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    Published on: December 12, 2019

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here and this is FaceTime with the Content Guy.

    So Starbucks announced the other day that it is loosening up its official dress code for the third time in about six years.

    Back in 2014, Starbucks said its baristas could for the first time have visible tattoos, as long as they did not contain vulgarities.

    Then, in 2016, the company said that employees could veer away from the previously approved shirt colors of solid black and white, and could wear a variety of shirt colors that include gray, navy, dark denim and brown. Employees can also wear patterned tops in these colors.

    Now, the company says that employees can wear facial piercings, because "we believe the Starbucks Experience is best delivered when partners can bring their whole selves to work."

    Of course, "whole selves" only goes so far - the facial piercings can't be larger than a dime.

    I feel bad for the poor managers who are going to have to keep a supply of dimes on hand so they can measure - not as easy as you might think at a time when so many people use their Starbucks app to order and pay for their coffee.

    It reminded me of when I went to Iona Prep in the late sixties and early seventies, and the school's principal, Brother Delaney, used to go around and measure students' sideburns and check on whether their hair hit the back of their shirt collars, which was forbidden. (We didn't know it at the time, but it ends up, in retrospect, that the Irish Christian Brothers were being vigilant about all the wrong stuff. Nobody has sued them, after all, for hair length … they've been sued multiple times for sexual abuse. Like I said, they were focused on all the wrong stuff.)

    I think that this is as clear an indication as you could ask for that it is hard to hire and keep good people. It is a sellers market, and so Starbucks is having to be a lot more flexible than it used to me, even if that means running the risk that some folks might be put off by the appearance of the folks making their lattes.

    I'm not a piercings guy. Not even a tattoo guy. But spending every summer in Portland, Oregon, I've sort of gotten used to this stuff. In the end, what's really important is the quality of the service and the quality of the coffee.

    I know retailers out there that have vastly different feelings about this. There are some who are rock solid in their rules - no piercings, no visible tattoos, no exceptions. And there are some who have no problem because they believe it adds a sense of hipness and authenticity to the store.

    It would be nice if it all were about how customers would react, but the reality of the moment is that when good people are hard to find, even the most conservative retailers have to figure out how they can be more flexible even while being true to their brands.

    It isn't easy, but then, nothing is these days. This is just another example of the kinds of issues and decisions with which retailers have to grapple.

    One pretty good bet … it isn't going to get any easier.

    That's what is on my mind this morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: December 12, 2019

    by Kevin Coupe

    Let's hear it for Larry Maykrantz, president of Maryland real estate firm St. John Properties.

    The Washington Post reports that at the company's annual holiday party last weekend, he handed out red envelopes with end-of-year bonuses to his 198 employees.

    Bonuses "averaging $50,000 and totaling $10 million, life changing sums based solely on tenure. One man, a maintenance technician who started at the company in 1981, received more than $200,000."

    “I just hope other companies look at this and realize that the employees are who they are,” Maykrantz tells the Post, saying that company leadership "thought it was important to recognize everyone’s role and to do so based not on title but on tenure 'to show that all of us are equal in achieving this goal'."

    Founder and chairman Edward St. John said: “I steer the boat, but they’re the ones that run the boat. They’re the ones that make the boat go.”

    Now, not every company can afford this kind of largesse. St. John Properties has had a run of success, and so it could afford this level of generosity, could afford to, in many cases, quite literally change its employees' lives.

    But … what is even more important than the number is the attitude, the recognition that everyone in an organization contributes to success, not just a few high-level execs and salesmen who collect big checks and contractually-required bonuses that sometimes seem out of synch with a company's performance.

    So good for Larry Maykrantz and his team for understanding what really creates success. I hope that this Eye-Opening move pays them dividends for years to come.
    KC's View:

    Published on: December 12, 2019

    CNBC reports this morning that "Kroger and Walgreens Boots Alliance are teaming up to cut costs by sourcing more merchandise together. With what they call the Retail Procurement Alliance, the chain retailers will look for overlaps in the products they are receiving so that they can combine their orders. Doing so would increase scale and lower costs. The two will also see if Kroger can start manufacturing items in-house for Walgreens, and vice versa."

    And, the two companies are hoping that other retailers join the alliance, creating even more synergies and economies of scale.

    According to the story, "The alliance comes at a time when traditional retailers are under pressure as more consumers shop online and, as a result, are looking to find cost savings where they can. The joint venture builds on work that Kroger and Walgreens have already been doing together."

    More than a year ago, Kroger and Walgreens partnered to begin selling Kroger products at select Walgreens stores, and even allowing for the pickup of online orders at some Walgreens. They expanded the test last August, and also started selling some Walgreens HBC items in Kroger stores.

