, wait out his non-compete period, and then start something else.

    Published on: October 8, 2019

    The Washington Post has a story about how vendors selling on Amazon and former employees "familiar with Amazon’s internal strategy say the company is increasingly focused on boosting its profits on the backs of its sellers — often without any clear upside for customers.

    "The services include charging sellers thousands of dollars to speak to account managers, as well as making it necessary to purchase ads to guarantee the top spot on a search page. Plus, Amazon is aggressively pushing its own brands – something that may be cheaper for consumers in the short run, but demonstrates its overall power over pricing and merchandise on the site. That gives it an advantage over rival products and sellers who rely on Amazon for their livelihood and have few alternatives if they want to thrive selling online."

    This is no small matter: "Amazon has become a powerful marketplace alongside its role as an online retailer, with more than 2.5 million third-party sellers who have become global businesses on its platform." Amazon generated more than $42 billion in revenue from so-called "seller services" last year alone, the story says - a number that has doubled in just the last two years.

    This, the Post (which, let's not forget, is owned by Amazon founder/CEO Jeff Bezos) writes, "has drawn the attention of regulators and lawmakers both in the U.S. and abroad, who are investigating Amazon and other large tech companies for potential violations of antitrust law and abusing dominant marketplace power. Traditionally, U.S. regulators have focused on consumer harm, but officials recently emphasized the need to look at the way several tech giants are using their market clout to lower quality, reduce innovation and diminish consumer privacy as officials consider regulating giants of the digital economy."
    KC's View:
    Let's be clear. If Amazon sacrifices its longtime and relentless focus on customers on the altar of short-term profits, it will be an enormous mistake. No question.

    But … there are a lot of companies out there that, as they gain competitive power, hold their vendors feet to the fire in order to improve their bottom lines … and that use expanded private label penetration for the same end. This isn't new … Amazon is just better at it than most, since it knows far more about its customers than competitors, and so can be a lot more surgical in its moves.

    Though, to be clear … I'm not sure that Amazon is best served by moves that are similar to those of traditional retail.

    I do think that the problems being dealt with by marketplace vendors can be dealt with most effectively when companies work with some of the firms out there that have been built to help third parties navigate the Amazon system. As it happens, that's one of the things that MNB contributor Tom Furphy's companies - Ideoclick - does … which I would mention here even if Tom weren't a friend and MNB contributor.

    Published on: October 8, 2019

    Crain's New York Business reports that the once-iconic food retailer Dean & DeLuca continues its devolution, closing the SoHo flagship store that helped to introduce "Americans to international delicacies more than four decades ago."

    According to the story, a sign on the door says that the closing is temporary. " While the lights were on, and shelves and containers and espresso machines were still in place, there was mostly no food or products."

    Dean & DeLuca’s Bangkok-based owner, Pace Development Corp., which bought Dean & DeLuca for $140 million in 2014, was not commenting on the closure. Not only has Dean & DeLuca been closing stores, but it also has fallen beyond on its payments to suppliers, which has created enormous in-stock problems for the stores, which have fallen back on selling traditional, mainstream grocery products in some of them instead of the gourmet, specialty food items for which it is known. However, reports are that Dean & DeLuca stores outside the US remain a more robust presence.
    KC's View:

    Published on: October 8, 2019

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

    • The Washington Times reports that "the US Supreme Court rejected Monday an appeal from, requiring them to pay their warehouse employees as they go through anti-theft security screenings following their shifts." The ruling came on the first Monday in October, traditionally the beginning of the Supreme Court term.

    The Times provides some background: "A group of Amazon workers filed a lawsuit in 2010 against the shipping giant and their staffing company for what they describe as mandatory 'post-9/11 type of airport security' screenings to combat theft by employees."

    The workers argued that they should be paid for the roughly 25 minutes each day that they spent going through security. Amazon said the characterization was "grossly inaccurate."

    Bloomberg has a story about how delivery service and online retailer Instacart has seen its sales rebound after its separation from Whole Foods - one of its first customers and an investor in its business - after the retailer was acquired by Amazon. According to the story, "The gig-economy startup has picked up enough new business from retailers like Costco Wholesale Corp., Publix Super Markets Inc. and Wegmans Food Markets Inc. to more than make up for the shortfall."

    The story notes that "Instacart’s army of shoppers now weave their way through the aisles of more than 300 retailers, 100 more than it had in its network last year. It now covers 80% of U.S. households, up from 35% in 2017. Instacart is looking for more: It’s pushing to add alcohol to its food deliveries, a service that’s now available in more than 20 states."

    And, it quotes Barclay's analyst Karen Short as saying that "both retailers and consumers are becoming increasingly reliant on Instacart."

    What the Bloomberg story doesn't mention is that while Instacart is a strong short-term solution for retailers, it is a horrible long-term solution, since it is positioning itself to be a retailer competing with its client retailers, opening dark stores and selling its own private label, and not needing client retailers in many markets. More and more consumers say they are "Instacart customers," which is good for Instacart but a real threat to retailers that it is disintermediating out of the store-shopper relationship. Plus, there are examples out there of how Instacart has weaponized shopper data against its own clients.

    The good news is that one of the things I heard at GroceryShop this year was that retailers are beginning to look for alternatives to their existing Instacart relationships … so maybe they finally are seeing the light.

    • The Wall Street Journal reports that outlet stores, which long seemed "immune to pressures weighing on traditional malls, including the shift to online shopping that has sapped customers from physical stores," now seem to be showing signs of stress related to the same trends. "Outlets are feeling the effects of retail bankruptcies and the shift to online shopping, too. Chains including Gymboree and Charlotte Russe have closed locations in outlet centers, and Forever 21, which filed for bankruptcy protection this week, plans to close around a dozen outlet stores."

    Which is why "Simon Property Group Inc., one of the largest mall owners, in conjunction with Rue Gilt Groupe, which operates flash-sale websites, has launched, where brands from Vince to Under Armour offer their outlet goods for sale online. It is one of the first curated websites to feature merchandise from outlet stores."
    KC's View:

    Published on: October 8, 2019

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

    Forbes reports that chef Rick Bayless, who has built a small empire out of restaurants, cookbooks and food products sold in supermarkets, now "plans to open Tortazo, a premium fast-casual restaurant, in a huge new food hall at the base of the famous black tower" in Chicago that used to be called the Sears Tower, and now is the Willis Tower.

    "The food hall is called Catalog," the story says, "and it’s already signed up some other top-notch names. It will feature Shake Shake, Sweetgreen and Starbucks, as well as local favorite Do-Rite Donuts. Catalog is scheduled to open later this year, and it will feature five stories of dining, retail and entertainment."

    Tortazo is a "3,000-square-foot space, with a menu of tortas, chilaquiles, bowls, salads and churros. Tortazo will also feature a full bar with margaritas, tequila based palomas, beers and wines."

    I'm in, definitely, next time I go to Chicago. Love the food hall concept, and love Bayless restaurants in general. Yup, I'm in … especially because I'll go pretty much anywhere for decent chilaquiles.

    USA Today reports that Target is opening new Disney shops inside 25 of its stores that have "a 'shop-in-shop' layout with an average of 750 square feet. They are located near Target's kids clothing and toy departments and have more than 450 items, including more than 100 products previously only available at Disney retail locations.
    Disney also is making products available on Target's side, many of them tied to a pair of upcoming film releases that are expected to go through the box office roof - Frozen 2 and Star Wars: The Rise of Skywalker.

    The story says that this is just the beginning of a longer-term relationship: "Another 40 locations are likely to open by October 2020, and a new Target store is planned for 2021 at the western entrance of the Walt Disney World Resort in Florida at Flamingo Crossings Town Center."
    KC's View:

    Published on: October 8, 2019

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

    • It is a presidential campaign season, and so it probably was inevitable that someone would weigh in on the recent announcement that Kroger would be laying off hundreds of middle managers throughout its various chains around the country.

    In this case, it was Sen. Elizabeth Warren (D-Massachusetts), currently a front runner for the Democratic presidential nomination, who weighed in on Twitter, saying that unions are "fighting for Kroger's success, but who in Kroger is fighting for workers?"

    The Cincinnati Enquirer reports that Warren also pointed to the fact that the layoffs come after a period during which Kroger invested in stock buybacks; last year, the story notes, "Kroger spent $2.4 billion repurchasing its stock." It is time, Warren wrote, "to return power to working people."

    The Enquirer writes that Kroger responded to the criticism by saying that "Kroger is proud to be one of America’s largest employers. In addition to creating more than 100,000 new American jobs over the past decade, we continue to invest in our employees by both raising wages and through a new education assistance program called Feed Your Future…"
    KC's View:

    Published on: October 8, 2019

    …will return.
    KC's View:

    Published on: October 8, 2019

    • The New York Yankees defeated the Minnesota Twins 5-1 yesterday in their AL Divisional Series, completing a 3-0 sweep of the best-of-five series and now moving on to the AL Championship Series.

    Meanwhile, in the other ALDS, the Tampa Bay Rays beat the Houston Astros 10-3. The Astros now have a 2-1 lead in their best-of-five series.

    Over in the National League…the Washington Nationals beat the Los Angeles Dodgers 6-1, and the two teams are now tied 2-2 in their best-of-five series.

    And the St. Louis Cardinals defeated the Atlanta Braves 5-4, also creating a 2-2 series tie.

    • And, in Monday Night Football, the San Francisco 49ers defeated the Cleveland Browns 31-3.
    KC's View:

    Published on: October 8, 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: