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    Published on: January 15, 2020

    Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

    This week, Tom Furphy and I found ourselves at the National Retail Federation (NRF) Big Show, and at Google's NYC headquarters for a panel discussion in which Tom participated, and that I moderated, about to use digital strategies to drive people back to the store. (It was a terrific panel with some great experts from a variety of disciplines, and we'll be posting a podcast of the session here next week.)

    While we were there, we grabbed a couple of chairs, got out the iPhone, turned on the video camera, and recorded this week's Innovation Conversation …focusing on the challenges facing the distribution and shipping business, as evidenced by recent speculation that FedEx could be acquired. One suggestion for a company to make that acquisition: Walmart. If such a deal were to happen, dominoes would be likely to fall as the industry contracts.

    You can watch this week's innovation Conversation above left. Enjoy.

    KC's View:

    Published on: January 15, 2020

    by Kevin Coupe

    Fast Company has a story about how insurance company Cigna is partnering with MDLive, which offers telehealth services, to provide a video-based primary care service that will address a dwindling supply of doctors, growing costs, and a growing lack of access to healthcare.

    The new service, according to the story, "will give patients the option of choosing their primary care doctor and staying with them, as opposed to being introduced to a new doctor every visit. Before patients meet with their online doctor, they will first have to schedule an appointment with a lab to undergo a blood screening test, so the results will be in the hands of the doctor on the day of the appointment. Before video-chatting with the doctor, patients will also do an interview with an artificially intelligent chatbot (all patient data lives on MDLive’s HIPAA compliant platform and is shared with healthcare providers as well). Doctors, which are all board-certified, then use this interview, the lab results, and physical cues to diagnose patients, write prescriptions, or make further recommendations for screenings or specialty care."

    While there almost certainly will be some shortcomings in the system, it also seems likely that, if properly used and implemented, it will provide access to some level of healthcare that a lot of people may not have had.

    It also speaks to the changes taking place in healthcare that are affecting retailers, as companies such as Walmart, CVS and Amazon are investing enormous amounts of money in finding new approaches that can build on their strengths and accessibility to create new connections to their shoppers.

    That seems to be a big and Eye-Opening part of the game these days. The question seems to be how retailers are going to play, not if they should play.
    KC's View:

    Published on: January 15, 2020

    CNBC reports that CVS has committed to opening 12 HealthHUB installations a week, which will give it 600 by the end of the year, with a goal of having 1,500 by the end of 2021.

    The company had 50 at the end of 2019.

    "We’re seeing increased traffic in the stores, we’re seeing higher front-store margins and we are seeing terrific utilization of the health-related services,” CEO Larry Merlo tells CNBC, adding, "We’re really excited about what we’re seeing from the consumers. The acceptance, the interest that is growing with our clients."

    CNBC writes that "Boston, Dallas-Fort Worth, North Carolina and Ohio are among the next markets that CVS is targeting for its HealthHUB expansion this year. With its HealthHUBs, CVS wants to offer more health services and products to customers, which is tailored around the company’s $70 billion acquisition of Aetna. Florida, Maryland and Virginia are also on the list to carry the new concept in the first half of 2020."
    KC's View:
    This goes back to something that I've long said here - that the successful retailers will be more than just a source of product, but will develop a reputation for being a resource for the shopper. That's what CVS is doing here, which makes competitive sense at a time when both Walmart and Amazon are building up their street cred in the healthcare/self care segment.

    Published on: January 15, 2020

    Variety has a piece from the current the Television Critics Association press tour, which provided a window into how Amazon sees its role competing with the likes of Netflix, Disney+ and Apple TV Plus, not to mention a perspective on how the company sees itself in general.

    "We’re in a different business model unlike the pure-play video SVOD [streaming video on demand] players," said Amazon Studios chief operating officer and co-TV head Albert Cheng. “For us it’s about Amazon Prime customers, making sure we’re delivering value, that we’re looking at our content to drive subscriptions. … We don’t have to play as a substitute for a different type of service or compete in that way."

    Amazon Studios head Jennifer Salke said that even in streaming video, Amazon is a customer-centric business. "You come into Amazon, it’s a very customer-focused company and we find ourselves saying 'customer' a lot,” she said. "We’ve never said those things before in our previous incarnations. But then you get in there and you realize, yeah, we do have a very different model and it’s very clear to us what those drivers are, who our customers are. It’s not that complicated for us and we really try not to pay attention to the competition."

    Variety writes that "while other streaming services are standalone entities concerned with video subscriber churn and keeping its audience, Salke said Amazon Prime Video’s goals were different: 'Any decision you see us make falls into three categories: is it enhancing the value of Prime subscription, is it driving Prime subscription and is it engaging a new audience with Prime in general. That’s how we make decisions, based on that'."
    KC's View:
    These are critical insights about Amazon … not new, because its customer-centricity always has been a highly visible feature of the company's operations and culture … but essential nonetheless. Everything connects, and everything builds mass.

    Published on: January 15, 2020

    The Washington Post has a piece about how, for some 30 years, "Bath & Body Works has been an enduring and unexpected bright spot in the now-crumbling landscape of America’s malls. The retailer, known for highly scented lotions and candles with names such as Twinkling Nights and Underwater Oasis, has notched 40 straight quarters of sales growth and continues to attract new customers at a time when mall visits are dwindling. Analysts say it has defied many of the challenges roiling the retail industry — though they could not exactly say why."

    The numbers are extraordinary: "Bath & Body Works is posting double-digit growth and expanding into new locations. Analysts say its 1,600 U.S. stores, most located in shopping malls, have become destinations unto themselves."

    Experts say that the brand has maintained and even grown its strength through a "constantly changing assortment of candles, shower gels and hand creams, which can be tried out in stores. Many products are affordable indulgences that appeal to preteens on an allowance, as well as 50-somethings in search of a pick-me-up. It doesn’t hurt that the company has invested heavily to transform its stores into bright, fanciful enclaves of escape."

    Management says it also helps that it does not have direct competition able to "strike the same balance between 'prestige' and affordability."
    KC's View:
    What's interesting is that Bath & Body Works has the same parent company - L Brands - as Victoria's Secret, which has a toxic brand reputation these days. You'd think that during the company Christmas party or summer picnic, people from these two businesses could share a thought or two, and maybe help each other out.

    Published on: January 15, 2020

    CNBC reports that at the National Retail Federation (NRF) show this week in New York City, Kohl's CEO Michelle Gass said that her company's developing relationship is anything but dysfunctional.

    “I get this question, ‘Is Amazon working?’” Gass said. "Amazon is working. This returns program is working. We’re seeing the traffic. We’re getting new customers … “We’re getting a younger customer. And to what we expected, some of them were buying. ... You’re never going to get 100%. But some of them are buying.”

    The story notes that "Kohl’s had said ahead of the 2019 holiday season that a nationwide rollout of the Amazon returns service was going to be a boon for its business.

    "But Kohl’s same-store sales dropped 0.2% during this past November and December. It led retail analysts to call the tie-up with Amazon into question. Some say it isn’t turning out to be all that Kohl’s hyped it up to be. Some say it is benefiting Amazon more than it is Kohl’s."
    KC's View:
    Just because Amazon may be benefitting more doesn't mean that it is all downside for Kohl's. After all, maybe the numbers would be a lot worse for Kohl's if it didn't have Amazon customers stopping by to drop stuff off.

    Here's a basic reality. If you're doing business with Amazon, almost certainly Amazon is getting the best of the deal. That's the cost of doing business with it.

    Published on: January 15, 2020

    • The Wall Street Journal reports that Amazon yesterday "notified its third-party merchants that they could once again use FedEx’s Ground network to ship orders placed under Amazon’s Prime membership program, nearly a month after imposing a ban on the service.

    "The move ends a standoff between Amazon and onetime shipping partner FedEx, whose lower-priced Ground network was blocked for the final rush before Christmas and several weeks thereafter."

    Amazon has said that it banned FedEx Ground because the service was not meeting its standards, and now is reversing the decision because FedEx's service has reached acceptable levels.

    Reuters reports that Amazon has committed "to give more data on counterfeit goods to law enforcement in a further crackdown on fakes listed on its e-commerce sites … the company plans to disclose merchant information to European and U.S. federal authorities every time it confirms a counterfeit was sold to customers, increasing the frequency and volume of reporting to law enforcement."

    The move, according to Reuters, "comes as Amazon faces public scrutiny over how it polices counterfeits and allegedly unsafe products on its platform. Fakes have long frustrated top labels like Apple Inc and Nike Inc, discouraging some from selling via Amazon at all."

    Bloomberg reports that "Amazon said it planned to ask a judge to temporarily block Microsoft Corp. from performing any substantial work on a $10 billion Pentagon cloud contract until its lawsuit challenging its validity resolved … Amazon claims it lost the Pentagon cloud contract because of political interference by President Donald Trump, according to the judge overseeing the case.

    "Amazon filed the lawsuit under seal in November to formally protest its loss of the Pentagon’s Joint Enterprise Defense Infrastructure, or JEDI, cloud contract."

    Reuters notes that "the Department of Defense has stood by its decision, with its Secretary Mark Esper rejecting any suggestion of bias and saying the decision was conducted freely and fairly, without any outside influence."
    KC's View:

    Published on: January 15, 2020

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

    • The Grocery Manufacturers Association (GMA), which used to be the Grocery Manufacturers of America (GMA) is no more. Its latest change of name - to the Consumer Brands Association (CBA) - took effect this week.

    Under its new mandate, CBA says it plans to focus on HBC and GM, expanding on its previous focus on food and beverage.

    CBA CEO Geoff Freeman tells The Hill that "CBA's main goals will involve championing smart regulations for the industry, building frictionless supply chains, enhancing packaging sustainability and building consumer trust."

    “We are looking at issues through the lens of the totality of the industry. To think of the metaphorical grocery store, we are looking at aisles one through 15 and we’re saying, ‘what does the industry have in common?’ That’s our sweet spot,” Freeman says.

    Well, this time they're going to have to get new towels. I also hope they get a different attitude toward consumers, because where GMA got in trouble - and lost members - in my opinion, was when it seemed to lose touch with consumer priorities. The industry isn't worth a hill of beans if it is seen as being out of touch with the folks it supposedly serves.

    • The Houston Business Journal reports that Belden's, described as a Houston institution serving the city's Jewish community, is closing after a half-century in business.

    At least in part, the closure is blamed on Hurricane Harvey, which forced a lot of its customers to leave the area, the story says.

    At the same time, Albertsons-owned Randalls in the Houston market is closing five stores, which will leave it with 17 in the area.

    "In such a competitive environment, our company must sometimes make tough decisions to close underperforming stores so that we can reinvest in our remaining stores in the marketplace," Randalls said in a statement.

    The Business Journal writes that this is just the latest Randalls' closing over the past few years, as the company has consolidated its operations.
    KC's View:

    Published on: January 15, 2020

    Yesterday we took note of a Wall Street Journal report that Albertsons is planning an initial public offering that would value the company at $19 billion.

    MNB reader Glenn Cantor responded:

    The hidden gem in the news story about a possible IPO for Albertsons is “Albertsons has substantially reduced debt since it last filed paperwork for an IPO in 2015. It ended November with about $8.34 billion in net debt excluding operating leases, down from $10.52 billion a year earlier.”  In my experience, the remaining $8.34 billion in debt is still a considerable burden on any company.

    Regarding a story about how at the current time there are more women in the workforce than men, MNB reader Mitch Hill wrote:

    I absolutely agree that it is a positive thing to see a growing role for women in the workplace.  However, until there is completely equal pay between men and women this is not really an achievement.

    We had a story the other day about how Taco Bell has made a 2020 commitment to "convert all consumer-facing packaging - that’s anything the customer comes into contact with when they order food, like the wraps around tacos or the physical box that holds the $5 Cravings Box items - to be either reusable, recyclable, or compostable at all locations across the globe within the next five years."

    I commented:

    For me, the problem always has been that Taco Bell food tastes like cardboard packaging, albeit packaging that is slathered with cheese and sauce.

    Prompting MNB reader Russ Allison to write:

    Taco Bell approaching a progressive sustainability initiative in over 7000 stores is impressive on several fronts (be more impressive if/when it occurs) and imo exhibits a strong leadership move.  Definitely more worthy than an incredibly predictable and tired stab at their food, which is definitely not being marketed to your (or mine) demographic.

    Fair enough. I went for the easy joke. I do that almost reflexively.

    We linked the other day to a Fast Company piece about how to fix the toxic brand that is Victoria's Secret. There were two suggestions:

    • "Fix the company’s C-suite problem, and hire women in leadership roles. You know, lady-folk whose ages start with 5- and 6-, with letters like ‘M’ ‘B’ and ‘A’ after their names - such as any of the dozens of highly talented executives running U.S. fashion retailers. Keep hiring until the C-suite overflows with ladies who fully comprehend two important words: 'me too'."

    • The second step is an extension of the first step: "Clean house. Multiple executives, including the chairman and CEO of L Brands, Lex Wexner, were heavily intertwined with Jeffrey Epstein. It’s time to realize that women can purchase coverings for their lady bits in numerous ways that will not enrich men implicated with a sex trafficker of underage girls."

    One MNB reader responded:

    Step 3: Start selling sizes that fit the diverse body types that exist. Not just small, smaller and smallest.

    Commenting on robots that patrol stores to identify messes that need to be cleaned up and out of stocks, I wrote yesterday:

    I saw several of these things wandering the exhibit floor at the National Retail Federation show in New York City yesterday, and while they are impressive, I did find myself feeling a little skeptical about them.

    Not that they can't do what they're pitched as doing. They seem perfectly capable. But I can't help but wonder if stores - and more importantly, customers - would be better served by having employees in the aisles, able to detect out of stocks and clean up messes, but also able to talk to shoppers and serve both an ambassadorial and utilitarian role.

    MNB reader Bob McGehee wrote:

    In my last manager gig in retail grocery, I would make sure that at least once per hour my most pleasant cashier would take a lap through the store to seek out people with the ‘lost look in their eyes’ to assist them.  I increased the frequency to every 30 minutes prior to holidays.  It was understood that any person with a piece of paper in their hand and a expression that said ‘I don’t want to be here’ would get special attention to hopefully ease their pain.
    They would also check the shelves for low/empty sale items and pass a list to the grocery staff. 
    While a robot might be able to do the second item but I doubt it could do the first.

    Regarding a dip in wine consumption in the US last year, MNB reader Craig Espelien wrote:

    For me, it is no surprise that wine consumption is down. With land values in CA skyrocketing and cheap/sweet wine (think Yellow Tail or Two Buck Chuck) there are not high quality (or at least perceived quality) wines to entice the new generation. Additionally, wine got “old” - think The innovator’s Dilemma by Clayton Christenson. With craft beer and now hard cider and craft cocktails (backed by local distillers) wine has become a bit of a victim of their own success.

    The cycles will continue…remember Zima? The first try at hard seltzer - sweet but not cheap and did not last as taste buds matured.

    Responding to a comment by former Apple Store exec and JC Penney CEO Ron Johnson that he thinks that Amazon is going to be in some competitive trouble going forward, one MNB reader wrote:

    I found Ron Johnson’s comment interesting: “… It has everything to do with how old school retailers are reinventing themselves - finally - to not only compete against Amazon, but be the first choice for consumers."  I wonder how much of his view is from the C suite, and if any is from the trenches.
    As a consumer, I find “old-school retailers” are still driving me to Amazon.  In the last few months, I’ve gone to both Home Depot and Staples to buy a basic item that I figured would be in stock.  I drove to these retailers because I wanted to use the item that day.  In both instances, a very nice clerk told me that they didn’t carry that item in store (a tool case from Home Depot and a label maker from Staples), but they could easily order it for me online.  It would arrive at the store in a couple of days, and I could pick it up then.
    Sooooo, I can wait a couple of days and drive back to the store?  Two days later, I’m opening my items, the exact models I wanted at the same or better price, that were delivered from Amazon to my door step.  No return visit needed.

    And finally, on another subject, from another MNB reader:

    I too am in this age cohort of considering retirement (I am 63, my spouse is 61).  My concern over the greying of the workforce stems from the reality our firm faces daily – that is, how to manage workers in retail grocery who are no longer capable of performing the tasks & physical demands of their jobs?  We have no valid, legal tools to exit or transition these folks and no lily pads to jump to for these older workers.  Sedentary jobs in our business are few and far between.  The business is geared towards taking 10’s of 1000’s of pounds of product from the loading docks to the point of sale systems without injuring workers in the process.  I hate it when a 73 year old tears a rotator cuff while trying to separate 2 ‘nested’ shopping carts, or when a 65 year old falls while walking back to the front-end of the store then trips over a pallet jack in the pathway near the employee break room breaking both arms in the fall.
    I have empathy for my fellow seniors – yet I’m blessed with a desk job and don’t have to stand/walk 8 miles/day in a big box location.  I have no answers to these problems, just questions.  I’d venture to guess I am not alone in this regard.

    KC's View:

    Published on: January 15, 2020

    The Boston Red Sox said yesterday that it has parted ways with manager Alex Cora, who has been implicated in a cheating scandal that this week already had gotten the manager and general manager of the Houston Astros suspended by Major League Baseball and then fired by the team's owner.

    Cora, the Boston Globe notes, has had a "central role in baseball’s cheating scandal," apparently helping to engineer the use of technology to steal signs so that hitters could know in advance what pitchers were going to throw. He was a bench coach for Houston when the team was engaged in these activities, and then manager for Boston when the same things reportedly took place.
    KC's View:
    The Red Sox had no choice … and they did the right thing. MLB was going to come down hard on Cora, and it seems likely that he may get banned from the sport for a period of time. It made sense for the Red Sox to get ahead of the scandal as best they could … but they'll wear this stain, just like the Astros, for a long time.