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    Published on: December 2, 2019

    by Kevin Coupe

    The Washington Post this morning reports that "a decade of historically low interest rates has allowed companies to sell record amounts of bonds to investors, sending total U.S. corporate debt to nearly $10 trillion, or a record 47 percent of the overall economy."

    The story suggests that there may not be any immediate danger, but that some experts "say the borrowing has gone on too long and could send financial markets plunging when the next recession hits, dealing the real economy a blow at a time when it already would be wobbling."

    The Post continues: "Some of America’s best-known companies, including AT&T, General Motors and CVS Health, have splurged on borrowed cash. This year, the weakest firms have accounted for most of the growth and are increasingly using debt for 'financial risk-taking,' such as investor payouts and Wall Street dealmaking, rather than new plants and equipment, according to the IMF … Lured by low rates, companies have splurged on debt to repurchase their own shares, pay higher dividends to investors and fund acquisitions."

    I'm no economist, but to me it almost sounds like in the skyscraper that is the American economy, there are a number of companies that have spent so much time on the upper floors and penthouses, expanding amenities and improving the view, that they have not tended to shoring up the foundation so that it can withstand inevitable tectonic shifts.

    When the recession comes - not "if," because an eventual recession is inevitable - it seems likely that businesses and consumers may all be facing some sort of reckoning … a painful kind of Eye-Opener.
    KC's View:

    Published on: December 2, 2019

    CNN reports that Black Friday online sales reached a record $7.4 billion, in addition to $4.2 billion in online sales generated on Thanksgiving Day. The story says that "Friday was also the biggest day ever for mobile sales, as $2.9 billion came from smartphones."

    The story says that "Black Friday brick-and-mortar sales were up 4.2%, with the greatest increase over normal shopping activity seen across electronics and appliances, sporting goods, and clothing and shoes, according to data compiled by Fiserv."

    Reuters reports that "for the first time in several years … store traffic on Thanksgiving evening grew - indicating a shift in when consumers are leaving their homes to shop. It is also a sign of how Thursday evening store openings have continued to hurt what has traditionally been a day that kicked off the U.S. holiday season … Numbers from ShopperTrak, which is part of retail data firm Sensormatic Solutions, showed that visits to stores fell a combined 3% during Thanksgiving and Black Friday compared with the same days in 2018.

    "Shopper traffic on Thanksgiving evening increased by 2.3%year-over-year but was dragged down by Black Friday, which fell 6.2% from a year ago."

    CNN goes on to say that "the shopping sprees are far from over with Cyber Monday poised to be even bigger. Adobe is projecting $9.4 billion in online sales. It anticipates that the last few hours of Cyber Monday will attract a lot of sales from people unwilling to miss out on deals."

    Reuters notes that "the National Retail Federation had forecast U.S. holiday retail sales over the two months in 2019 will increase between 3.8% and 4.2% from a year ago, for a total of $727.9 billion to $730.7 billion. That compares with an average annual increase of 3.7% over the past five years."
    KC's View:
    Some of the numbers are going to vary, in part because different organizations measure things differently, and in part because different organizations have different biases in their metrics.

    This year has a shorter shopping season because Thanksgiving came so late, so the numbers will be a little skewed.

    But it seems pretty clear already that the shift from bricks-and-mortar to online shopping will continue. The question is whether this will put companies that have not adjusted their expectations and infrastructures sufficiently in any sort of existential peril.

    My guess is yes.

    Published on: December 2, 2019

    The Wall Street Journal reports this morning that retailers including Walmart and Target are "staffing stores differently in an effort to meet new competitive challenges," understanding that they need to expand the use of labor for e-commerce fulfillment purposes.


    • "Target said it now sources 80% of its online orders from stores, not warehouses. At the Brooklyn store around 80 workers handle internet orders, collecting products from shelves or putting items into boxes in the backroom for delivery.

    "Target retrained the bulk of its 300,000 year-round U.S. workers over the past year, giving them new titles and responsibilities. The Minneapolis, Minn.-based retailer hopes to mold each into an expert for a specific area of the store such as the beauty department, toys or online fulfillment to offer better customer service and use labor spending more efficiently."

    • Walmart, the country’s largest retailer by revenue, has also asked more staff to stock goods during the day in recent years, though only in a minority of the retailer’s 4,700 U.S. stores, a spokesman said. The Bentonville, Ark., company uses stores to fulfill its online grocery orders and is increasingly relying on stores for other types of e-commerce orders, although most are shipped from dedicated warehouses.
    KC's View:
    While it clearly is important for stores to have enough people working to handle fulfillment of online orders, it seems to me that it would be a mistake to under-staff the bricks-and-mortar component - because the people who actually come into the store won't want to be treated like second-class citizens or an afterthought. If they end up feeling that way, it may just reinforce the idea that actual stores are irrelevant.

    Published on: December 2, 2019

    Stock Daily Dish reports that Amazon-owned Whole Foods plans a major price-cut promotion, starting this Wednesday.

    The campaign reportedly will be aimed at all shoppers, not just the Amazon Prime members who have been the focus of most of its promotions over the past few years.
    KC's View:
    Amazon wants more Prime members, because they spend more, so it does what it can to entice them into the ecosystem.

    Lower prices for everyone is just the bait.

    Published on: December 2, 2019

    CNBC reports that Amazon has struck a deal with Giant Eagle that will allow the retailer's customers with prescriptions can use the Alexa-powered devices for reminders about taking their medications.

    According to the story, "Alexa will walk Giant Eagle customers through the process of setting up a profile and personal passcode, which serves as an extra level of authentication so that Alexa won’t deliver a medication list to the wrong person. After linking their accounts, a customer can ask Alexa about their medications and get a description of each. They can say 'Alexa, manage my medication,' to get started on reminders. And once the reminder goes off, a user can ask: 'Alexa, what medication am I supposed to be taking right now?' Alexa will again ask for the passcode before providing an answer.

    "Customers can also request prescription refills via Alexa, and Giant Eagle has an existing service to deliver medications to the home."

    The program will be available at Giant Eagle's more than 200 locations in Pennsylvania, Ohio, Maryland, West Virginia and Indiana.

    The story notes that "in the battle for the connected home, Amazon, Google and Apple are building devices to help consumers manage their busy lives. Health is a lucrative but complicated market because of the regulations and privacy rules around managing sensitive health information on behalf of hospitals and pharmacies. Making the technology compliant with the Health Insurance Portability and Accountability Act can take years, and Amazon is already facing a backlash following reports this year that Alexa is listening to its users to improve functionality.

    "Amazon announced in April that Alexa is HIPAA compliant, representing a big step for the company into the $3.5 trillion health-care sector. Unlike its rivals, Amazon has a dedicated team working on health and wellness use cases, including medication management, for its voice assistant."
    KC's View:
    This strikes me as the perfect use of this technology … the only thing that might concern me if I were Giant Eagle is that the program could end up being a feeder for Amazon's PillPack system.

    Published on: December 2, 2019

    Fast Company has a story about how "over the last 15 years, craft coffee startups like Blue Bottle, Ritual, Verve, Stumptown, La Colombe, and Intelligensia have burst onto the scene with coffee that was more sophisticated - and expensive - than anything that had ever come before.

    "It’s often described as ‘third wave’ coffee because it builds on the previous two waves: The first, which began in the early 20th century, was when coffee first became widely adopted thanks to companies like Maxwell House and Folgers that invented cheap, instant coffee that people could drink at home. Then, in the 1990s, second wave companies like Starbucks, Peet’s, Costa, and Caffe Nero entered the scene, creating a cafe culture that made premium, $4-a-cup coffee normal."

    The story suggests that "third wave coffee startups started as niche brands, catering to coffee aficionados in coastal cities and growing steadily. But industry experts believe that third wave coffee is about to hit a tipping point. Over the next five years, the sector is expected to enter a period of explosive growth that will make high-end craft coffee more mainstream, ballooning  from $35 billion in 2018 to $85 billion in 2025."

    These expectations have brought with them big investment dollars: "Over the last few years, investors and holding companies have poured tons of cash into third wave brands. In 2015, European holding company JAB bought Stumptown and Intelligentsia for undisclosed figures. In 2017, Nestlé bought a majority stake in Blue Bottle for $425 million along with Chameleon Cold Brew, for an undisclosed amount. And besides these acquisitions, other coffee startups are being fueled by VCs. Philz Coffee has raised $75 million to date, and Bulletproof Coffee has raised $68 million, largely from tech investors. Wandering Bear, a cold brew brand, raised $8 million in funding last year."
    KC's View:
    If this indeed is the next wave, retailers wanting to have a differentiated coffee program ought to be thinking about investing in a startup, or finding something different than the standard Starbucks or Peets program. But the moment would be now to start the process, before everybody else has done it.

    Published on: December 2, 2019

    Thirty-seven years after Steven Spielberg's E.T>: The Extra-Terrestrial hit movie theater screens around the world, becoming an enormous critical and popular success, a "sequel" came to television screens … via a commercial for Comcast-owned Xfinity.