    Some context from CNBC: "Kroger and Walgreens aim to compete with e-commerce behemoth Amazon, which continues to push further into food and health. Amazon, which owns grocery chain Whole Foods, dropped the fee for two-hour grocery delivery for all of its paying Prime members. It also owns internet pharmacy company PillPack."
    KC's View:
    To me, one of the most interesting things about the tie-up between Kroger and Walgreens is how it gives Kroger the ability to move into markets where it doesn't have stores, like New England … it could create an e-commerce pure-play model that would use Walgreens stores as pickup points. This becomes even more possible as Kroger builds one of its Ocado robotic warehouses in Florida, in an area where it doesn't have any stores. But Walgreens has more than 800 there … which tells you something.

    Building on this partnership for procurement purposes just makes sense.

    Published on: December 12, 2019

    The Wall Street Journal has a story about Amazon's workforce training efforts, reporting that "Amazon is in the midst of retraining a third of its U.S. workforce, spending $700 million over roughly six years to help everyone from fulfillment-center workers to software engineers prepare for new types of work."

    Beth Galetti, the company’s senior vice president of world-wide HR, tells the Journal that "more jobs now involve working with advanced software or machines, even in fields that might not have traditionally required such digital acumen. Fulfillment-center workers in warehouses must understand how to work alongside automated tools, she said. Software engineers will need a deeper understanding of more advanced skills, such as machine learning. In the past five years, Amazon has seen a 500% growth in roles such as data scientists and networking and security engineers, she said."

    The retaining path has had its share of bumps. For example, Amazon launched a program called Amazon Career Choice that "pays 95% of tuition and fees for certificates and degrees in high-demand fields such as nursing, work that could take staffers outside of Amazon. Early in the program, the company offered to pay for training in professions such as aircraft mechanics even when workers would have had to change cities to ultimately find work in the field."

    Now, Amazon has "curated its programs down," working to keep workers engaged in programs that will allow them to stay in their communities.

    “The No. 1 thing that causes our employees to stay or leave is whether they have access to do meaningful work,” Galetti tells the Journal. “Are they actually able to see the impact they’re having? We will lose employees if we don’t satisfy that need much faster than if they’re working for a manager they may not get along with as well.”
    KC's View:
    Amazon is in a position to spend a lot of money on worker education, more than most companies do. But … it is the understanding of how continuing education, in the broadest definition of the term, is critically important to maintaining a company's relevance, that really differentiates the effort. This investment in employees, properly directed and curated, can be an enormous competitive advantage.

    Published on: December 12, 2019

    The Food Marketing Institute (FMI) is out with its annual Retailer Contributions to Health and Wellness report, concluding that "the majority (90%) of survey respondents report having an established health and wellness program and about half (49%) have programs for both employees and customers." This, the study says, represents "an 86% increase in health and wellness activity since 2017."

    The study also says that 71 percent of food retailers see health and wellness programs as a business growth opportunity, and 63 percent see it "as a way to meet consumer expectations."

    More from the study:

    "To ensure a high level of health and wellness offerings, 85% of survey respondents report employing registered dietitians. Of those, 70% employ these nutrition experts at the corporate level while 27% employ them regionally. In addition, one in three grocery stores report having an in-store clinic for shoppers with about half of these clinics owned and operated by a health system organization."

    However, the study also suggests that opportunities remain: "According to this year’s survey, 94% of retailers who responded offer online shopping, yet only 70% extend their health and wellness initiatives to those online shoppers."
    KC's View:
    I've been saying this for years - that retailers able to draw a direct line between food and health/wellness programs, making them differentiated and actionable for shoppers, are going to have a competitive advantage.

    Published on: December 12, 2019

    Wired reports that now that the company owning the Toys R Us brand has opened two stores - in New Jersey and Texas - after the company went bankrupt and closed more than 800 stores last year, it is coming under fire for surveillance technology being used in those units.

    Here's the context:

    "Media reports described how Toys R Us partnered with the startup b8ta to install sensors in the stores‘ ceilings, which track people as they walk around and look at toys … The cameras are powered by technology from RetailNext, a surveillance giant that supplies more than 500 brands and malls in more than 90 countries."

    That includes children, the story says, even though "collecting information on kids is a highly sensitive issue, and US law carves out various additional protections or restrictions when it comes to minors—the only major federal law on digital privacy, the Children’s Online Privacy Protection Act, for example, was passed to protect children under 13. Often these rules, including COPPA, require obtaining parents’ permission before collecting data."

    Tru Kids, the new parent company of Toys R Us, released a statement claiming that "this data allows Toys R Us to measure and manage the performance of the store, including product placement and staffing. All traffic data is anonymous and the cameras do not register kids.”

    The Wired story says that "b8ta helped the company turn its new stores into interactive marketing destinations, where kids can play Nintendo games, shoot Nerf guns, and even attend events at a dedicated in-store theater. All the while, sensors in the ceiling calculate the number of shoppers—shoppers, again, that the technology has determined are over 13—who enter the store and how long they spend with each company’s toys."
    KC's View:
    Of course, RetailNext undermines that argument by saying that the cameras ignore anyone under four feet tall … Wired points out that the CDC says that the average US ten-year-old can be close to five feet tall.

    I think that most people would be surprised exactly how much surveillance takes place in many stores (and malls and airports and other locations where large numbers of people congregate).

    Wired writes that "many consumers are likely aware they’re being filmed while shopping, but may assume the footage wouldn’t be used unless they try to shoplift. It’s not clear how aware people are of more sophisticated cameras like the ones RetailNext offers, and disclosure notices inside stores are typically discreet."

    I'm not sure I buy that. It all depends on what you mean by "many." I think the vast majority of people are ignorant of exactly how much they're being watched.

    The Wired story correctly points out that "over the past two years, digital privacy has become a prominent issue for lawmakers and activists, but most of the discussions have centered on companies like Facebook and Google. Less attention has been paid to physical surveillance for things like ad targeting—even as retailers have adopted the same technology as the tech giants."

    That's a great point - maybe privacy advocates ought pay more attention to the physical world.

    Published on: December 12, 2019

    From Fast Company:

    "'Healthcare is the biggest business in the world, and it is phenomenally broken,' says Peter Diamandis, cofounder of the X-Prize, Singularity University, and Health Longevity Inc. 'So, do I think Apple and Google and Amazon can do a better job? A thousandfold'.

    "In his upcoming book, The Future Is Faster Than You Think, which will hit bookshelves in late January 2020, Diamandis makes the case for why he believes big tech companies are going to be running healthcare by 2030. In December, he came to Fast Company’s offices to make the case for why Big Tech is the doctor of the future.

    "'We’re going to see Apple and Amazon and Google and all the data-driven companies that are in our homes right now become our healthcare providers,' he says, referring to smart speakers such as Google’s Assistant, Amazon’s Alexa, and Apple’s HomePod. While many of these home voice assistants started with simple tasks like restocking home pantries and surfacing cooking tutorials, they’re already starting to move into the business of managing family well-being."

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

    Published on: December 12, 2019

    Ahold Delhaize USA this week announced plans "to transform and expand U.S. supply chain operations over the next three years by investing $480 million, including leases." The investment, the company says, "supports a strategy to transition the supply chain network into a fully-integrated, self-distribution model. The move includes the acquisition of three warehouse assets from C&S Wholesale Grocers and new leases on another two facilities.

    "In addition, Ahold Delhaize USA will partner with various companies to build two fully-automated frozen facilities. The initiative will provide the infrastructure needed to support aggressive omnichannel growth plans."

    Included in the company's three-year plan: Ahold Delhaize USA will "increase distribution presence with seven new and acquired warehouses, including two fully-automated frozen facilities in the Northeast and Mid-Atlantic … pursue optimal facility locations near the local brands of Ahold Delhaize USA and their customers, enabling local product expansion, increased product freshness and speed of delivery … innovate in warehouse design, including transforming facilities to enhance automation and leverage technology advancements, such as an integrated transportation management system and end-to-end forecasting and replenishment technology, designed to support the omnichannel experience and multi-channel growth … continue to build upon relationships with vendors and suppliers, and through the integration, further deepen partnerships to enhance service, quality, innovation and efficiencies; and expand Ahold Delhaize USA companies’ presence in local markets and reaffirm local community connections through the expected creation of hundreds of jobs in local communities, including positions in support offices."
    KC's View:

    Published on: December 12, 2019

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

    • The New York Times this morning has a story about there are antitrust concerns in some quarters that a possible acquisition by farmer-owned cooperative Dairy Farmers of America (DFA) of the assets of Dean Foods, "the century-old milk processing company that sought bankruptcy protection in November."

    According to the story, "The biggest dairy co-op in the United States, with more than 14,000 members from New York to California, D.F.A. was established in 1998 to help farmers … market their raw milk to dairy processing companies, which prepare the milk for distribution to retailers.

    "Over the years, however, the co-op has also invested heavily in milk-processing operations, meaning that it buys some of the milk its own marketing arm sells. Those investments have created a conflict of interest, farmers and the lawyers who represent them say, since milk processors benefit from lower prices, while farmers benefit from higher ones."

    This is not "the first time the co-op has faced allegations of anticompetitive behavior," the Times notes. "In 2018, D.F.A., which makes billions of dollars in annual revenue, paid $50 million to settle a long-running class-action lawsuit brought by farmers who claimed the co-op had colluded with Dean Foods to lower milk prices. A group of the plaintiffs dissented from that settlement, filing a separate suit against D.F.A. in federal court in Vermont.

    "That suit alleges that D.F.A. has engaged in a wide range of anticompetitive practices: making deals with other co-ops not to poach one another’s members, sharing milk-pricing information with those rivals to suppress payments to farmers, and signing restrictive supply contracts with processors like Dean Foods and Farmland that made it impossible for farmers outside the co-op to sell to those companies directly."

    The Vermont suit is moving forward, despite the fact that DFA has decried it as being "without merit." It also remains "unclear" whether DFA will move to acquire Dean Foods' assets, or whether such a deal would be approved by antitrust regulators.

    • Lord & Taylor has returned to New York's Fifth Avenue, just in time for the end-of-year holiday shopping season. But it isn't in the iconic location where it operated for more than 100 years before closing down less than a year ago; rather, it is in a pop-up shop in SoHo "selling a limited collection of inoffensive holiday gifts to last-minute shoppers."

    The Times suggests that this is "a symbol of 'change and flexibility and newness that we’re bringing to the brand'," as expressed by Le Tote, the clothing rental startup that bought Lord & Taylor last summer for $100 million.

    Not everyone is impressed.

    "I don’t think anyone’s been hoping and praying someone would do this," Mark A. Cohen, director of retail studies at Columbia University, tells the Times. "A pop-up can work if it’s different and distinctive and you can’t find it anywhere else — something brand-new and edgy. If, at the end of the day, it’s just a lot of stuff with a formerly famous name attached to it, it’s not going to fly."

    But Le Tote seems undeterred. The company has plans to open boutique-style stores around the country even as it decides what to do with existing department store locations. But the challenge is considerable - maintaining its relationship with the older customers it has established over decades while cultivating new connections to younger customers that it feels it needs to grow the brand.

    Good luck with that. I always thought of Lord & Taylor as an old-person brand when I was young, and I still think of it that way now that I'm … well, older. It would take a lot of work to lure me into one of its stores without Mrs. Content Guy dragging me in, though to be fair, I'm not the target customer Lord & Taylor is seeking.

    USA Today reports that Nestlé is selling its US ice cream business - brands that include Dreyer’s, Häagen-Dazs, Outshine, Skinny Cow, Edy’s and Drumstick - to Froneri, described as "a joint venture Nestlé created in 2016 with PAI Partners to manage Nestlé’s European ice cream business in 20 countries."

    The story says that "Nestlé will continue to manage its remaining ice cream businesses in Canada, Latin America and Asia as part of its market structure. Froneri has operations in Europe, Latin America, Africa and the Asia-Pacific region."

    "We are now making this business our global strategic partner in ice cream and are convinced that Froneri’s successful business model can be extended to the US market," says Nestlé CEO Mark Schneider. "With this transaction, we are taking a decisive step towards our goal of achieving global leadership in ice cream."

    Business Insider reports that IHOP has unveiled a new format - Flip'd by IHOP, which will see its first location open in Atlanta next April, with more versions elsewhere in the country on the drawing board.

    According to the story, "Flip'd serves menu items that are not available at IHOP, including breakfast burritos and pancake bowls, the latter of which are intended to make it easier to eat pancakes on the go … IHOP developed a new menu for the Flip'd chain that mixes classics with new menu items. Among the new options are breakfast burritos, sandwiches, and pancake bowls, which allow customers to add sweet and savory toppings to made-to-order pancakes — served in a bowl to allow for on-the-go consumption."

    The story says that "IHOP aims to use mobile ordering and kiosks to get customers' orders in quickly and allow for faster turnaround."

    It isn't the speed that bothers me about IHOP. It is the awful feeling in my stomach that I get after eating there. Sort of like when I go to White Castle. I always end up feeling like I need to have my stomach pumped, except that an hour later, nature takes care of that for me. So I suspect that the 'by IHOP' part of this banner won't exactly be a selling point for me.

    Fast Company reports that Dwayne Johnson - one of the biggest movie stars in the world - apparently has a jones for Salt & Straw ice cream.

    The story says that he and his business partner Dany Garcia have invested in the Portland, Oregon-based ice cream chain that has a cult-like following, now with 19 locations on the west coast.

    The size of the investment was not disclosed. Fast Company says that "for Salt & Straw, the investment represents the latest in a growing portfolio of notable partners. Back in 2017, Danny Meyer’s Union Square Hospitality Group invested in the company, and in May, the burgeoning chain reported $4.2 million in new investors, including half of that from Oregon Venture Fund."

    In a statement, Garcia says that “Salt & Straw’s proven commitment to connecting with local communities through their storytelling and creativity make this strategic investment a natural fit. We’re thrilled to provide our expertise to build upon their forward-thinking and disruptive approach that has delighted consumers and inspired meaningful brand experiences.”

    Plus, the story says, "It’s a fun departure for Johnson, whose brand extensions to this point—Under Armour, Voss water, and the Athleticon conference announced in September with Garcia—have tied closely to his commitment to, and identity as, an absolute tower of muscle. But cheat day’s also full of business opportunity."
    KC's View:

    Published on: December 12, 2019

    There is an obituary in the Washington Post totally worth reading this morning, of George J. Laurer, who essentially created the bar code.

    Laurer passed away last week at age 92; he was suffering from prostate cancer and a heart ailment.

    The Post obit says that in the early seventies, IBM "was working to develop a bar-code and scanner system that could be used in supermarkets across the country to track inventory and speed up checkout lines … The bar-code concept had originated in the 1940s, when N. Joseph Woodland designed a bull’s eye-shaped system of concentric circles, inspired by the dots and dashes of Morse code. It took decades for computing and laster technologies to catch up to his vision, but Woodland was now an IBM colleague of Mr. Laurer, who had been instructed to develop the bull’s eye system for commercial use."

    Laurer's job was to develop a pitch to make to supermarkets, but when Woodland went on vacation, Laurer did something else - he came up with the "zebralike pattern of vertical black lines, became the basis for the modern bar code — the Universal Product Code — which shook up everything from retail to air travel, marathon races to medical devices. A staple of soup cans, sports cars and most everything else that is sold in stores, UPCs are scanned more than 6 billion times each day, according to GS1, a nonprofit organization that manages and issues the codes."

    Laurer, an inveterate tinkerer, knew that he was betting his job by coming up with a new concept rather than doing what his bosses wanted. In a classic case of understatement, he said, "“My arguments must have been persuasive.”

    The Post obit points out that Laurer was tinkering almost to the moment of his death, "working to make his hospital bed more comfortable and using timer-controlled lamps so that his clock glowed blue or red depending on the time of day."
    KC's View:

    Published on: December 12, 2019

    Responding to my Eye-Opener about department stores opening bars and stylish cocktail lounges to attract shoppers, one MNB reader wrote:

    Love the idea of department stores opening bars, and having happy hours, to get people back in the spirit of shopping "in-person".  Perhaps they could entice people to buy something while they are there, by making the drink comped if they spend X amount of dollars in-store that day.  Kind of like validating their parking.

    And from another reader:

    Nice to see that Nordstrom is innovating to do whatever they can to stay fresh / relevant.
    Maybe they can reinvigorate their Privacy Policy next – since its only window dressing and is only applied when it suits their interest/s?

    We reported yesterday that New Seasons Market which operates 26 stores under the New Seasons and New Leaf banners primarily in the Portland, Oregon, market but also in San Francisco and Seattle, is being sold to Good Food Holdings, a subsidiary of Emart, which is part of The Shinsegae Group of South Korea.

    Prompting one MNB reader to write:

    Like you, I am a big fan of New Seasons. However, I was completely confused by them opening their store in Ballard. While I live several miles away, I shop, eat, drink, and workout it that neighborhood regularly. It serves mostly the same clientele as the Trader Joes, QFC, and now PCC markets that are all just several blocks away. If that is not enough, there is a very nice Safeway, Fred Meyer, and Ballard Market within the same area...and don't forget the very busy Amazon Fresh pickup. Add to that a Walgreens, Bartell Drugs and new urban Target...what were they thinking? 8 blocks North -- on the other end of the same demographic -- is a food desert!

    Location, location, location or just "head up the ---" ?

    I think we know why the Ballard store is being closed. But … let's not totally dismiss the idea that New Seasons thought it was worth taking a shot. It likely was an expensive misstep, but missteps help people and companies to learn. If we're going to celebrate companies like Amazon for being willing to fail, I think we have to be willing to allow other companies to do this same.

    Full disclosure … I learned this lesson a few weeks ago when I criticized another company for failing at something, and an MNB reader made this point to me. Just want you all to know I pay attention and even, occasionally, retain stuff.
    KC's View:

    Published on: December 12, 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: