business news in context, analysis with attitude

Published on: February 18, 2020

by Michael Sansolo

Insights often merge from what we see and hear.  But sometimes, - as in Arthur Conan Doyle's "The Adventure of Silver Blaze," in which Sherlock Holmes solves a mystery in part by realizing that a dig did not bark when it should have - we can insights from something that we don't see or hear.

I'm not Sherlock Holmes, but that is the elementary deduction I made just a few weeks ago, when participating in the judging for the National Grocers Association (NGA) annual Creative Choice merchandising and marketing competition.  I am impressed every year by the exceptional creativity shown by small retailers working on extremely limited budgets, and it is my privilege each year to interview the winners at the NGA annual convention, which will take place next week in San Diego.

This year, though, the dog didn't bark .. or rather, we judges noticed that something was missing.

As one of the judges pointed out to the rest of us, over the past year there have been two consumer items that have been incredibly newsworthy: CBD-infused products and plant-based meat substitutes. Yet as we dug through the hundreds of entries we only found one each highlighting CBD and plant-based meats.

In the case of CBD, obviously there remains significant controversy and the laws are very inconsistent state to state. Plant-based meat is a different story, though, and at least partly thanks to Burger King, is featured in television advertising as much as car insurance. Yet, clearly, the independent operators in the NGA competition didn’t land much on either topic.

The point the judge made was simple. Independents need to stay current and that means recognizing the products and trends that seem to be of the moment. And like it or not, that means putting at least some focus on areas like CBD and plant-based meat.

Supermarkets occupy a unique position in communities because they are usually the business everyone interacts with most frequently, which means the issues in society are the issues in the industry.

That means that throughout the industry there needs to be a consistent focus on emerging topics. For that reason, companies need think about how they will handle CBD as it is legalized and made increasingly available in your locality. In addition, you need to determine how to sample, introduce and market the daylights out of plant-based meats. 

And don’t for a second think it stops there. Right now, I hope retailers of all stripes are having internal discussions about coping with the potential impact of the coronavirus that leads the news (however you consume it) constantly. I know next to nothing about diseases, but it seems obvious to me that this thing is spreading and the reporting from China shows us how devastating this is.

It’s more than focusing on the coming interruption to supply chains; it’s also about how to create the safest environment for shoppers. That may mean putting all workers in disposable gloves, placing hand sanitizer dispensers every where and making it clear that you understand shopper anxiety and you are doing everything to protect them.

Let’s be clear about this. Coronavirus is a widely discussed topic and mania at the moment and if shoppers decide to cocoon to avoid crowds, there now exists many readily available shopping services that will bring their staples to them. Have you heard of Amazon?

Being current isn’t just a nice thing it’s a necessary thing.  It is critical, perhaps even more so if you are a smaller independent retailer fighting a very difficult competitive battle.

Which, by the way, reminds me of another Sherlock Holmes observation, from "The Hound of the Baskervilles," in which he tells Dr. Watson, "There is nothing more stimulating than a case where everything goes against you."

Sort of like bricks-and-mortar retailing in 2020.

One final thing.  If you attend the NGA show in San Diego next week, please come by to say hello. Just don’t be offended if I keep putting Purell on my hands.

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com.

His book, “THE BIG PICTURE:  Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available here.

And, his book "Business Rules!" is available from Amazon here.

Published on: February 18, 2020

by Kevin Coupe

The Washington Post had a story over the weekend that grabbed my attention because it talked about one way that retailers can get customers to come to bricks-and-mortar stores, rather than doing all their shopping online.

Booze.

The Post writes:

"Across the country, shopping centers, malls and major chains like Nordstrom, Crate & Barrel, Whole Foods and Giant are increasingly allowing - even encouraging - customers to imbibe while they browse. It’s the latest attempt by stores to offer shoppers an experience they can’t get online, like in-store climbing walls and designer trunk shows but with a much bigger reach: Retailers say customers tend to stay longer and spend more freely when they’re drinking … fans say drinking at the store offers a small diversion from otherwise quotidian tasks and is no different from ordering a lunchtime beer or after-work margarita."

Wow.  What a concept.

However, not everyone is in favor of the trend.   The Post writes that "public health experts find the trend troubling, even out of touch, given the rise of 'sober curious' culture and hashtag-friendly challenges such as Dry January. In fact, alcohol consumption is on the decline worldwide, down 1.6 percent in 2018, according to the International Wines and Spirits Record."

I think that is a fair criticism.  Employees at in-store bars are going to have to be very conscious about how much people drink, lest they leave the store and get in a car to drive home - not only is this a prescription for tragedy, but it also could end up being a legal, ethical and financial nightmare for the institution that sold the alcohol.

But there is such a thing asa responsible drinking.  And, to be honest, while the Post wrote about it in mid-February, I'm pretty sure that I made the observation back in October that if bricks-and-mortar stores really want my business, serving me a Tito's and soda with a slice of lime is a pretty good start.  (You can see the FaceTime video where I made that observation below.)

Bottom, Eye-Opening line:  If you are going to compete., you have to employ every weapon at your disposal.   For bricks-and-mortar stores, that means defining experiences that customers cannot get online.  And that's the real lesson.

Published on: February 18, 2020

CNBC has a story about how "investors and analysts are watching for signs that Walmart is turning its e-commerce sales growth into a profitable business … The Bentonville, Arkansas-based retailer is spending heavily to compete against Amazon. It’s seen that pay off with significant sales growth, especially in its grocery business. Walmart’s e-commerce sales in the U.S. grew by 41% in the third quarter — its strongest quarter reported so far in fiscal 2019 — and the company estimated online sales would grow by 35% for the full year. It will report earnings for the fourth quarter Tuesday."

But … "Walmart’s path towards a thriving e-commerce business hasn’t been straightforward. It bought Jet.com for $3.3 billion in 2016 as a way to scale up its online sales and fend off Amazon. Its U.S. e-commerce division is led by Marc Lore, the Jet.com co-founder … As Walmart expanded in e-commerce, it’s had some notable flops. It acquired several e-commerce brands, including menswear maker, Bonobos; women’s casual clothing company, ModCloth; and women’s plus-size apparel company, Eloquii. Bonobos had layoffs last year and its founder, Andy Dunn, announced his exit from Walmart in 2019. Walmart sold Modcloth in late 2019 for an undisclosed amount. And Eloquii is reportedly still unprofitable."

And that doesn't even count last week's decision to shut down Jetblack, its New York City-based concierge buying service.

Published on: February 18, 2020

New York magazine's "Grub Street" column reports that Wegmans has begun making deliveries to all of Manhattan's more than 40 zip codes from its four-month old Brooklyn store.

The story says there is just one caveat:  "The delivery windows will be much longer - an estimated two to five hours - due to longer driving times. So, plan on being home all afternoon and/or ordering enough groceries to last for at least two weeks. Or, you could just head to Brooklyn and experience the magic of Wegmans in person, as the food gods intended."

Published on: February 18, 2020

The U.S. Public Interest Research Group (PIRG) reports that, believing "consumers have a right to know about food recalls to protect their health from dangerous pathogens, chunks of metal, and undeclared allergens," a survey of "26 of the largest grocery stores in the United States to determine the efficacy of their policies and practices notifying consumers about food recalls" revealed that most were not getting the job done.

FMI-The Food Industry Association begged to differ.

Here's what PIRG says in its report:

"The U.S. PIRG Education Fund Food Recall Failure report evaluates supermarkets on publicly available information regarding three different areas of recall notification: store policies, in-store customer notification, and direct customer notification.

"Harris Teeter, Kroger, Smith's and Target were the only stores to receive a passing grade by providing adequate information about their recall notification policies to the public.

"Eighty-four percent of grocery store chains failed to provide any public description of their process for notifying customers about recalls. This critical failure leaves consumers to seek out this information and risk inconsistent implementation by individual stores.

"More than half of surveyed grocery store chains report some program to directly notify consumers about recalls through email or phone. In most cases, we were unable to find out when the program is activated, how customers participate, or what information is included in the notifications — limiting its potential effectiveness.

"No store provided information online about where recall notices are located in stores."

And here's what Hilary Thesmar, FMI's Chief Food and Product Safety Officer and SVP Food Safety, says in response:

"Will your supermarket warn you about hazardous food? Absolutely. The food supply chain works within the regulatory framework and acts quickly to remove recalled product from shelves and notify shoppers. This is the most fundamental service grocers provide to maintain the trust of their customers.

"The greater food industry is effective at recall communications, particularly grocers at the end of the supply chain due to the number of recalls they manage with varying products and volume. Importantly, we believe recalls are the final step of a food safety management program to effectively and efficiently remove potentially harmful products from commerce."

And, she added, "We recognize that communication preferences vary generationally and regionally; therefore, retailers utilize multiple methods of communication depending on the circumstances to communicate recalls to their customer.

"We will continue to participate in the comments process with government agencies, and our industry remains committed to communicating relevant recall information to customers wherever – and however – they shop."

Published on: February 18, 2020

Jeff Bezos said over the weekend that he is launching what he calls an "Earth Fund," designed to fund research and awareness about climate change.

He's seeding it with an initial commitment of $10 billion.

In an Instagram post, Bezos wrote, "I want to work alongside others both to amplify known ways and to explore new ways of fighting the devastating impact of climate change on this planet we all share."

Axios writes that the "$10 billion comes from Bezos' personal money and none of the funds will be used in for-profit enterprises, investing in private companies or startups … The new fund is the latest example of tech companies or their billionaire founders devoting more resources to climate change."

The Financial Times writes that "the world’s richest man, with an estimated net worth of $130 billion, said he would start issuing grants this summer to support 'scientists, activists, NGOs — any effort that offers a real possibility to help preserve and protect the natural world'."

Published on: February 18, 2020

SmileDirectClub, the disruptive teeth alignment business that is growing in part by nurturing relationships with the likes of Walmart and CVS, found itself frowning last week because of a report from NBC News about how there were "dozens of Better Business Bureau customer complaints about the clear-plastic aligner treatment, saying it has led to 'painful problems for some people'."

Faced with bad publicity and a stock price that dropped by 16 percent last Friday alone, SmileDirectClub now is fighting back, saying that the report "was not accurate or balanced and fails to recognize the more than three-quarters of a million people who have undergone the treatment safely."

The USA Today story points out that "The spat comes amid a nationwide boom for clear-plastic removable teeth aligners, which offer an alternative to traditional braces. SmileDirectClub is a rapidly growing competitor to the more established service, Align Technology's Invisalign.

"The biggest difference between SmileDirectClub and Invisalign is that Invisalign customers are required to visit a dentist or orthodontist in person to get their treatment plan launched and administered. Most SmileDirectClub customers get their mouths scanned through a 3D system in person or an at-home putty impression kit, after which they receive aligners in the mail and have their progress monitored remotely."

While SmileDirectClub "has drawn criticism from the American Association of Orthodontists, or AAO, which filed complaints against SmileDirectClub in dozens of states, saying the company's do-it-yourself model violates dental-practice laws," the USA Today piece points out that the company "says that dentists or orthodontists monitor each patient's treatment remotely through photos and chats and are prepared to adjust or extend the treatment plan when necessary. The service typically starts at less than $2,000 and can handle cases of mild complexity. More complex cases can be handled by Invisalign or braces."

Published on: February 18, 2020

The New York Times reports that Pier 1 Imports, which "in the 1990s became a popular destination for exotic rattan chairs and cheap embroidered pillows only to cede its market niche over the last decade to lower-priced competitors, announced on Monday that it had filed for bankruptcy and was pursuing a sale of the company."

The story notes that it was just last month that Pier 1 announced that it was closing about half its 936 stores.  But apparently that was not enough to save the troubled business.

The Times writes that "the rise and fall of Pier 1 offers a case study of a successful business that found itself unable to adapt after competitors began to replicate and scale its retail approach … Pier 1’s appeal began to fade with the rise of popular e-commerce sites like Etsy, Amazon and Wayfair — along with physical stores like Home Goods — which offered similarly eclectic décor items, often at lower prices. The retailer once known for home furnishings deals suddenly seemed expensive to some consumers.

"Pier 1 also struggled to come up with an effective online retail strategy, analysts said, even as it neglected to sufficiently modernize its stores and refresh its merchandise assortments."

The year 2020 isn't even two months old, but it has been a tough one for retail - more than a thousand store closing already have been announced, and real estate transaction tracker CoStar projects that retailers will close more than 100 million square feet of store space in 2020 - which, it notes, is the equivalent of something like 560 Walmarts.

Published on: February 18, 2020

The Wall Street Journal reports that "a trustee for Tops Markets LLC creditors filed a $375 million lawsuit against private- equity backer Morgan Stanley Investment Management and other former owners, alleging they took hundreds of millions of dollars in illegal dividends that drove the grocery chain into bankruptcy in 2018. 

"The company took on so much debt to finance four separate dividends between 2009 and 2013 that it couldn’t fund its obligations under two underfunded union pension 

plans."

The story says that "Alan Halperin, a trustee appointed in the Tops bankruptcy case to pursue claims against the company’s private-equity owners, filed the lawsuit on behalf of creditors, including workers and retirees under the pension plans."

Morgan Stanley has not commented on the suit.

Published on: February 18, 2020

The Wall Street Journal postulates that while capitalism's "ultimate heroes" used to be the people who would scale the corporate ladder over time, these days "we celebrate those attempting to knock the ladder down," who focus on "employing fairer pay policies, adopting social causes and weighing in on politics."

One would assume that this is easier if you're the CEO of a privately held company than a public one, but the Journal story focuses on a corporate leader who even ants to challenge that assumption:

"Pat Brown, the man behind plant-based meat maker Impossible Foods Inc., is becoming a bit of a cult figure in Silicon Valley. He is positioned to be a very wealthy man, but also poised to be a lightning rod for those who think environmentalists just want to take away our gasoline, steaks and styrofoam.

"Mr. Brown is out to change the world through good old-fashion capitalism instead of coercion, and his company’s multibillion-dollar private valuation has Wall Street salivating for an initial public offering. His plant-based products infused with soy leghemoglobin, or 'heme,' replicate the taste of beef. Items like Impossible Whoppers or Impossible Lettuce Wraps are on their way to becoming as well known as Happy Meals.

"Dining on Impossible Burgers and Impossible Pizza at an Italian restaurant on Stanford University’s campus Tuesday, Mr. Brown talked about practices that could be at odds with the desires of investors. He wants to continually cut prices for instance.

"After the plates are cleared, he wonders out loud if there is a way to make sure the Impossiblites working lower-paid jobs are compensated more like the brass. He already pays a 'thriving wage,' but he seems uncomfortable with the idea that some of his employees are using a raise to simply get their head above water while others may be using them to buy a vacation home."

You can read the story here.

Published on: February 18, 2020

The Wall Street Journal over the weekend had a story about the continuing problems affecting self-checkout lanes at retail, which are becoming more used even as their issues become more pronounced.

Here's how the Journal frames the piece:

"Shoppers aren’t the only ones frustrated by self-checkout machines. Retailers are too.

Walmart Inc., Target Corp. and other retailers are adding thousands of self-checkout machines to U.S. stores to save money on labor as they spend more to staff new services like online delivery. But self-checkouts come with new, sometimes costly challenges as retailers try to curb theft, cut wait times and keep customers happy.

"Some retailers, including Walmart, have quietly disabled or removed the weight sensors used to deter thieves, because they trigger too many “wait for assistance” messages that annoy shoppers.

"Now retailers hope cameras gathering data on products and shoppers can solve their self-checkout woes. They are replacing scales with video systems that some say are better at catching mis-scanned items and stopping transactions in progress only when it is necessary."

You can read the story here.

Published on: February 18, 2020

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

•  Bloomberg reports that "Amazon.com is severing ties with small delivery firms around the country — putting at least 1,300 drivers out of work — in an effort to eliminate partners that aren’t meeting its standards … The action underscores the challenges of outsourcing deliveries to new, untested companies instead of traditional partners such as UPS and FedEx. It also serves as a warning to Amazon delivery partners that the company is an exacting client willing to cut them off."

I have no problem conceptually with the idea of separating from a company to which you have outsourced certain elements of your business if it is not living up to the basic value proposition and doing everything possible to enhance your brand.  That's basic business 101.  

• Two interesting jobs-related stories about Amazon.

First, from the Wall Street Journal, a story saying that the company "is no longer hiring as many M.B.A.s from top-ranked U.S. business schools, as it seeks to recruit a new wave of management talent from a broader array of institutions."

The focus seems to be on creating a more diverse workforce.  Instead of just recruiting from the likes of MIT’s Sloan School of Management and Texas A&M’s Mays Business School, now Amazon "says it has broadened its scope and has extended offers to students from 80 M.B.A. programs, curtailing some campus visits and putting a heavy emphasis on virtual meetings. Other companies including Goldman Sachs Group Inc. and Bain & Co. have also increasingly opted to expand the scope of schools from which they recruit to pull from a greater diversity of backgrounds and talents."

Meanwhile, the Seattle Times reports that "at one point last week, Amazon had about 37,200 job listings around the world.

"That’s the most listings the Seattle company has posted on its Amazon.jobs career site in at least 15 months, a company spokesperson said — and may be the most ever, though a system update prevents easy comparisons to earlier periods.

"Amazon is seeking everyone from hourly warehouse workers to top-paid machine-learning experts, underscoring the breadth and scope of the company’s operations and ambition."

The big need:  "Amazon’s labor needs, particularly for in-demand technology professionals, can boggle the mind. The company had more than 10,600 jobs listings in software development, the largest single category, with an additional 7,400 listings in adjacent roles such as IT engineering and data science."

(If you're looking for a job, you can find out more here.)

Published on: February 18, 2020

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

•  The Washington Post reports that Walmart's new "great Workplace" initiative, announced about a year ago as "a sweeping overhaul that would make its stores better run and create more opportunities for employees to 'do meaningful work'," actually is creating turmoil and tsuris in many of its stores.

The problem:  Walmart reportedly "is telling employees that it is doing away with certain positions — including hourly supervisors and assistant store managers — and replacing them with a smaller set of roles that carry more responsibilities, often for the same pay, according to interviews with current and former store employees, and internal documents obtained by The Washington Post."

What this means is that "workers say they are being asked to apply, interview and test for new positions, essentially pitting them against their colleagues for a shrinking number of jobs. Some are terrified they will lose their job and insurance."

It may seem heartless to say this, but to make an omelette, you have to break a few eggs.  If Walmart did not acknowledge the changing role of the physical store - and with it, the changing roles that employees must play in those stores - then we'd all accuse the retailer of having its head buried in the sand, and just doing things a certain way because they've always been done that way.

I feel bad for these employees.  But they also cannot simply assume that things always will be done the way they've always been done, and they bear some responsibility for finding ways to be relevant in the same way that their employer is.

Published on: February 18, 2020

•  The nation's largest dairy farming cooperative, Dairy Farmers of America, has agreed to acquire "dozens of plants" from bankrupt Dean Foods for $425 million.

The deal needs to be approved by federal regulators.

The Wall Street Journal reports that "Dean is a huge presence in the U.S. dairy sector, operating 57 plants in about 30 states, and both farmers and supermarket operators have fretted over the prospect of the company’s collapse. The company’s role as a major milk buyer, purchasing about 10% of U.S. farmers’ production, prompted the dairy farmers cooperative last October to begin discussing a deal to acquire plants and other assets from Dean."

Published on: February 18, 2020

A.E. Hotchner, who wrote more than 20 fiction and non-fiction books, including a notable memoir about Ernest Hemingway, but who may be best known as the fellow with whom Paul Newman created his Newman's Own line of food products that have donated 100 percent of after-tax profits - more than $500 million - to charities since 1982, has passed away.  He was 102.

Published on: February 18, 2020

…will return.

Published on: February 18, 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.