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    Published on: February 26, 2020

    Tom Furphy is at the National Grocers Association (NGA) convention, and Kevin Coupe is at the Category Management Association conference, and they compare notes via Skype on how these two constituencies are seeking transformational answers to their competitive challenges.

    And, they talk about the challenge of creating an "intrapreneurial" climate in an existing business.

    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 26, 2020

    by Kevin Coupe

    Obviously, we talk a lot about Amazon here on MNB.  (Most of you think the coverage is appropriate.  Some wish we'd talk about something - anything - else.   My position is when Amazon stops being interesting, innovative and provocative, I'll stop writing about it.)

    Got an email yesterday from an old friend and longtime MNB reader, Tom Murphy, that I thought was worth turning into an Eye-Opener because it focuses on an "Amazon practice that I don’t ever hear people discussing…and it may be more disruptive than most of its other practices."

    Tom continues:

    Several years ago, as a consultant, I was involved in a proposal discussion with Amazon HR pertaining to helping them manage the scale of annual growth in employees.  As we were discussing their views on HR, they painted a scary picture for most competitors.  You see, Amazon thinks everyone in the world is a potential employee as well as a potential customer.  Unlike traditional competitors, they don’t think of the employee cycle ("cradle to grave”) as hire date to termination/retirement date.  Amazon spends inordinate amounts of energy, time, and resources trying to figure out how to find, entice and capture the best and brightest candidates.  Similar to their customer obsession, they obsess on this candidate pool.

    And here is the Eye-Opener…unlike most companies, when an employee leaves for new opportunities, Amazon doesn't view them as an unwanted traitor.  Amazon sees them as potential business leaders for future partnerships, growth and hopes that they will learn more about the business world…then come back to Amazon as a better, more rounded and experienced employee!  They have people, processes and technology that track these ex-employees.

    Unfortunately, most retailers (and businesses in general) paint such employees as disloyal traitors…and celebrate their leaving as “no loss”.  What a waste of good humanity and a horrible strategic error!

    Agreed!  And thanks for sharing.

    Published on: February 26, 2020

    by Kevin Coupe

    DALLAS - Fascinating day at the annual Category Management Association/Shopper Insights Management Association convention here, with Duncan Wardle - for 25 years with the Walt Disney Company, most recently as head of Innovation & Creativity - suggesting to attendees that if they see themselves as being in the retailing business, they are likely to be out of business by 2030.

    Retailers, he said, sell products - the vast majority of which also can be bought online.  "You're going to be gone by 2030 if you don't offer customers an experience," he said.

    Wardle's example:  In 1940, Walt Disney produced Fantasia, and when he was talking to theater owners about releasing it, he wanted to do things like spritz the audiences at moments when there was water onscreen.  Theater owners, of course, said no - too expensive, too hard, and too much trouble.

    Which made Disney think about the fact that he was essentially unable to control the environment in which he was trying to tell stories.  He wasn't happy about that, and so he decided to address the problem.  His solution:  Disneyland, which opened in 1955.  (FYI … I'm condensing the story, and not telling it with nearly the panache that Wardle did.)

    But his point was this:  One has to think about retailing as storytelling, and that by approaching it from that perspective, it is possible to differentiate one's business from the competition.

    While there's no question that AI is becoming a great factor in all our lives and businesses, Wardle suggested that there are four things that AI cannot do:  Creativity, imagination, curiosity, and intuition.  And it is in those four things that retailers can go beyond retailing, and maybe crave out a credible and growing role for themselves.

    More from CMA/SIMA tomorrow…

    Published on: February 26, 2020

    E-marketer is out with its annual projections of US e-commerce market shares, and Amazon retains its overwhelming leadership position at 38.7 percent.  Walmart is second at 5.3 percent.

    The analysis points to the fact that "Target’s increased focus on building its ecommerce business" seems to be working.  Last year, Target didn't even make the top 10 (it was #11), but this year it has jumped to the eighth spot, with 1.2 percent of e-commerce business.  E-marketer writes that "this year, Target’s ecommerce business will jump 24.0% to $8.34 billion. That means its share of the total US ecommerce market will grow to 1.2%, up from 1.1% in 2019."  This moves Target past both Costco and Macy's in e-commerce market share over the past year.

    The balance of the top 10 include eBay at #3 with a 4.7 percent market share, followed by Apple with 3.7 percent, Home Depot with 1.7 percent, Wayfair with 1.5 percent, and Best Buy with 1.3 percent.  Following Target there is Costco at 1.2 percent, and Macy's at 1.1 percent.

    Both e-Bay and Apple saw their shares drop slightly, while "Amazon’s share will grow to 38.7%, up from 37.3% in 2019.  This year, Amazon will capture 4.6% of total retail sales (online and offline) in the US."

    KC's View:

    I would always argue that Amazon sees robust competition - like direct competitors such as Walmart and Target seeing their e-commerce market shares increasing -  as an overall positive, because it creates the kind of argument that can quell some concerns about its growing power.  Of course, Amazon's market share also is growing, and Amazon's power is only party about its e-commerce business.

    Anyone want to bet the over-under on when Amazon will have 10 percent of total US retail sales?

    Published on: February 26, 2020

    The Northwest Arkansas Business Journal reports that Walmart U.S. CEO John Furner and Marc Lore, CEO of Walmart U.S. eCommerce, have announced several merchandising personnel changes designed to break down any silos between its stores and online businesses.

    According to the story, "Furner and Lore said the company will create one omnichannel merchandising team. When complete, there will be six categories:

    Apparel, led by Andy Barron (and sourcing for general merchandise and private brands … Consumables, led by Latriece Watkins … Entertainment, Toys and Seasonal, led by Jeff Evans … Food, led by Charles Redfield … Hardlines, led by Diana Marshall … (and) Home, led by Anthony Soohoo."

    “We’ve asked Chandra Holt to serve as chief merchandising and integration officer for Walmart eCommerce, and lead the work that will create an omni-merchandising organization,” the memo said, and the story says that "Holt’s position is dual purpose, the memo said. She will continue driving e-commerce business results, while simultaneously working through the process of integrating the teams as each is ready."

    KC's View:

    The most important thing about these moves is that Walmart is recognizing something important - that barriers between online and physical retailing organizations need to be torn down.  Brand equity has to cut across all channels, with unhealthy internal competition eliminated.  Having everyone heading in the same direction is a great first step.

    Published on: February 26, 2020

    From CNN:

    "Costco relies on a surprising perk to engage its executive members and keep them hooked on their $120-a-year subscription: The Costco Connection monthly magazine.

    "Costco mails out the Connection to executive members every month for free. The magazine features cooking recipes, offers from Costco's travel and auto services, electronics and book reviews, ads for its Kirkland Signature private-label products, and a range of home, health and lifestyle original content … The magazine is no stunt. Like Costco's popular $4.99 rotisserie chickens and $1.50 hot dogs at food courts, the Connection is emblematic of Costco's strategy to stand out against Amazon and Walmart by offering members distinct services and products. Costco also offers home and life insurance, a mortgage program and advice on their next vacation."

    The story says that "the Connection has a circulation of around 14.3 million copies per edition, up from 12.2 million in 2016, as Costco has grown its executive membership program. That makes it America's fourth-highest distributed magazine."

    KC's View:

    I'm pretty sure it doesn't say anything positive about me, and I probably shouldn't admit it, but at a quick glance I can't tell the difference between the Costco magazine and the AARP magazine.

    I would argue that this reinforces the long-held position here that retailers have to be more than a source of product, but have to evolve into being a resource for shoppers.  That's what Costco does very effectively here, and, go figure, it is doing so with a dead-tree vehicle.

    Published on: February 26, 2020

    The Los Angeles Times has a story about the "increasingly widespread corporate practice of hunting down customer thoughts and fixing them into a quantitative data set."  In other words, consumer surveys.

    "Although some call it a valuable peephole into the thoughts of customers, others see customer service surveys as a breeding ground of bad data, awkward interactions, nervous employees and coached responses," the story says.  "Technology has only supercharged both the ubiquity of the surveys and the lingering questions about their effectiveness. What was once a plodding exercise involving handwritten documents and postage stamps has evolved into a juggernaut that administers real-time ratings via screen taps and interprets them through artificial intelligence."

    You can read the story here.

    KC's View:
      One of the recurring themes of this piece is something that over the years we have talked about a lot over the years here on MNB - consumer surveys that are only designed to reinforce the biases of the people giving them.

    Michael Sansolo wrote a column about this a while back - being told by an auto dealership that he'd be getting a survey and that they would appreciate it if he'd only give them the highest marks … and if he couldn't give them a "5" on everything, they'd rather he not take the survey.

    I've bumped into this same attitude several times in recent days, and it is mystifying (or maybe not so much).  A "4" out of "5" is a pretty good grade, and if you ask the right follow-up question, it gives you the ability to improve.  It also gives you the opportunity to figure out where the friction is - it might be personnel, but it might be infrastructural, or operational, or some random thing that you never might have considered.  But if management (I won't call it leadership, because they're not leading the company anywhere) creates a model in which it is "5" or nothing, then it is guilty of business malpractice.

    And in a world where so many surveys are administered and evaluated algorithmically, it only gets worse.

    It is, in my view, sheer stupidity.

    Published on: February 26, 2020

    •  Canadian Grocer reports that Loblaw there has reported that it did $1 billion, or the equivalent of $1.2 billion US, in e-commerce during 2019, which was almost twice what it did a year earlier - the majority of it via click-and-collect.

    Company president Sarah Davis said, “We believe that the click-and-collect model will be a strong one going forward and Canadians have adopted it readily.  And in our business we have a higher growth in the click-and-collect business than we do in delivery.”  However, she also said that the company will not de-emphasize delivery;  she said that Loblaw "believes in giving its customers choice 'and that’s how we expect to stay competitive going forward'."

    Published on: February 26, 2020

    •  Bloomberg reports that Apple has decided to reopen half its stores in China, apparently persuaded that the coronavirus is less of a problem than it was just a few weeks ago.  However, some of those stores will be operating under shortened hours.

    The story says that Apple is "trying to rebound from a sales hit tied to the coronavirus … Apple’s retail footprint in China is critical to the company’s sales. The store closures were one of two main reasons for Apple saying it wouldn’t meet its revenue target of at least $63 billion in the current quarter ending in March."

    I would be very disappointed if Apple is only reopening stores because it is concerned about its bottom line … and I must admit that it doesn't look to me like the coronavirus epidemic is lessening.  Most public health experts seem to feel like a) a pandemic is likely, b) it is going to hit the US at some point, and c) we aren't ready.  The question is, will we get to the point where Apple - and a lot of other US retailers - will have to start closing stores.

    •  In San Diego, at the National Grocers Association (NGA) convention, the “Outstanding Marketer” and “Outstanding Merchandiser” in the Creative Choice Awards were announced.

    Outstanding Marketer was awarded to K-VA-T Food Stores, Food City for their Grand Opening in Abingdon, Virginia.

    Outstanding Merchandiser was awarded to Brookshire Grocery Company for their Big Grocery Cart that is over 12 feet in height and can carry 1,000 bags of groceries.

    •  Marketing Daily reports that "at a time when everyone is understandably jittery about passing on germs, Procter & Gamble has introduced a new antibacterial home sanitizing product, Microban 24, that it says will keep surfaces protected against bacteria for 24 hours, if used as directed … Microban 24 is sold as a sanitizing spray, a multipurpose cleaner, and a bathroom cleaner in both fresh scent and citrus scent, and P&G launched Instagram and Facebook accounts for it to provide tips on how to use it."

    Good timing.  Every news report about the coronavirus will serve as a kind of sales pitch.

    •  From CNN:

    "The US Food and Drug Administration has issued a warning letter to the Jimmy John's sandwich chain, saying certain vegetables it served were implicated in five outbreaks of E. coli or salmonella in the past seven years.

    "The letter accuses the chain of engaging in a pattern of receiving and selling 'adulterated fresh produce, specifically clover sprouts and cucumbers'."

    Jimmy John's president James North responded by saying that sprouts have been removed from his stores.  "Food safety is our top priority ... This removal (of sprouts) was out of an abundance of caution and was not initiated by any known, immediate threat," he said.

    •  This Is Money reports that Tesco has officially departed China with the sale of its 20 percent stake in its Gain Land joint venture to a unit of its state-run partner China Resources Holdings for the equivalent of $1.2 billion (US).

    The story notes that Tesco has been "has struggled to crack the Chinese market … Tesco combined its 131 stores Chinese stores with partner CRH's almost 3,000 sites in 2014."  Tesco pulled out of South Korea in 2015.

    This Is Money writes that it is possible that Tesco could pull out of Thailand and Malaysia as well, which would "reduce Tesco's non-UK operations to central Europe and Ireland.   Tesco has 1,967 stores in Thailand and 74 stores in Malaysia and has been operating in Asia for over 20 years."

    •  From the Wall Street Journal:

    "Fast-casual dining chain Così Inc. filed for bankruptcy protection for the second time since 2016, saying it would place a greater focus on catering after closing 30 of its soup-and-sandwich restaurants … Così reduced its bricks-and-mortar footprint with a round of restaurant closings in December."

    Published on: February 26, 2020

    Yesterday I took note of a New York Times story 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.

    I commented, in part:

    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.

    MNB reader Gail Ginther responded:

    You don’t visit a library much, do you? You’re assuming that everyone has great online access from home.

    In many rural areas libraries offer online access for people to use for job search, government filings such as unemployment, and a place to download data or read their email since they can’t get a good connection at home.

    Libraries are resources for home school families, as well as providing space for gathering, meetings, socialization.

    Libraries provide live help to those trying to do family research and explore local history. They host programs of all sorts from live music, history presentation, business development, to family story hours and toddler play time to give stay-at-home moms a chance to connect with each other.

    Every time I walk into my local library there are teens in the meeting rooms doing homework or just hanging out with their friends, families browsing the children’s area, people checking out DVDs and audio books. They have had two well-planned expansions of the physical building over the past 15 years, a focal point in the middle of the town which is our county seat, in easy walking distance of most of the town residents.

    Your East Coast snark is showing.

    Snark?  I'm not sure that it was snark that was showing.  After all, I wasn't being critical.  Maybe a little ignorant.  Or showing some coastal smugness.

    We actually have a vibrant local library in my Connecticut town.  But I would argue that if librarians think they have an unassailable business model, they're making the same mistake as a lot of businesses.

    Yesterday we ran a story that I never expected to get a comment about:

    In San Diego, at the National Grocers Association (NGA) convention, the Women Grocers of America (WGA) presented the Woman of the Year Award to Jennifer Graff of Columbiana Foods/Giant Eagle.

    One MNB reader responded:

    Am I the only woman feeling like it’s 2020 so why in the hell do we need a separate organization to recognize woman in my industry? I understand that the grocery has been dominated by men, and I’ve certainly had my share of meetings where I was the only woman (including one last week where the contractor introduced the general manager and myself as the ‘lady bosses’), but until woman can stand on the same stage with the men we work alongside, we are doomed to be “other” and less than.

    I suspect you are not the only woman who feels that way.

    Regarding Amazon's opening of a new full grocery store in Seattle that utilizes Amazon Go-style checkout-free technology, MNB reader Jeff Weidauer wrote:

    We know that Amazon makes most of its profit from AWS and Prime subscriptions. I suspect that the plan here is to license the technology rather than build a bunch of stores. That’s where the real money is.

    No disagreement here,

    Published on: February 26, 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.