    The commercial, which you can see at left, features E.T. returning to earth to visit Elliott, the boy with whom he bonded all those years ago - once again played by Henry Thomas - but who has grown into a forty-something man with his own family. Elliott proceeds to show E.T. all the things that have changed since the original film, including broadband marketed by … you guess it … Xfinity. The theme: "holidays are for reuniting with family."

    In a quote released by the company, Henry Thomas says that "the audience is going to get everything they want out of a sequel without the messy bits that could destroy the beauty of the original and the special place it has in people's minds and hearts. It's really a win-win."

    Spielberg reportedly was consulted about the ad and approved of its production.

    KC's View:
    This is one of those that I suspect will play differently for different folks. I was impressed by the production values but completely put off by the concept - E.T>: The Extra-Terrestrial was one of those films that had not been exploited in sequels, and I hated the idea that the little fellow now is being used as a salesman.

    But I'm a purist. I hate it when my cultural touchstones are violated.

    Published on: December 2, 2019

    The New York Times has a terrific piece about the impact and influence that Amazon is having on US communities. An excerpt:

    "As federal regulators and Congress assess whether Amazon’s market power should be curbed under antitrust laws — and whether, as some politicians argue, the company should be broken up — The New York Times has explored the company’s impact in one American community: greater Baltimore.

    "Baltimore’s pleading pitch last year to become an additional headquarters city for Amazon, promising a whopping $3.8 billion in subsidies, did not even make the second round of bidding. But Amazon’s presence here shows how the many-armed titan may now reach into Americans’ daily lives in more ways than any corporation in history. If antitrust investigators want to sample Amazon’s impact on the ground, they could well take a look here."

    Baltimore, the story says, "offers in microcosm the contentious issues that Amazon’s conduct has raised nationally: The erosion of brick-and-mortar retail. Modestly paid warehouse work and the looming job destroyer of automation. An aggressive foray into government and institutional procurement, driving local suppliers to partner with Amazon or face decline. A swift expansion in air cargo, challenging FedEx and U.P.S. The neighborhood spread of video and audio surveillance. And the steady conquest of the computing infrastructure that underlies commerce, government and communications, something like an electric utility — except without the regulation imposed on utilities."

    You can read the entire story here.
    KC's View:

    Published on: December 2, 2019

    • The New York Post reports that "Costco is seeing red after a Thanksgiving Day computer foul-up tanked an estimated $11 million in sales for the warehouse retailer … The site was down for at least 16 hours on Thursday … The retailer did add an alert to its site about 'slow response times' and said it would extend Thanksgiving Day promotions into Black Friday 'while supplies last'."
    KC's View:

    Published on: December 2, 2019

    • The Washington Post reports that even as projections suggest that " the global cannabidiol (CBD) market will grow from $311.7 million this year to a staggering $1.25 billion by 2024," the US Food and Drug Administration (FDA) is attempting to apply the brakes.

    "The U.S. Food and Drug Administration issued warning letters to 15 companies for illegally selling products containing CBD, saying they had violated the Federal Food, Drug and Cosmetic Act," the Post writes. "At the same time, the FDA published a revised Consumer Update detailing broad safety concerns about CBD products.":

    The critical message: "The federal government has not concluded that CBD is 'generally recognized as safe' (GRAS) for use in human or animal food. Thus, CBD in food and drink is still illegal."

    The story notes that a number of manufacturers and retailers express frustration that federal regulators have been slow to provide guidance about what is legal and permissible, and what is not.

    The Wall Street Journal notes that "the FDA has so far only approved one prescription drug containing CBD, a medication used to treat two rare forms of severe epilepsy. The agency said it is working to answer questions related to the safety and quality of other products containing CBD."
    KC's View:

    Published on: December 2, 2019

    …will return.
    KC's View:

    Published on: December 2, 2019

    In Week Thirteen of National Football League action…

    Chicago 24
    Detroit 20

    Buffalo 26
    Dallas 15

    New Orleans 26
    Atlanta 18

    Tennessee 31
    Indianapolis 17

    San Francisco 17
    Baltimore 20

    NY Jets 6
    Cincinnati 22

    Cleveland 13
    Pittsburgh 20

    Philadelphia 31
    Miami 37

    Washington 29
    Carolina 21

    Green Bay 31
    NY Giants 13

    Tampa Bay 28
    Jacksonville 11

    LA Rams 34
    Arizona 7

    Oakland 9
    Kansas City 40

    LA Chargers 20
    Denver 23

    New England 22
    Houston 28
    KC's View:

    Published on: December 2, 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: