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    Published on: November 26, 2019

    by Michael Sansolo

    There’s a major fact of life we all tend to overlook with regularity in discussions on the retail food industry and that’s why the first story in yesterday’s MNB edition should be required reading and a topic of discussion.

    To summarize, the story focused on a small Florida town that lost its last supermarket, which resulted in the town itself taking over daily management of the store. Not surprisingly, the town leaders are finding it a pretty hard job.

    But the story goes beyond the political implications of a municipality jumping into business and into the simple importance of a single store to a small town. Sadly, as the article makes clear, this situation is not isolated and, in fact, there’s a good likelihood of this happening elsewhere especially as aging storeowners in small towns find no one interested in taking over the business.

    Remember, this is a hard job.

    But as the Florida town demonstrates again, it’s kind of an essential job all the same. I found it ironic that the Washington Post - owned by Jeff Bezos, who runs another company that's had some small impact on how commerce is transacted in this country - published the story, as well as another one about the evolutionary attempts mall operators are taking to keep their centers in business. Those two stories cannot be separated from each other nor can they be separated from other recent stories about companies like Walmart and Kroger rethinking their approach to electronic commerce.

    There are a couple of elements in these stories that need be tied together. The first is that e-commerce is not and will not ever be easy. As people far smarter than I have pointed out, the essential problem is how to profitably provide a service to customers that they used to handle for themselves—that is, selecting their orders and bringing them home.

    Making e-commerce profitable, whether through delivery or click-and-collect, is no easy job and I can’t imagine the town government in Florida will figure out that answer.

    But the second connective theme of these articles may be solvable. As the Florida town illustrates, stores hold a strangely important place in the psyche and mentality of any town or neighborhood. When that one store disappears, the locality suddenly feels less whole, less self-sufficient and strangely lacking. Food deserts, it seems, leave a gap in both food offerings and emotions.

    So yes, today it is so easy to question the relevance of brick and mortar stores, malls and more especially in competition with electronic commerce players and among younger shoppers. And it’s probably cold comfort to those operators going out of business that their communities are remorseful once they are gone.

    But here’s where the story about shopping mall revivals might offer some insights. Malls no longer work the way they did decades back. Increasingly, they are looking to add new experiences such as fitness centers, bowling alleys, amusements and even supermarkets. Put simply, Sears is out and fun is in.

    (As the always brilliant Neil Stern of McMillanDoolittle pointed out to me recently, the enormous American Dream mall that just opened in northern New Jersey puts the full emphasis on the mall’s experiences and scant attention on stores or shopping.)

    What I think we need to distill from this news and then emphasize, especially with store teams, is that shopping itself is still relevant, but no individual store has a lock of success. More than ever stores, staffers and more need engage, delight and dazzle shoppers.

    That's no easy job. But there’s really no option either.

    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: November 26, 2019

    by Kevin Coupe

    There's an old adage that "there is no such thing as bad publicity."

    I'm not sure that's true anymore, since social media can create negative feelings and opinions about people, brands and institutions almost instantly, and once those take root - no matter how inaccurate they may be - it is hard to change them.

    I'm not sure how the folks at Heinz feel about the ad satire that ran on "Saturday Night Live" last weekend - though in my opinion, they should relax and enjoy it.

    Which would be appropriate, since the commercial was for a fictitious product called Heinz Relax, which is designed to address the sometimes unfortunate noises that bottles of ketchup can make.

    It is, in my opinion laugh-out-loud funny. And, in its own way, an Eye-Opener.


    KC's View:

    Published on: November 26, 2019

    GeekWire reports that Amazon, which retired its physical Dash button replenishment program earlier this year, has come up with a new take on the automatic replenishment business - "smart shelf that knows when supplies are low and automatically reorders them."

    From the GeekWire story: "The Dash Smart Shelf is a WiFi-enabled scale for office supplies. When common supplies like printer paper, pens, or coffee are running low, the shelf can automatically re-stock them or send a notification to put in a manual order.

    "Amazon envisions offices replete with several of the thin black scales placed in break rooms, supply closets and other locations. The scales are only an inch tall and come in three sizes: seven inches by seven inches, 12 inches by 10 inches and 18 inches by 13 inches.

    "The device will be available to customers of Amazon Business - the company’s marketplace for business, government, healthcare and educational organizations - next year. Amazon did not say how much the shelves will cost."

    The Dash button program was launched in 2015, and offered consumers the ability to buy the buttons for $4.99 each and place them in relevant places - a Tide button on a washing machine, a Pamper button on a baby changing table, etc… The $4.99 would then be deducted from the first purchase made using the button.

    While Amazon discontinued the sale of new buttons, it has continued servicing the ones that are already out there, plus has offered virtual Dash buttons online.
    KC's View:
    Another brick in the replenishment wall, which Amazon would like to build in order top wall in some percentage of sales that, once it has captured them, will never, ever return to the retail venues where they used to be transacted.

    Amazon's Subscribe-and-Save business is, all by itself, easily a top 20 retailer … completely based on replenishment. Why more retailers haven't made a concerted effort to grab some of this business … which allows them to create sustained relationships with shoppers … is utterly beyond me.

    When the history books are written about this era, I think that retailers' unwillingness to engage with a replenishment model will be an entire chapter … and it'll be a chapter about denial and defeat.

    Published on: November 26, 2019

    The New York Times has a story about how some bricks and mortar retailers have stabilized their declining fortunes, their victories - such as they are - "may be short-lived because retailers are caught up in a seemingly never-ending race against Amazon. The more they spend to compete, the more their profits are sapped. And even when they succeed in attracting customers, Amazon responds with new ways of delivering inexpensive items as quickly and conveniently as possible."

    The thing is, the Times writes, competing with Amazon has never been a fair fight. For decades, the online giant has appealed to investors by growing quickly, even as it lost money on shipping, building out its warehouses and developing gadgets like the voice-activated Echo with Alexa. Amazon also runs a cloud computing business, Amazon Web Services, that can increase the company’s overall profits. In its most recent quarter, Amazon said, profit fell 28 percent as it invested in one-day shipping initiatives."

    And, the Times points out, it isn't just Amazon: "Dozens of start-ups, backed by private investors not concerned with immediate profits, have been chipping away at department store offerings, section by section. The costs are weighing on many retailers, even in a relatively strong economy when consumers are expected to spend heartily during the holiday shopping season, which begins in earnest this week."

    If Walmart and Target have done better than most under these circumstances, the story says, it is largely because they "have evolved from big box stores into retailers that have succeeded at offering the same conveniences as Amazon like one-day delivery.

    "They have managed to thrive because they are helped by a wide range of products like food and household staples that customers have to buy on a regular basis. Their sheer size also allows them to pressure their suppliers to lower the cost of their goods, which frees up money to invest in e-commerce."
    KC's View:
    To me, the ability of retailers to compete with Amazon has more to do with which how much they are willing to subvert their own business models, disrupt the marketplace's perception of what bricks-and-mortar retailer is, and innovate in ways that Amazon cannot or will not.

    Not easy, I know. But that's what Amazon is going to have to do when someone comes along with a concept or model that threatens to upset its apple cart.

    Published on: November 26, 2019

    The Dallas Morning News has a story about how Swedish retailer Ikea "is nearly doubling its U.S. forestland portfolio," purchasing a combined 60,000 acres in Texas and Oklahoma.

    According to the story, Ikea's parent company already owned 64,000 acres of US forestland; it now owns more than 500,000 acres around the world.

    The News writes that Ikea "began buying plots of forestland around 2015 at a time when timber prices were expected to rise worldwide. The intention has been for IKEA to develop a sustainable source of wood for its furniture for years to come. Though it’s run into some controversy with conservationists in other countries, IKEA has touted its practices as part of its effort to become self-sustaining and a responsible steward of the environment."

    “We are pleased to continue our forestland acquisitions in the U.S, as we see a good match between what the market has to offer and our high standards related to responsible forest management," said Krister Mattsson, managing director of Ikea's parent company.

    The story notes that Ikea, which has 374 stores in 30 countries, has committed "to becoming 'climate positive' under goals detailed in the Paris Climate Agreement. It even issued a statement recently to its employees saying it 'remains committed' to the Paris Agreement, despite the U.S. issuing a formal request to withdraw."
    KC's View:
    Add another company to the list of those that remain committed to the Paris agreement. Walmart is the most recent to make that statement; others that have said so include Apple, eBay, Gap Inc., Google, Intel, Microsoft, and Nike … not to mention a fair number of communities and educational institutions.

    I think if you're going to make stuff out of wood, it makes sense to develop a sustainable source. Which is what Ikea seems to be doing, understanding that if it is to have a sustainable business model, it needs to play a role on every curve of the circle of life.

    Published on: November 26, 2019

    Wired has a story about hearings held by the US House of Representatives antitrust subcommittee in which the issue of "gating" by Amazon was addressed.

    "Gating," the story explains, is what happens when a brand is able to limit who sells its products on an e-commerce platform. It was relevant in this case because of a unique trifecta that Wired suggests it has achieved: "Amazon is the only seller of Amazon private brands in the Amazon store." Which, the story says, could be a violation of antitrust law.

    An excerpt:

    "The House investigators asked a number of questions getting at the issue of gating, but Amazon’s answers were vague. Sometimes, as with a handful of big brands like Apple, it makes special deals 'to gain access to additional selection for customers.' Translation: gating is for brands with enough market clout and distribution control to threaten to take their business elsewhere. (In August, the Verge reported that the Federal Trade Commission is investigating whether the Apple arrangement itself violates antitrust laws.) In other cases, Amazon wrote, it will limit who can sell for 'reasons including safety, authenticity, and selection.' None of that explains why every one of the company’s roughly 158,000 (by its own estimate) private label products need to be gated."

    You can read the entire story story
    KC's View:
    I guess it is a measure of the fact that I'm not an antitrust lawyer that I don't completely understand this. After all, you can only buy Kroger private label products at a Kroger-owned store … Albertsons private label products at an Albertsons-owned store … Walmart private label at a Walmart store … and so on.

    Isn't that the point of private label? And isn't the very nature of retailing that stores curate, to one degree or another, the products they sell?

    Published on: November 26, 2019

    • Nielsen is out with new research in anticipation of the Black Friday/Cyber Weekend shopping extravaganza, with major data points being: "75% of American adults are omni-shoppers—buying both online and offline … In the fourth quarter of 2018, 9 million more shoppers made a CPG purchase online than in fourth-quarter 2017, amounting to $1.64 billion in year-over-year growth for the quarter … Prior use is the top consumer motivation for buying online (58%), followed by free/reduced shipping (40%)."

    The research goes on to say that Amazon's "market penetration is unrivaled, with two-thirds of new fourth-quarter 2018 shoppers choosing Amazon as their point of entry. Thanks to Amazon, shoppers have increasingly grown to expect free or reduced shipping, methods that many retailers are investing in to remain competitive. So it’s no surprise that Walmart and others are touting free next-day delivery (without a membership) to combat Amazon’s estimated 74 million Prime subscribers in the U.S. to gain access to this new pool of shoppers."
    KC's View:

    Published on: November 26, 2019

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

    • The Wall Street Journal this morning reports that "activist investor Starboard Value LP has taken a stake in CVS Health Corp. and held talks with the drugstore-and-insurance giant’s management, according to people familiar with the matter.

    "The stake appears to be relatively small and the people said the talks, held recently, are amicable. How much Starboard currently owns and what it has discussed with the company couldn’t be learned. But Starboard is one of the top activist-investment firms and its presence in a stock usually causes a company to sit up and take notice."

    I hope that Starboard doesn't do anything to distract CVS from its long-term healthcare-centric strategy. That approach isn't necessarily going to help folks looking to make a short-term profit, but it is, I think, the best way for a company like CVS to position itself for the future.

    USA Today reports that "New Jersey-based arts and crafts chain A.C. Moore will close its 145 stores, its parent company Nicole Crafts announced in a news release Monday. Up to 40 of the closing locations will become Michaels," the the nation's largest arts and crafts retailer, which also will acquire a distribution facility and Moore's intellectual property.

    The story notes that "not including A.C. Moore, nearly 9,100 store closures have been announced in 2019, 55% higher than total closures in 2018, according to a recent report from global marketing research firm Coresight Research … Retailers that closed or are closing all locations in 2019 include: Payless ShoeSource, Dressbarn and Gymboree."
    KC's View:

    Published on: November 26, 2019

    • C&S Wholesale Grocers announced that Miriam Ort, who until now has been senior vice president of human resources Americas at Avis Budget Group, has been named as its new chief human resources officer.

    She succeeds the retiring Asad Husain.
    KC's View:

    Published on: November 26, 2019

    Got a number of responses to yesterday's story about Kroger;'s struggles and decision to "get back to basics".

    One MNB reader wrote:

    In reading your article it seems the problem with Kroger is they simply have grown too big, too fast, and got into areas of business they did not properly plan for or fully understand.That seems to be the essence of what both Millerchip and Gundelach state in your article.

    Being in Chicago my experience with Kroger comes 100% from shopping at Mariano's. While I do agree "back to basics" sounds like regression in a world where progress and change are driving success, I see opportunity at Mariano's to improve some foundational basics. By that I mean things that are core to any grocery shopping experience. I shop less and less at Mariano's due to high prices, change in selection that has driven me elsewhere, and significantly lower quality produce than when Roundy's was independent. Plus the store by me recently removed another 4 or 5 checkout lines to install more self-checkout (obviously related to cutting 1,000 jobs). However this has caused noticeably longer lines. People struggle with self checkout systems as there are many older and immigrant shoppers in my area . There is also a lot of family shopping done at the store by me, so there are half as many lanes to handle all the full shopping carts that come through. I'm not near a downtown store with a healthy "to-go" clientele that pick up a minimal amount of items multiple days per week. I'm not sure Kroger did the work on a by store/by market basis when implementing store level changes.

    You remind me of something that my old friend and MNB fave Glen Terbeek used to say - that 100 store companies would be better off if they operated as independent pods of 10 … that it would make them more responsive to local customers in a way that bigger corporate structures cannot.

    Another MNB reader had a similar take:

    Kroger’s problems began to weigh them down when they purchased Roundy’s. Don’t get me wrong - Bob Mariano is the Picasso of grocery, but he builds unsustainable platforms with huge debt for the infrastructure, entertainment and design he offers. He has never been able to sustain a profitable regime.

    Many of us in the grocery industry - said at the time of the acquisition, “just wait he will weigh even Kroger down”.

    Mariano - is a designer/entertainer and innovator for grocery - but not a bottom line, sustainer. Kroger was foolish to buy and try to sustain his visions.

    One MNB reader asked:

    Does this remind you of A & P’s failed “Price and Pride?”

    Not a comparison that would make any retailer happy, methinks.

    From another reader:

    Being based in Kroger’s hometown, we have a birds-eye view of so of the challenges facing Kroger. Yes the industry is skeptical of the multitude of investments behind the Restock Kroger initiative and the fact that the ROI behind the millions of dollars of investments is way down the road and not today whether it be the Ocado warehouses, MFC’s, the partnership with Walgreens to Nuro. The one initiative that I thought was most promising was in training. We heard that the category managers were to get negotiating skills set training to strengthen their ability to compete. But the biggest challenge they face is the morale of its people. Laying off thousands of employees to cut costs  doesn’t help.

    A great example is in the frozen departments where the execution of Nestle going from DSD to warehouse is under way. The frozen managers now have to stocks hundreds of more items everyday with no additional man-power. I was in my local Kroger Saturday at noon, and the GM aisles were cluttered with 4 pallets of goods and not one person in sight. I couldn’t even navigate down the aisle in search of freezer containers for my butternut squash soup I was simmering back home. Talk to any store employee and the cutback in labor hours is their biggest gripe. Maybe Kroger is right, they need to get back to the basics and support their store staffing.

    And from another MNB reader:

    Lessons learned … "If you never forget the basics, you never need to go back!"

    Pithy. And a good point that everyone should learn.

    Responding to our piece about Target's advances, one MNB reader wrote:

    I am in my hometown of Minneapolis for the holiday week and, as always, I’m in awe of the Target stores here compared to the ones I regularly shop at in NJ and NH where I previously lived.

    I ran into the Target store in Edina, MN yesterday for a couple of quick things and will make a point to head back to that store for a longer visit before heading back to NJ. I only wish the stores in the Northeast were half that nice! Beautiful lighting and presentation and pristinely clean. As I mentioned it was a brief trip but I saw fully stocked product throughout, unlike what I routinely experience in my NJ stores.

    I agree with you and hope the company implements some of these changes in the Northeast stores.

    It always is easy to update the stores near headquarters - you know, the ones where management shops and where spouses, friends and family members shop. Sure, they're easy to check on … but they're also good for lulling management into a sense of complacency, thinking that these stores are typical of the fleet.

    On another subject, from another MNB reader:

    I am not surprised in the stories about Walmart closing Jet fresh deliveries or the story about Kroger going back to basics.  I have spent 5 years trying to see how any retailer can make a profit at eCommerce in food items and am still looking.  Walmart seems to have found the same and Kroger struggles can be traced to their fascination with click and collect to the detriment of their base business.  I propose that even Amazon loses money on food eCommerce and makes it up with other businesses due to the attraction of the number of  food transactions.

    The eCommerce business is very attractive to high value customers for many retailers, but the cost to pick, assemble and deliver to curb or home is hard to recoup by charging the customer who expects the service free or at little cost.  Former Walmart CEO Bill Simon traced the decline in Walmart profitability as they have grown their eCommerce business impressively and Kroger’s results are open for all to see.  It costs $15 or so to prepare a 50 item grocery order for pick up and another $10 or so for delivery of that order to a home.  When you add up to $25 in cost to any grocery order, it is hard to make any money.

    And, regarding yesterday's piece about the problems malls are having, one MNB reader wrote:

    I would like to add a little information to “Inside The Death Of A Mall” article in reference to Southdale Center in Edina Minnesota. First Southdale was one of four “Dale” malls built in the Twin Cities. They are Southdale (Edina late 50’s), Brookdale (Brooklyn Center early 60’s), Rosedale (Roseville late 60’s) and Ridgedale (Minnetonka mid 70’s). The four Dales all did well, each in their own way until the decline of Malls took over and we all know the outcome of that story. Southdale was a premier mall until 1992 when the Mall Of America (about 5 miles away as the crow flies) came to town and “Ate their Lunch”.

    At this point the number and quality of stores at Southdale declined and many areas had the now familiar false walls covering many storefronts as time went on. Brookdale closed in 2010 after being a ghost town for many years and in 2011 was demolished and replaced by a Walmart Supercenter. Point being Brookdale closed and nobody cared because it was in a working class part of town. Rosedale and Ridgedale still hold their own being they are in affluent areas. As for Southdale, also in an affluent area, the repurposing of the mall is a good thing. An example is that the local county library (Hennepin county) is moving into another empty big box space at Southdale. The name Southdale will live on for this “Life Style Center” not because of the once great shopping mall it was, but because it is part of the local DNA of the Twin Cities area.

    Responding to the piece about how increased minimum wages may not be inhibiting economic growth as some predicted, MNB reader Robert Smith wrote:

    I had a conversation with some retailer friends over the weekend about minimum wage.  The consensus was that competitive forces have driven wages in Wisconsin well above the legal minimums.

    They said it almost impossible to hire at Wisconsin’s minimum wage of $7.25 per hour and difficult to keep good people unless you’re paying about $12.00 to $15.00.

    Perhaps this is why some of the predicted negative impacts of increased minimum wages have not been felt.  Market forces are helping solve the problem by driving wages up even faster than the government mandated increases.

    And finally…MNB reader James (Mac) Patrick wrote:

    Thanks for recommending the segment on Frieda Caplan, but you should know, it was never broadcast!  It was even noted in the information regarding the various segments on food.  We love CBS Sunday Morning and this week was quite interesting, but no Frieda, boo.

    From MNB reader Deborah Faragher:

    I was looking forward to seeing the Freda Caplan piece on CBS Sunday Morning. In my opinion, they could have easily dispensed with the segment devoted to the growing phenomenon known as Mukbang which I found gag-inducing. (If, like me, you didn’t know what Mukbang is, you will add no value to your life by learning.) I sure hope she gets a reprieve as learning about her would have been a far richer experience for me.

    Unfortunately, CBS doesn't run its programming decisions by me. (They should.) But I am assured that Frieda will be featured on a future program.
    KC's View:

    Published on: November 26, 2019

    In Monday Night Football, the Baltimore Ravens - driven by QB Lamar Jackson, who threw five touchdown passes and ran for 95 yards - smoked the Los Angeles Rams 45-6.
    KC's View:

    Published on: November 26, 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: