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    Published on: February 12, 2020

    In this edition of The Innovation Conversation - with Tom Furphy and Kevin Coupe, talking coast-to-coast via Skype - the focus is on growing and significant consumer concerns about Amazon's impact on retail and the environment, and how competitors can use retail marketing to compete with Amazon's juggernaut.

    The discussion turns on a new survey from Convey, reported by DC Velocity, saying that "one in four Americans (24%) have negative feelings about Amazon's impact on the retail industry, but 21% of those shoppers said they still buy at least 50% of all their goods on Amazon."  At the same time, "27% of respondents said they feel very or somewhat negative about Amazon's impact on the environment, yet more than one in four of those respondents said they still buy at least 50% of all their goods on Amazon."

    Furphy and Coupe talk about how these disconnects offer competitors opportunities to differentiate themselves - in their stores, via their supply chains, and with their people.  It isn't easy … but it likely is critical to survival.

    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.  Me, I just like hanging and talking with people smarter than I am.

    Published on: February 12, 2020

    by Kevin Coupe

    One of the components of the Girl Scout motto is, "To help people at all times."

    This apparently includes when they've got the post-pot munchies.

    Fox News reports that "an industrious group of Girl Scouts sold hundreds of boxes of their signature cookies after setting up shop outside of a Chicago cannabis dispensary over the weekend."  The Girl Scouts sold 230 boxes during a four-hour shift outside the dispensary.

    Recreational marijuana became legal in Illinois on January 1.

    The cookie stand's presence outside outside Dispensary33 in the Andersonville neighborhood reportedly was arranged by the troop's leader, who found that many other locations already had been reserved by competing troops.  "We’re always looking for opportunities, places that have walking traffic," said Melissa Soukoup.  "I was looking for places that weren’t taken, and I thought of this.”

    This week,  Fox News reports, "Dispensary33 revealed that the Girl Scouts already booked them up for sales during the rest of February."

    I'm sure there will be some folks who question whether this is a good idea, and if the Girl Scouts are being taught the right lessons.  I'd prefer to think that they are being taught a valuable, Eye-Opening lesson about entrepreneurship - you don't wait for customers to find you, but rather have to go to them.

    Next year - Girl Scout-branded hash brownies.

    Published on: February 12, 2020

    Ahold Delhaize USA yesterday announced that it plans to close the Midwest division of its Peapod online grocery sales business.  As of next Tuesday, February 18, the company said, "service for Midwest customers placing online grocery delivery orders in Illinois, Wisconsin and Indiana will be discontinued. As a result of this decision, the following facilities will close: a distribution center and food preparation facility in Lake Zurich, Ill., distribution facilities in Chicago, Ill., Milwaukee, Wis., and Indianapolis, Ind., and a pick-up point in Palatine, Ill."

    Ahold Delhaize said that peapod's Midwest business represents $97 million of its total annual $1.1 billion revenue.

    According to the company, "This decision will enable Ahold Delhaize USA to focus on expanding the leadership position of its brands on the East Coast and execute its strategy of enabling each local brand to be the leading omnichannel grocery retailer in each of their markets utilizing the market-leading capabilities of Peapod Digital Labs. There are no changes for customers in other markets."

    “Chicago will remain the headquarters for our Peapod Digital Labs team, and we will continue to draw from the valuable pool of digital and eCommerce talent in the market,” said JJ Fleeman, President, Peapod Digital Labs and Chief eCommerce Officer. “Through Peapod Digital Labs, we will continue to build upon Peapod’s technology legacy. Peapod began here, and we will remain here, in the heart of Chicago. We look forward to honoring and leveraging Peapod’s longstanding legacy of expertise in online grocery and fully focusing our team’s energy and talent on supporting the growth of each of the East Coast brands.”

    “This was a difficult decision given Peapod’s rich history in the Midwest,” said Kevin Holt, CEO, Ahold Delhaize USA.  The company noted that Peapod was the first online grocer in the U.S., and was acquired by Ahold USA in 2000."

    KC's View:

    To be honest, this feels like the first of two shoes.  I'm not sure why Ahold Delhaize would leave Peapod Digital Labs in Chicago when every other one of its operations are on the east coast, hundreds of miles away.  Plus, it could be argued that Boston is more of a tech hub than Chicago is … and Amazon's investments in the Washington, DC, market pretty much assures that there will be a lot of tech talent there as well.  Leaving Peapod all by itself in Chicago wouldn't seem to make any sense.  And so I am guessing that another shoe will drop.  Eventually.

    Peapod's presence in the Midwest did seem to be more of a legacy proposition than anything else - it started in Chicago.  But I always thought that, especially at this time in the e-commerce continuum, it would've made a lot more sense for Peapod to position itself as an e-commerce provider to retailers with which it did not compete all over the country.  It had the history and the infrastructure, and with some tweaking and innovative thinking, Peapod could've positioned itself as a competitor to the likes of Instacart, telling retailers that it understood the importance of their brands, and wanted to build on that equity, not subvert and eventually steal it.

    Published on: February 12, 2020

    The Federal Trade Commission (FTC) yesterday announced that it plans to review acquisitions made by Amazon, Facebook, Apple, Microsoft, and Alphabet/Google over the past decade, with Axios writing that it is seeking "to learn whether large tech companies are buying up small potential competitors in an anticompetitive manner."

    At least some of these acquisitions were not subject to antitrust scrutiny, the story says.  The Wall Street Journal writes that "the new probe likely will involve hundreds of transactions that never drew federal scrutiny because they were under the dollar-value threshold for antitrust review, which is edging up to $94 million this year … The FTC also is looking at deals that don’t involve full-fledged takeovers. That will involve examining potential competitive impacts of minority investments, as well as data acquisitions and licensing arrangements."

    The move appears to be what the Journal calls "a significant expansion of the government’s already extensive examination of possible antitrust concerns in digital markets. Both the FTC and the Justice Department have been conducting antitrust investigations of tech giants including business practices at Google and Facebook."

    The Journal notes that "critics contend acquisitions by big tech firms show a pattern of establishing 'kill zones' around themselves to prevent upstart rivals from posing a competitive threat, and say this can discourage innovation and investment.

    "Defenders of the tech giants say a small startup’s prospect of being taken over by a major company—and the big payoff that can result—is a spur to investment and innovation. Many tech entrepreneurs start companies with the specific goal of being bought by one of the giants."

    KC's View:

    It does not appear that there will be a broad effort to unravel previous acquisitions, though I wouldn't be surprised if the FTC or the Justice Department take a shot at one or two.  It might not even be a matter of politics - this probe is being initiated by the Trump administration, but also is supported by the likes of Sen. Richard Blumenthal (D-Connecticut), a frequent critic of big tech.

    I agree with one of the assessments made in the Journal story, that it is "hard to see an antitrust case against major tech companies snapping up small, unproven businesses so they can hire engineers well-versed in cutting-edge technology."   Not only do such deals often give extended life and resources to these small businesses, but they are usually sought by them … it is one of the reasons they go into business to begin with.

    Published on: February 12, 2020

    Eater reports that Row 7, which was founded two years ago to disrupt the existing seed monopolies "and breed delicious, healthy plants that more people want to eat," has struck a deal with Wegmans to "sell the company's orange badger flame beets - and Row 7’s story - at all of its 101 stores."

    It is seen as the first step in having a broader presence in the nation's grocery stores, a strategy hatched by famed chef Dan Barber.

    According to the story, "Slinging produce at supermarkets may be an unexpected strategy from a Michelin-starred, farm-to-table chef who has long voiced opposition to the corporatization of the food system. But Barber said he sees the partnership - and an overall push into grocery stores - as the best way to get the food and its message to the masses."

    Eater quotes Barber as saying that "the jump from market darling to supermarket sensation was harder than it looked, because of the plug-and-play nature of the wholesale produce market."  Most stores simply were not built to accept and market Row 7 products.  But "Wegmans already had infrastructure in place that would allow the company to test how well the vegetables would grow and sell, and to educate consumers on the new varieties.

    "At its own organic farm and orchard in upstate New York, Wegmans’ farmers tested seven acres of badger flame beets to gauge how the beets would perform if they decided to ask growers in their network of 34 organic farms to plant them. Then they rolled the beets out in select stores to gauge how customers responded to them."

    KC's View:

    One of the things that separates both Wegmans and Row 7 is that they recognized it was not enough to simply have something new - they needed to actually sell it, and Eater says that "Wegmans created signage and in-store displays, and Barber spoke personally to 70 'produce ambassadors' who educate customers in the stores."

    That's huge, but it is a commitment that not enough companies make.  But it seems to me that in order to differentiate a store from its competition, whether physical or online, that is exactly the kind of commitment required.  It takes people, it takes money, it takes energy.  Take it or leave it.

    I'm interested to see how Barber adapts to a less rarefied atmosphere than he is used to;  I've eaten exactly once at his Blue Hill at Stone Barns restaurant, and it was one of the most memorable and expensive meals I've ever had.  I certainly never thought that he'd find his way into supermarkets, even Wegmans (which, as it happens, will be opening a store in Harrison, New York, in just a few months - less than 20 miles from the restaurant).

    He's already reportedly working with the likes of Fresh Direct, Sweetgreen, and the Bon Appétit Management Company, which will put Row 7 products into places like Oberlin College and San Francisco’s Oracle Park.

    Seeds have been planted.  It will be interesting to see what grows.

    Published on: February 12, 2020

    Fast Company reports that online store Brandless, created less than three years ago to sell "simply branded household, personal care, baby, and pet products on the cheap," and in doing so compete effectively with Amazon, is going out of business.

    The story says that Brandless "is no longer taking orders and has laid off 70 people. The last 10 employees still working at the company will process the remaining few customer orders and 'evaluate any acquisition offers'."

    Fast Company points out that that this is "a dramatic end for a company that entered the market with an original idea … bringing the direct-to-consumer business model to the consumer packaged goods industry. They created the infrastructure to develop high-quality organic products but make them cheaper than what you might find at Whole Foods. They were able to do this by controlling their entire supply chain from manufacturing to the actual selling of the product, cutting out the middlemen along the way.

    "Originally, the company had a very limited assortment of products and sold every item for $3 to simplify the overwhelming number of decisions people make when walking through the supermarket or shopping online. Later, Brandless expanded into more expensive products but typically sold them for a multiple of $3."

    However, changes at the top of the company and demands from investors that it show a profit as soon as possible, may have pushed Brandless further and faster than it was prepared to go.

    Published on: February 12, 2020

    CO reports that "coming this year to more than 9,000 retail locations is a makeover of in-store messaging that harmonizes how CVS and its brands communicate with consumers, informed by shopper intent - whether they’re picking up prescriptions or paper towels … CVS’ new store signage, rolling out chainwide this year, will employ different brand voices depending on what shoppers are doing and where they are in the store. At the pharmacy counter, for example, the CVS brand voice will prevail; at other places in the store, a product supplier’s brand voice will dominate … The objective is to help shoppers find items faster and with greater confidence. The strategy is driven in large part by the extensive research CVS conducted to understand shopper behavior."

    Marcy Brewington, director, in-store marketing strategy, CVS Health, says that the bifurcated messaging will work this way:  "When customers go to pharmacy in the back of the store to pick up a script, they expect to hear from CVS, because CVS is a trusted authority. If we blasted supplier messages back there, it wouldn’t work for what they are looking for.

    "On the other hand,” she continued, “a lot of our customers are looking to buy by the brand. When they come into CVS, they expect to see the supplier brand voice coming through. We know our suppliers spend a lot of money [on marketing] to help customers understand what their products are and what the brand stands for, so we’ll allow them a place in the store to talk about that.”

    KC's View:

    If the messages are designed to inform customers about the products they are buying - being a resource of information as well as a source of product - then this is a good thing. 

    But I must admit that when I first saw this story, I thought to myself, when I go into the local CVS, I don't want or need harmonized messages.  Shorter lines would be nice.

    Published on: February 12, 2020

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

    •  The New York Times this morning reports that "four years after Chile embraced the world’s most sweeping measures to combat mounting obesity, a partial verdict on their effectiveness is in: Chileans are drinking a lot fewer sugar-laden beverages, according to study published Tuesday in the journal PLOS Medicine.

    "Consumption of sugar-sweetened drinks dropped nearly 25 percent in the 18 months after Chile adopted a raft of regulations that included advertising restrictions on unhealthy foods, bold front-of-package warning labels and a ban on junk food in schools. During the same period, researchers recorded a five percent increase in purchases of bottled water, diet soft drinks and fruit juices without added sugar."

    The Chilean initiatives, adopted four years ago, are described by the Times as "a bold gambit by the government of a country with some of the world’s highest obesity rates. Three-quarters of Chilean adults and more than half of children are overweight or obese, and health officials warned that the medical costs of obesity could consume 4 percent of the nation’s health care spending by 2030, up from 2.4 percent in 2016."

    The Chilean approach appears to have some imitators:  "Peru, Uruguay, Israel have adopted Chilean-style front-of-package labels; Brazil and Mexico are expected to finalize similar labels in the coming months, and a dozen other countries are considering them as well."

    •  Good piece in the Wall Street Journal about the new headquarters that Recreational Equipment Inc. (REI) is building in Bellevue, Washington, just miles from Seattle, where once it opens "workers will be able to walk from one room to the next through outdoor staircases and bridges. They can hold group meetings on rooftop terraces, or around a fire pit in a courtyard full of native plants. Skylights and oversize sliding doors will bring in sunshine and air … The main office building, a 380,000-square-foot structure around two courtyards, is oriented from east to west to maximize the amount of sunlight it gets. Next to it will be an indoor marketplace that will be open to the public and powered in part by rooftop solar panels."

    The story points out that "REI is one of a growing number of companies building unique headquarters meant to attract employees and market their brand. In 2017, Apple opened a massive, donut-shaped office in Cupertino, Calif., whose futuristic design earned it the nickname spaceship. Consumer-goods company Unilever PLC renovated its U.S. headquarters in Englewood Cliffs, N.J., to re-create the feeling of a New York City loft and appeal to younger workers."

    Sounds just like MNB world headquarters.  I have walls.  Windows.  I can see my yard from my desk.  A kitchen with a coffee pot.  I can walk the dogs frequently during the day.  We even have a couple of skylights and one sliding door.  Yup.  REI's and MNB's headquarters have a lot in common.

    Published on: February 12, 2020

    •  The Kellogg Company announced that Scott Salmon, its Chief Customer Officer, is leaving the company after 22 years there to become president of the pet foods division of Simmons Foods.

    Published on: February 12, 2020

    Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire.

    The New York Times reports that Sen. Tom Udall (D-New Mexico) and Rep. Alan Lowenthal (D-California,) are introducing in to their respective houses of the US Congress legislation that would make plastics manufacturers " financially responsible" for dealing with the waste their products create.

    It is, the Times writes, "one of the most aggressive, sweeping attempts to hold the plastics industry, beverage makers and other companies financially responsible" for their garbage. 

    "The legislation includes measures that the sponsors argue will increase the nation’s meager recycling rates, such as a national 'bottle bill' that would incentivize people to return their empty soda and water bottles by providing a 10 cent refund for each bottle. It would also require companies that produce and sell food service and plastic packaging to pay for the waste collection, a burden that now falls primarily on taxpayers."

    The Times notes that "the so-called Break Free From Plastic Pollution Act is a long shot, with no Republican co-sponsors and several provisions that seem sure to be nonstarters in an election year. But the legislative effort at the federal level, even if a politically unrealistic one, shows the growing sway of environmental groups that have pushed to stem the flow of plastic waste into the ocean."

    Published on: February 12, 2020

    Regarding the continuing dominance of Amazon in the smart speaker segment, one MNB reader wrote:

    Our office microwave finally bit the dust so I jumped on Amazon to order one for next day delivery. I arrived the next day and it has an Alexa control button?

    The microwave was inexpensive but to be honest – in our application – what’s the point?  We still have to get up and put the food in…

    From MNB reader Justin Anthony:

    My family is a new smart speaker user.  We use Alexa powered systems, but how we started might be a little unconventional.

    We were blessed enough to be able to build a new home in this past year.  Built by Meritage Homes.  One of the standard features included in their builds were smart devices.  Front door lock, Ring doorbell, light switches, thermostat, even the oven.  Here’s where Amazon steps in.  Shortly after closing we received an Amazon promotional code from Meritage Homes.  This code was good for an Echo Show & Dot at no cost.   It also had us schedule a technician, at no additional cost, to come to our home, set it all up and show us how to use it. Amazon wanted to make sure we used their devices in our new home. It worked. Not just for us, but for our whole neighborhood.

    Welcome to the Amazon ecosystem.

    Responding to yesterday's story from the New York Times about how Dart Corp. finds itself making and selling products that have been labeled by many as threats to the environment, MNB reader Richard A. Eastes wrote:

    Especially since the beginning of the Industrial Revolution, ‘cost reduction’ has been the human production mantra.

    Deforestation, coal fired manufacturing , mining, dumping of waste carelessly into rivers and landfills have poisoned humans, the environment, and most all life forms. Our burning for generations of relatively inexpensive petroleum products has dramatically affected the level of carbon dioxide in the atmosphere that threatens to alter the viability of the thin envelope of habitable environment into which humans have evolved.

    Modern day manufacturing efficiencies have not reduced per-item expenses, but rather have only served to postpone the true cost of production into the future where inflation exacerbates those true expenses to our earthly home even further.

    Cheap convenient plastic in all its forms continues to spoil our water, landscape, and our oceans. Unfortunately, market forces, as practiced, are not necessarily the best way to “efficiently” value and allocate resources. Humans are really poor at recognizing ‘the actual cost inputs’ in our earth’s “closed system”.

    To a large degree, society has only been paying ‘down payments’ on what sustains us, while postponing payments on the principle expense.  Some balloon payments are now coming due; in the air, in the water, in our climate, in our food,  and in our bodies in the form of cancer and diseases. Refusing to pay as we go for the ‘real’ price of our so-called efficiencies is becoming very expensive and does not portend our species long-term survival unless we start acknowledging, and trimming our longer term expensive taste.

    We continue to get a ton of email about the MNB redesign/reboot, and I am happy/relieved that the fix implemented yesterday solved a lot of the problems about which people were complaining.

    One MNB reader yesterday wrote:

    I am so glad you got hammered with complaints. Yesterday I wrote MNB off and decided I would get my news elsewhere. Today, I noticed the Mea Culpa (I was raised Catholic) and decided to at least check it out. Surprise! Back to a reasonable format. Thanks.

    Kyrie eleison.

    Keep those cards and letters coming in, as Dean Martin used to say.  We will continue to tweak the site and make improvements as we go along and learn from your experiences.

    Yesterday we ran an email from an MNB reader accusing me of having "gone corporate," which prompted MNB reader Bill Senn to write:

    Kevin, for goodness sake – YOU?? “GONE CORPORATE”???.  Come one folks – these are the same people who would have stayed on the horse-n-buggy waiting for bigger, faster horses.  These are the same folks who thought putting monkeys, and God forbid, men, into space was a stupid folly – but they can’t live without their phones and TV’s running off satellites…..I could go on and on but ‘Change is Constant’ and when we see someone we enjoy interacting with in the morning bring on new partners, we should applaud and look forward to more great insights!!!  That’s it, change is good!!  Keep it going Kevin!! 

    Every criticism I got I read as being from someone who cared about MNB, who felt a relationship with me and the site, and wanted to be sure that what makes MNB special will be sustained and nurtured.

    I think that is going to be the case.  I'm just going to keep doing the work.

    It is all going to be okay.

    Published on: February 12, 2020

    Digital strategies aren't just about creating alternatives to the bricks-and-mortar shopping experience.  Done effectively, they can actually bring people back to the store, while also eliminating customer anonymity, creating rich and actionable data, and deepen relationships between the store and consumer in a way that transcends the simple transaction.

    Our newest Retail Tomorrow podcast, which brings together a terrific panel of experts from a wide range of disciplines, was recorded at Google’s New York City offices during the recent National Retail Federation (NRF) Show.  Our guests:

    •  Matt Alexander, co-founder of Neighborhood Goods, an unusual and fascinating take on physical retailing with stores in Dallas and New York.

    •  Patrick Flanagan, senior vice president of digital marketing and strategy for Simon,  which has more than 200 properties in 37 states and Puerto Rico.

    •  Tom Furphy, CEO and Managing Director of Consumer Equity Partners, a member of the Retail Tomorrow podcast family and a regular contributor to "The Innovation Conversation" on MNB.

    •  And Jalna Silverstein, a leader in Ernst & Young’s Transaction Advisory Practice and its Real Estate, Consumer Experience and Retail Strategy.

    You can listen to the podcast here.

    This Retail Tomorrow podcast is sponsored by the Global Market Development Center (GMDC).

    Pictured below are our panel members, from left:  The Content Guy, Matt Alexander, Tom Furphy, Patrick Flanagan, Jalna Silverstein.