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    Published on: November 25, 2019

    by Kevin Coupe

    The Washington Post has a story about Baldwin, Florida, a community of some 1,600 that last year lost its only grocery store.

    And so the town government opened its own.

    "At the Baldwin Market, which opened its doors on Sept. 20, all of the employees are on the municipal payroll, from the butcher to the cashiers," the Post writes. "Workers from the town’s maintenance department take breaks from cutting grass to help unload deliveries, and residents flag down the mayor when they want to request a specific type of milk."

    The story says that so far, "the experiment has been a success. The town council had hoped to take in $3,500 a day, and sales have routinely exceeded that … About 1,600 people — roughly the equivalent of the town’s population — stopped in during opening weekend, according to the Florida Times-Union, and the market sold out of meat. Eight employees, all Baldwin residents, were hired at the outset, but the town recently brought on two more people to help out during the busy holiday season."

    As it happens, "Baldwin isn’t alone. A similar experiment is underway in St. Paul, Kan., which has had a city-run grocery store since 2013. David Procter, who directs the Rural Grocery Initiative at Kansas State University, told The Post that another city-owned grocery store will open in Caney, Kan., in the spring, and at least one other town in the state is considering following suit.

    "Many small-town grocers are reaching retirement age, and it’s tough for communities with dwindling populations to attract new residents when there’s no supermarket nearby."

    The Post notes that there is an irony here - that "these experiments in communal ownership are taking place in deep-red parts of the country where the word 'socialism' is anathema."

    The Post goes on: "In places where fresh, healthy food is hard to find, it’s more common to see nonprofit organizations respond by opening their own stores, or for residents to band together and form food cooperatives. Often, local governments will lend funding and critical support, and experts are divided on whether there’s an advantage to having the town itself own the store. There’s some dispute over whether residents will have more decision-making power in a co-op, and whether stores created by politicians risk facing closure or severe cutbacks when a new group of elected officials are voted in."

    I'm reasonably sure that the majority of these governments would like to not be in the retailing business, but to me, this story simply points out the degree to which a good store offering relevant fresh foods can be important - even critical - to a community's health (in all the permutations of that word).

    You'd think that some retailer could find a way to invent a format that could serve these communities effectively and efficiently. You'd think that Amazon or Walmart or Target could find a way to make their e-commerce offerings work for these places.

    But maybe not. Which is why local governments have to make the Eye-Opening move into the retail business.
    KC's View:

    Published on: November 25, 2019

    The Wall Street Journal has a story saying that as Kroger navigates the increasingly turbulent waters of competition, it has decided to get "back to basics," having concluded that it has been "trying to sell too many new products and renovate too many stores at once."

    The problem, Kroger seems to have concluded, is that both its message and operational implementation were suffering as it tried to excel at bricks-and-mortar food retailing, compete in the e-commerce arena, improve its warehouse operations while working with Ocado on robotics, and keep prices down in order not to lose that battle with dollar stores and limited assortment formats.

    Kroger already had announced that it was laying off close to a thousand employees to cut costs, and now, the Journal writes, it is "planning to refurbish stores at a slower pace so that it can keep more stores fully operational."

    The move is in response to disappointing financial results in terms of same-store sales, despite the fact that it has invested in a "Restock Kroger" initiative designed to give it a "bump" that also has not lived up to expectations, or the results of some prominent competitors.

    Some competitive context from the Journal story:

    "Some other grocers are also renovating stores to draw in new customers. National chain Albertsons Cos. expects to remodel about 240 of its more than 2,260 stores in its 2019 fiscal year, Chief Financial Officer Bob Dimond said during an earnings call in October. Inc. has lowered prices and put more emphasis on local and regional products at Whole Foods Markets since acquiring the natural grocer in 2017. Even European discounters that have put pressure on Kroger and others to hold down prices are adding more fresh foods to their stores to reflect the preferences of U.S. shoppers.

    "Kroger began selling clothes and cars, and struck partnerships with Alibaba Group Holding Ltd. and Walgreens Boots Alliance Inc. to carry its goods. The 136-year-old chain is building automated warehouses with British retailer Ocado Group PLC; testing driverless delivery with startup Nuro Inc.; and bought a meal-kit company, Home Chef."

    “There is a certain pace you can go at and there are only so many things you can do at one time,” says Gary Millerchip, Kroger’s chief financial officer since April, in an interview.

    “You can’t get too far into focusing on the new shiny objects,” adds Tory Gundelach, a former Kroger executive and a vice president at Kantar Consulting.
    KC's View:
    There is a real sense of disappointment out there in some quarters about Kroger's performance, with a sense among certain constituencies that there isn't a light at the end of the tunnel, and that the company's fractured focus cannot be solved with a back-to-fundamentals mandate. To some folks, Kroger's prospects look bleak.

    Myself, I've always been a little skeptical about "back to basics" or "back to fundamentals" declarations. Especially in today's competitive marketplace, doing the fundamentals is a basic requirement of being able to stay in business - differentiation is what you do above and beyond the basics, I think.

    In some ways, Kroger's current issues illustrate how hard it is for legacy businesses to keep up with the pace of innovation established by newer companies that have been able to make internal disruption part of their corporate DNAs.

    Published on: November 25, 2019

    Axios this morning has a story about how increased minimum wages may not be having the negative impact on hiring that some predicted.

    From the Axios story:

    "Eighteen states rang in 2019 with minimum wage increases — some that will ultimately rise as high as $15 an hour — and so far, opponents' dire predictions of job losses have not come true."

    Context: " Opponents have long argued that raising the minimum wage will cause workers to lose their jobs and prompt fast food chains (and other stores) to raise prices.
    But job losses and price hikes haven't been pronounced in the aftermath of a recent wave of city and state wage-boost laws. And more economists are arguing that the link between minimum wage hikes and job losses was more hype than science."

    However, Axios notes, " There could still be negative long-term effects, such as businesses choosing to locate in states with lower minimum wage requirements." At the same time, proponents of higher wages need to factor in the fact that there may be a ceiling to how high minimum wages should be increased.
    KC's View:
    One thing that these conclusions do not allow for is what happens when a recession hits; I'm not an economist, but I wonder if a $15 minimum wage might create bigger or different problems under those circumstances.

    That's not a reason to avoid paying people enough to be able to afford food and lodging and clothing and an education for their children.

    Here's the other thing. All the research that I've seen has shown that as the economy has improved and companies have reported improved profits, much of that money has gone to stock buybacks and investor rewards, and not to higher wages and capital investments.

    Higher minimum wages, it seems to me, are just one component of a complicated economic landscape that I find to be increasingly worrisome.

    Published on: November 25, 2019

    CNBC has a story about how Target's digital sales during the last quarter were up 31 percent, "with its same-day services accounting for 80% of that growth. Those services include a curbside pickup option, same-day delivery via its Shipt network and buy online, pick up in store."

    Target, the story says, "says it has found a way to slash costs and make money."

    CEO Brian Cornell tells CNBC that "when Target fulfills an online order from the back of its stores versus shipping from a distribution center, 'about 40% of the cost goes away.' He said when customers order online and pick up at a store, use curbside pickup or select shipping via Shipt, 'about 90% of the cost goes away'."

    The story notes that "arguably, this is the one area where Amazon can’t compete at the same size and scale. It doesn’t have a network of stores, like Target and Walmart, where shoppers can pick up orders. But it has been adding Amazon lockers to its Whole Foods grocery stores and shopping malls."
    KC's View:
    Target seems to have done a very good job of creating an innovation-centric culture within the confines of a legacy company … which is impressive. I'm interested to see how this plays out long-term, and also to see how it ends up being extended to the Target in Stamford, Connecticut - which is the one closest to me that is, to be honest, kind of crappy.

    Published on: November 25, 2019

    The Washington Post had several stories over the weekend about the implications of the impending death of so many Americans malls. Some excerpts:

    • "Dozens nationwide have shuttered in the past decade, and a quarter of the estimated 1,100 that remain are projected to follow by 2022, opening large swaths of empty space … The die-off has created challenges for the municipalities and developers tasked with repurposing millions of square feet of vacant retail space and parking lots. But the successes have taken multiple forms: community colleges, public preschools, churches and libraries. Some old malls have turned into micro-apartments or microbreweries, and at least one abandoned shopping mall is now an Amazon fulfillment center, offering a glimpse into consumers’ shifting habits and priorities."

    • "Shopping malls are increasingly adding eye doctors, dental offices and cancer centers to their lineups. Medical clinic leases at shopping malls have grown nearly 60 percent since 2017, while leases for clothing stores have fallen about 10 percent, according to data from CoStar Group.

    "The nation’s largest mall, the Mall of America in Bloomington, Minn., this month opened a 2,300-square-foot walk-in clinic with exam rooms, X-ray machines and a laboratory. The facility — run by M Health Fairview in a former Shake Shack — offers physicals, travel vaccines, blood pressure checks and other routine medical services. Executives say they hope the clinic will serve the 40 million visitors who come to the mall each year, as well as the 13,000 people who work there."

    • "Southdale Center in Edina, Minn., is getting it this month in the form of a Life Time 'resort,' complete with a rooftop pool and beach club. The new gym — which also has a full-service spa, cafe and co-working space — will take the place of a former J.C. Penney store. Life Time is spending $43 million building the three-story facility … Life Time now has country club-like locations at malls around the country — including the Houston Galleria, Tampa’s International Plaza, and Oklahoma City’s Quail Springs Mall — and plans to open more than 30 more mall gyms in coming years. The company tends to take over spaces left behind by large department stores such as Macy’s, Sears and Lord & Taylor, which tend to have their own parking lots and access to the broader mall."

    • "Simon Property Group, the country’s largest mall owner, recently invested $5 million in Allied Esports and announced plans to create 200 mall gaming lounges for competitive video gaming events across the country. It’s also creating a video gaming tournament, called the Simon Cup, that will take place in malls in New York and Los Angeles, with final championship rounds in Las Vegas."

    • "(Malls) that are thriving are spending millions reinventing themselves as integrated lifestyle hubs — adding yoga studios, medical clinics and microbreweries — populated with more upscale shops. But such targeted investments are often coming at the expense of mall operators’ lower-tier properties — and analysts say the divide between rich malls and poor malls is widening … Even retailers on relatively stable financial footing, including Macy’s, are pruning hundreds of underperforming stores to focus on flagship locations. These closures, analysts say, are also having a disproportionate effect on lower-tier malls and shopping centers, making properties like Landmark Mall in Alexandria, Va., a kind of ground zero for America’s changing retail landscape."

    • "These days, the most successful malls tend to be dominated by brands that appeal to higher earners, like Nordstrom, Apple and Lululemon, as well as up-and-comers like Untuckit and Peloton. They also tend to have invested heavily in restaurants, spas and specialty gyms that keep customers coming back, week aft week, even if they’re doing more of their shopping online."
    KC's View:
    In some ways, this strikes me as a microcosm - or maybe, since it is such a big canvas, a macrocosm? - of retailing in general. The ways in which malls adapt - or do not adapt - to their changing circumstances can provide good object lessons in how stores can and should compete.

    It isn't by doing the same old thing.

    Published on: November 25, 2019

    Fast Company has a story about the Unocup, described as a rethinking of the coffee cup that "aims to cut down the amount of plastic waste that enters the ocean (8 million tons annually) by replacing conventional cup and lid designs with a single, origami-like cup that folds to create a lid. New York City’s caffeinated community alone uses roughly 1.1 million pounds of single-use plastic food ware (which includes hot drink lids) every year, whereas the entire world creates 300 million tons of single-use plastic waste annually. Since these omnipresent lids are responsible for 5% of those 8.25 million tons entering the ocean, according to Chan and Papo, their solution is long overdue."

    Fascinating … and you can read the story here.
    KC's View:

    Published on: November 25, 2019

    On Friday, I promoted the fact that "CBS Sunday Morning," hosted by Jane Pauley, was going to feature a piece about Frieda Caplan and the specialty produce business she launched back in the sixties, Frieda's. I think the world of Frieda and the whole Caplan family, and I was thrilled that they were getting that sort of national attention.

    And then, on Saturday, CBS changed its plans … and the piece did not run.

    Apparently the Thanksgiving edition of "CBS Sunday Morning" was quite literally over-stuffed with content, and the producers decided to hold off on the Frieda's piece for another weekend.

    Which is a shame … but could be a good thing for Frieda's and for viewers, who I'm sure will be treated to a good story, well-produced.

    I'll let you know when I hear anything.
    KC's View:

    Published on: November 25, 2019

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

    • The Associated Press reports that "U.S. health officials on Friday told people to avoid romaine lettuce grown in Salinas, Calif., because of another food-poisoning outbreak … The warning applies to all types of romaine from the Salinas region, include whole heads, hearts and precut salad mixes."

    The story goes on: "The notice comes almost exactly one year after a similar outbreak led to a blanket warning about romaine.

    "Officials urged Americans not to eat the leafy green if the label doesn’t say where it was grown. They also urged supermarkets and restaurants not to serve or sell the lettuce, unless they are sure it was grown elsewhere."

    Published reports in the UK say that Tesco plans to eliminate the jobs of some 9,000 employees by closing the fresh meat, fish and deli counters in about 90 stores, as well as cutting back on headquarters personnel in its buying and marketing departments.

    Several thousand of the people affected by the changes could be "redeployed" to other store-based customer-facing jobs.

    I'm not there, so it is hard to judge … but it is hard to imagine that the fresh foods that should differentiate a food store would be the things that need to cut back on in order to be more competitive. It just seems counter-intuitive (no pun intended) to me.

    USA Today reports that "more than a half of million pounds of pork products are being recalled because they were not inspected, the U.S. Department of Agriculture’s Food Safety and Inspection Service announced.

    "Maywood, Illinois-based Morris Meat Packing is recalling approximately 515,000 pounds of various raw pork products because they 'were produced without the benefit of federal inspection and outside inspection hours,' according to the USDA notice posted this week. The items, including pork loin, pork back ribs and pork chops, were shipped to distributors and Illinois retail locations."
    KC's View:

    Published on: November 25, 2019

    One MNB reader made the following observation:

    It’s interesting how you (and others) refer to Walmart’s ecommerce pivots as “stumbles”, and Amazon’s as “learning”. Maybe it’s because Walmart and Amazon are different types of business?
    I do think it bodes well for Walmart long term that it has taken some of Amazon’s attitude to heart: make some big bets, learn quickly and if you do fail, fail fast. While Jet delivery (and Bonobos, etc.) may be stumbles in the sense that they aren’t an integrated part of Walmart’s future, you can’t deny that the learnings they have gained have likely helped their overall ecommerce approach.

    I think that's a very fair point.

    Regarding the upstart coffee company truing to compete in New York City with the likes of Starbucks and Dunkin', MNB reader Michael D. Benghiat wrote:

    Being a Yankees fan, I love your really is a "David & Goliath" scenario.

    Never mind Starbucks and Dunkin', not to mention Tim Hortons and oh, the Golden Arches known for its coffee, but there's Caribou, Peet's, Coffee Bean & Tea Leaf, Dunn Bros., Seattle's Best, Coffee Beanery, Buggby, Gloria Jeans, Tully's and more.

    Like most categories, it is not becoming a crowded space it already is.

    I don't see what the differentiator is...really, a pop-up/kiosk-like coffee shop. That's a coffee-truck to me and I'd rather see a cool mobile unit serving excellent coffee at a reasonable price come to my place of business so I don't have to wait in a long drive-thru. That's cheaper, faster and convenient.

    And MNB reader Glenn Cantor wrote:

    You can buy a decent, very inexpensive cup of coffee at nearly every street corner in Manhattan.  Usually no waiting…
    KC's View:

    Published on: November 25, 2019

    In Week Twelve of National Football league action…

    Miami 24
    Cleveland 41

    Detroit 16
    Washington 19

    Oakland 3
    NY Jets 34

    NY Giants 14
    Chicago 19

    Carolina 31
    New Orleans 34

    Seattle 17
    Philadelphia 9

    Tampa Bay 35
    Atlanta 22

    Denver 3
    Buffalo 20

    Pittsburgh 16
    Cincinnati 10

    Jacksonville 20
    Tennessee 42

    Dallas 9
    New England 13

    Green Bay 8
    San Francisco 37
    KC's View:

    Published on: November 25, 2019

    Past Retail Tomorrow podcasts have focused on how technology can have an impact on business models and people's lives. In this edition, however, we drill down to talk about how technology affected one life … and, in fact, makes living a best life possible.

    Our guest: Heidi Dohse, senior program manager in Google's Cloud - Health and Life Sciences division. Dohse's personal and professional story makes for a compelling narrative that is at once provocative and inspiring.

    Hosted by Kevin Coupe, MorningNewsBeat’s “Content Guy."

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

    This edition of the Retail Tomorrow podcast is brought to you by GMDC, the Global Market Development Center.

    KC's View: