business news in context, analysis with attitude

Published on: February 25, 2020

Amazon today is opening its first full grocery store, Amazon Go Grocery, in Seattle, on Pike Street in the Capital Hill neighborhood.

Customers with the Amazon Go app, which can be downloaded to their mobile devices, simply scan the app when entering, bag their groceries as they walk the store, and then leave without scanning anything or going through any sort of checkout lanes.  Products are then charged to their linked credit card accounts.

The 7,700-square-foot store has about 5,000 SKUs, much more that the Amazon Go convenience stores, or, as Amazon describes it,  "everything you’d want from a neighborhood grocery store—from fresh produce and meat and seafood to bakery items and household essentials—plus easy-to-make dinner options. We offer a mix of organic and conventional items from well-known brands, along with special finds and local favorites."

“Amazon Go was really focused on serving customers breakfast, lunch and snacks in urban central-business-district areas,” Cameron Janes, an Amazon vice president who runs the company’s expanding fleet of physical stores, tells the Seattle Times.  Amazon Go Grocery, by contrast, will have “everything you’d expect to find in a neighborhood market.”

The Times goes on:  "Aside from improved convenience, shoppers may see few other differences between Amazon Go Grocery and other upscale urban grocery stores — and that’s no accident, Janes said. Everything about the Go Grocery store, including its layout, inventory and especially its sensing technologies, is engineered expressly so that 'customers don’t have to change the way they shop'.

"Although Amazon has used checkout-free technology since 2016, making it available for such a wide range of products was a challenge. Customers handle items such as tomatoes or apples differently than they do packaged goods, Janes said, and typically pick up several before selecting the ones they want."

Dilip Kumar, vice president of Amazon Go, tells the Wall Street Journal that there is no upwards limit to how big a store could be served by Go-style technology, now that they've cracked the code for this store. “We’ve learned a lot,” he says. “There’s no real upper bound. It could be five times as big. It could be 10 times as big.”

There currently are 25 Amazon Go convenience stores, ranging between 450 square feet to 2,300 square feet.  The operate in Seattle, New York, San Francisco and Chicago.

The Journal also adds another twist to Amazon's Go technology plans: 

"Amazon hopes the grocery store will serve as a showcase for its technology as it seeks to sell its system to other businesses. The company has recently been in talks with potential partners and is targeting retail options including convenience stores and shops in airports and sports arenas, according to people familiar with the matter. Amazon has discussed multiple revenue models, including a fixed licensing fee or a revenue-sharing agreement, one of the people said.

"Mr. Kumar declined to comment on how many Go Grocery stores are planned or plans for licensing.

"The Go licensing plans are Amazon’s latest effort to partner with some of the same traditional retailers it has long disrupted, and who regard the e-commerce giant as a fierce competitor and threat. In recent years, Amazon has also signed deals with Rite Aid Corp. and Kohl’s Corp. to handle delivery pickups or returns that help drive foot traffic to their stores."

Published on: February 25, 2020

by Michael Sansolo

Spending this week with members of the National Grocers Association (NGA) at its annual convention in San Diego reminds me how important it is for all of us - especially small companies - to remember:

All big things start small.

And sometimes, even gigantic things start that way.

The PBS show "Frontline" ran a two-hour episode last week (that you can watch here) that should be required viewing for businesses of all sizes. It is a frightening look into just how powerful Amazon - which competes not just with every NGA member, but with the vast majority of businesses in America and beyond - has become. 

The documentary delves into Amazon’s history and stunning rise from an acorn of an idea into possibly the largest oak tree ever grown. For Amazon haters out there, the show will reinforce everything you want to hate about the company, from the incredible power and sway the company now has and how that influence is wielded against suppliers, to the sketchy working conditions alleged in fulfillment centers to a seeming lack of interest in product quality.

It will no doubt get industry lobbyists ginned up with new ammunition to work for laws that might somehow control, break up, or at least slow Amazon.

But there also are clear business lessons in what Amazon has done.

For example, a story is told that inside Amazon a single chair is symbolically left empty in every meeting. The chair represents the shopper, whose needs and wants need be part of everything the company does. It’s corny and possibly misguided based on other points made in the show, but it is significant.

It is the exact question that every consumer-facing company should be asking as they make decisions.  It gives focus to every action.  

It’s also instructive to look inside the box at Amazon to witness the company’s focus on continuous improvement and growing technological capabilities. As I said earlier, this "Frontline" report may not going to turn anyone into a fan of the company, but it may serve as a vivid reminder of just how relentless a competitor has arrived and how much more it can do.

And, of course, there’s Jeff Bezos’ oft-repeated comment that “all big things start small.” At the NGA show I encounter folks from Wakefern/ShopRite, which began as a group of small grocers who today dominate the nation’s largest metropolitan area. Likewise, I always look forward to seeing folks from companies such as Dorothy Lane, Newport Avenue Market and Sendik’s, for whom size is no impediment to thinking big and creatively when it comes to creating compelling and exciting customer experiences.

As terrific as some of these companies are, and as relentlessly focused as their leaders and employees are on the customer, they, also, need to watch the "Frontline" piece - because one should never be complacent about how serious and aggressive competitor Amazon is to everybody.

It may not be a love letter to Amazon, but it does have one unspoken but inescapable message:  Amazon isn’t done growing.

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 25, 2020

by Kevin Coupe

Even the longest of traditions sometimes fall to the exigencies of competitive realities.

Even, apparently, library fines.

The New York Times had a story the other day listing the number of public library systems - in places like Chicago, Denver, Los Angeles, Philadelphia, and San Diego - that have either eliminated all late fees on borrowed materials, or adopted amnesty programs that largely have the same effect.

Some of the libraries are saying that they have come to the realization that to be able to lend out books and other materials, they have to get them back - and a lot of people may not be bringing things back because they don't want to pay fines that have grown to unhealthy proportions.

The Times writes that "the American Library Association urged its members a year ago to re-examine their policies on fines, which it said discouraged violators from accessing other services. Libraries are home to movie nights, free children’s activities, career training and literacy programs, and they offer computer access to patrons."

While the Times points out that "even as free information has proliferated online, libraries have remained essential fixtures of America’s small towns and city neighborhoods," it seems to me that libraries and librarians have to realize that they must compete for people's time and attention.  

Every competitor in every venue, it seems to me, needs to look at systems and procedures and figure out where the consumer friction is - and then act to eliminate it.  In so many ways, library fines are the very definition of friction.  It simply makes sense to eliminate them, even if they've been part of how libraries did business forever.

In fact, that may be the best reason to eliminate them.

But that's just one step in what has to be an ongoing process in which libraries must engage.  If I were a librarian, I'd be thinking about establishing small postal stations, and maybe even FedEx/UPS drop-off points in the building.  (Maybe even Amazon lockers?)

The key is to get people in the door at a time when there is very little that a library can offer that a person can't access from home.

Which is the Eye-Opening situation that so many retailers face.

Published on: February 25, 2020

by Kevin Coupe

DALLAS - Attendees at the annual Category Management Association/Shopper Insights Management Association convention here yesterday got the opportunity to get a sense of the new Walmart … and it was impressive.

It was in the person of Michael McGuire, CEO and co-founder of Local Theory, a data science business that is one of the entities being incubated by Walmart's Store No. 8 division.  McGuire, who has been with Walmart for 19 years and has spent the bulk of his time in merchandising, talked about how Walmart is encouraging "intrapreneurship," creating an internal culture that encourages innovation.

It is, he said, "taking the vibe of a startup into a large corporation" and offering "incentives for people to pursue innovation."

Intrapreneurship, McGuire said, depends on a business focusing 20 percent on business excellence and 80 percent on innovation … but it often is stymied because businesses tend to spend more time on business excellence - honing and improving existing skills - than on innovation.  That is, he said, because "there is no script to innovate … you must give up control to encourage innovation … and true innovation carries risk."

However, he said, to succeed in the current business environment, having an innovation-centric business model is "not optional."  It is required if a company wants to have "talent acquisition and retention … growth … and any sort of competitive advantage."

But, McGuire acknowledged, it requires upper management that gets it … and he conceded that it is harder to graft innovation DNA onto an existing entity, especially a public company, than it is to create it from scratch in a private company.

But, he argued, he believes that Walmart has turned this corner … and he offered his own experience as an example.

More from CMA/SIMA tomorrow…

Published on: February 25, 2020

Forbes has a piece about how Walmart and Amazon are both endeavoring to become favored employers at a time when unemployment is at record lows.  It also is a time when retail in general and both companies specifically are seen as being "lousy jobs" - offering unattractive environments, bad pay, and less predictability than they desire.

The tenor of the piece is that some of the moves may be more cosmetic than real:  "As Amazon and Walmart work to lure workers from a shrinking pool of candidates, as well as keep the ones they have, they need to meet and exceed candidate expectations on wages, education, paid family leave, and workplace safety at minimum. Both have made strides in certain areas, but have a way to go, particularly when it comes to ensuring employees feel valued and more like partners than workhorses."

Some excerpts:

•  Wages:  "Last year, Amazon announced it would increase minimum wage to $15 for all U.S. employees. While the news drew headlines, particularly as Bezos challenged others in the industry to do the same, it similarly drew criticism by employees. Amazon also announced it would be eliminating bonuses, which often added 8 percent a month to many employees’ earnings … While Walmart has not taken Bezos’ bait and matched Amazon’s minimum wage hike, it did recently announce a more measured approach to wage increases through an initiative it calls 'Great Workplace.' The idea is to empower employees by offering them more opportunities to be cross-trained in several functions to advance into a higher pay scale."

•  Benefits:  "In 2018, Walmart announced an expanded parental and maternity leave policy, with 10 paid weeks for birth moms and 6 weeks for other new parents (dads, non-birthing moms and adoptive parents), regardless of whether the employee is hourly or salaried.

"The move was likely an attempt to level up a bit closer to Amazon, which in 2015 began offering up to 20 paid weeks of leave for birth mothers, the ability to share up to six weeks of paid leave with a spouse or partner, and a flexible return to work program. These benefits apply to all full-time hourly and salaried employees."

•  Training:  "Both Amazon and Walmart are initiating in-house training programs in order to retain their current workforce. Just this month, Amazon announced its plans to retrain 100,000 employees through its 'Upskilling 2025' program. The goal is to help U.S. employees adapt to a workplace that is becoming 'increasingly disrupted by automation and new technologies.' The initiative feels like a big undertaking, but actually compared to Walmart’s program for every employee, it’s a bit sparse.

"Dating back to 2015, through its program Live Better U, Walmart employees have been able to get degrees in fields ranging from computer science to cybersecurity for the tuition tab of $1 a day, and earn free college credits and other educational perks."

You can read the full analysis here.

Published on: February 25, 2020

Ahold Delhaize announced what it called "new long-term targets for its Healthy and Sustainable growth driver. Entering the last year of fulfilling its 2020 sustainability targets, the company has established a new set of ambitions to inspire customers to make healthier and more informed choices, to increase product transparency, and to eliminate waste.

Among the moves:

The company's brands "will continue their commitment to reformulate products (e.g. less sugar, salt, fats) and to make it easier for customers to meet their own, personal health needs. By 2025, all Ahold Delhaize brands will provide science-based nutritional navigation systems for customers, such as Nutri-Score and Guiding Stars, in stores and online."

Ahold Delhaize "will provide even more information about where own-brand products are sourced, which production methods are used and under which conditions they are produced. Building on the company’s nearly 100% visibility and sustainability in its own-brand seafood supply chains, it will move quickly to apply lessons learned to its fresh fruit, vegetable, and meat supply chains."

Ahold Delhaize brands "are working toward zero plastic waste from own-brand packaging by 2025, through packaging reduction and moving to fully recyclable, reusable, or compostable plastics. Furthermore, 25% of own-brand plastic packaging will be from recycled materials by 2025."

And, the company "has also committed to setting long-term, science-based targets as of February 2021 to reduce its impact on climate change."

CEO/president Frans Muller called the moves as ways to "create a healthier and more resilient food system. I am convinced that this will make our business stronger and more robust for the future."

Published on: February 25, 2020

Fascinating story in the Los Angeles Times the other day about a place described as "a Noah’s Ark for citrus: two of every kind.

"Spread over 22 acres, UC Riverside’s 113-year-old Givaudan Citrus Variety Collection was founded as a place to gather and study as many citrus specimens as possible — right now, the inventory numbers at over 1,000. It’s an open-air temple where innovations in irrigation, fertilization, pest control, breeding and more have allowed California’s iconic $7-billion citrus industry to thrive for over a century."

This is, however, a story not about a sanctuary, but of an industry under threat:

"A bacterial infection known as citrus greening, or Huanglongbing, transmitted by the moth-like Asian citrus psyllid, has upended the agricultural world. It’s harmless to humans, but reduces trees to withered, discolored shells of their former selves that produce inedible, immature fruit … Originating in China over a century ago and first spotted in California in 2012, the disease has ravaged citrus wherever it’s appeared and presents an existential threat to the industry. Citrus greening has caused $2 billion in losses in Florida, where it first entered the U.S. in 2005 and is now estimated to affect 90% of the state’s groves."

Nothing seems capable of stopping the infection … which is why the Noah’s Ark for citrus is important - in addition to looking for solutions to citrus greening, it also is serving a critical role as a place that will preserve citrus varieties in the event a solution cannot be found.

You can read the entire piece here.

Published on: February 25, 2020

•  The Wall Street Journal reports that "New York City’s economic development agency has agreed to let Bronx-based e-commerce grocer FreshDirect defer paying a $5.4 million tax bill for five years to help the company restructure debt and continue operations, according to city officials."

According to the story, "FreshDirect will begin paying the tax bill in installments with 4% interest on June 30, 2025, according to city officials. FreshDirect will make installments through June 30, 2029. Officials at the New York City Industrial Development Agency voted to approve the deal at a meeting earlier this month.

"The grocer will also owe the city additional money if the employment numbers at its 400,000-square-foot Bronx warehouse go below 10% or more of its current staff levels, according to city officials."

Published on: February 25, 2020

•  In San Diego, at the National Grocers Association (NGA) convention, Associated Grocers of New England (AGNE) was presented with the inaugural Peter J. Larkin Community Service Award. The creation of the award, named after the recently retired NGA CEO, was announced during the Opening Session at the 2019 NGA Show and "is presented to an independent grocer or wholesaler company for their dedication and commitment to the community which they serve."

Also at NGA, the Women Grocers of America (WGA) presented the Woman of the Year Award to Jennifer Graff of Columbiana Foods/Giant Eagle. Graff began her career in the grocery industry when she was 17 as a cashier and currently holds the position of Perishable Director.

Published on: February 25, 2020

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

•  Modern Retail reports that less than a year after it started selling CBD products at more than 1,000 of its stores, Kroger "has quickly become one of the biggest brick and mortar CBD sellers by footprint, with plans to become the go-to hub for large CBD producers.

"The cannabidiol market is expected to reach $20 billion by 2024, so it’s no surprise that large retailers like Kroger find it lucrative to go all in on CBD. Since announcing the decision last July, Kroger has added Charlotte’s Web, The Yield Growth Corp., CV Sciences Inc. and Aurora Cannabis, among other big players in the space to its growing list of CBD brand offerings."

The market for CBD topicals - as opposed edibles and vaping materials - strikes me as a fertile one in which there is relatively little risk for retailers to get engaged.  There may be problems as the market evolves - there has been evidence that not every product is what its manufacturer says it is - but this is a growth area, and it would be foolish to ignore it.

Published on: February 25, 2020

Katherine Johnson has passed away at age 101.  She was the African American mathematician who was part of a cadre of such women who, working for NASA in the early days of the space program, solved complex equations by hand and calculated rocket trajectories that made it possible for people like Alan Shepard and John Glenn to go into space and return safely.  Johnson was portrayed in the hit 2016 film Hidden Figures, which helped to bring the achievements and contributions of these women to light.

Johnson's work for NASA continued through the Apollo moon missions and Space Shuttle program;  she retired in 1986.  In 2015, President Barack Obama awarded her the Presidential Medal of Freedom, the nation’s highest civilian honor.

Published on: February 25, 2020

MNB yesterday took note of a Wall Street Journal report that the US House of Representatives voted 300-131 last week to end country of origin labeling requirements for beef, pork and chicken, sending the measure to the Senate, where it faces an uncertain reception.  The Journal said that supporters of the move hoped "to prevent a protracted battle over the labels with Canada and Mexico."  The vote "follows a series of rulings by the World Trade Organization finding the labeling discriminates against animals imported from Canada and Mexico … consumer advocates, among the biggest supporters of the labels, say international trade deals should not trump consumers’ access to information about their food."

I commented:

I'm with the consumer advocates on this one, though I concede that the WTO does sort of put the US between a rock and a hard place.

My problem is with the base premise that labeling is discrimination.  That's nonsense.  Labeling is information.  Only people and companies afraid of consumers knowing the truth would argue otherwise.

If consumers don't seem to be factoring country of origin labels into their buying decisions, isn't that evidence that the labels are not discriminatory?  That said, they may want to use that information in the future, when it seems to be relevant.

One MNB reader responded:

On the flip side, doesn’t this create a marketing opportunity for US meat companies to position them as “made in the USA” or something like that? A “If you don’t see a Made in USA stamp, who knows where your food is coming from?” kind of angle?

From another reader:

Even without COOL regulations, grocery stores can still the do the right thing - tell their customers where the meat they’re carrying is from and how it was raised. And if you can’t verify, don’t carry it. 

But price trumps most things so we’ll see how that goes. 

MNB reader Olivier Kielwasser wrote:

Did Congress ask consumers what their preferences were on COOL regs?  I would think any consumer would want to be informed.  The question is, does potential discrimination against Canada and Mexico outweigh the information / transparency needs of US consumers, although in an age of over-information?

I repeat:  labeling is not discrimination.  It is information.

We also looked at a Los Angeles Times story about "Making The Cut," a new fashion series that will begin running on Amazon Prime next month, hosted by supermodel Heidi Klum and Tim Gunn, who used to to "Project Runway" together.

"The partnership between Amazon and Klum illustrates how the Seattle global giant can intertwine its two most notable divisions — retail and entertainment — and potentially produce new lucrative revenue streams," the Times wrote.  The goal is for people to be able to easily buy items they see on the show.

MNB reader Lisa Malmarowski wrote:

As someone in marketing, I actually hate the idea of being sold too this blatantly through a show. I’m sure it’s a goldmine of potential for the companies that link up, but I , as a consumer, have no interest in watching an hour long commercial. Even if the adorable Tim Gunn is in it. 

The current Project Runway has always been about the product placement but has devolved into the program working around what the product placements and sponsorships need it to be. It’s lame. 

On the other hand, Netflix’s new show “Next is Fashion” is pretty refreshing. The only “product placement” I’ve been able to discern at this point (besides talking up the designer judges) is that the makeup artists are obviously using MAC cosmetics. 

Guess I’m just weary of the constant shilling by big corporations. Most of reality TV is now about what products they can sell or get sponsorships from to pay for their production costs and materials. 

I get your point, but I'm less offended by a show constructed to combine entertainment and commerce than I am by shows that are obviously getting paid for product placements, and handle those moments clumsily.

Yesterday we quoted a story from the New York Times:

"Pharmacy employees at Walgreens told consultants late last year that high levels of stress and 'unreasonable' expectations had led them to make mistakes while filling prescriptions and to ignore some safety procedures.

"But when the consultants presented their findings at Walgreens’s corporate offices this month, there was no reference to the errors and little mention of other concerns the employees had raised.

"That’s because senior leaders at Walgreens had directed the consultants to remove some damaging findings after seeing a draft of their presentation, a review of internal emails, chat logs and two versions of the report shows."

This prompted one MNB reader to write:

There are two movies I think people should watch, The Big Short and Spotlight. I rewatched them a few months ago and a take away I got from both of them was, the information was there you just had to look for it and there was a lot of people who knew about it but did nothing. To take another recent news item look at Wells Fargo, they knew what was going on but looked the other way, just recently paid a 3 billion dollar fine, their reputation is in the tank and it will take years to get the trust back from the general public. Walgreens and CVS already have a black eye with the opioid crisis they don't need another one for prescription errors because their employees are overworked.

Published on: February 25, 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.