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    Published on: February 27, 2020

    This commentary is available as a video, above, or as text, below.  They are similar, though not identical;  enjoy both, or either.

    I reported on MNB yesterday about a presentation that Duncan Wardle - who was with the Walt Disney Company for 25 years, most recently as head of Innovation & Creativity - and how he talked about keys to unleashing creativity.

    There was one thing that he mentioned that I wanted to follow up on, because I thought it was telling.  (Let's be clear.  I am stealing this from him.)

    Duncan looked at the audience and said, "Fold your arms."

    So I did.

    You do it, too.  Go ahead.  I'll wait.

    Then, he said to the audience, "Now, fold them the other way."

    So I tried.  You try, too.

    Go ahead.  I'll wait.

    If you are anything like me, you found doing it the other way to be uncomfortable.  I was so used to doing it one way that it actually was sort of hard to do it the other way.

    And that's a really good lesson.

    We talk here all the time about how the worst thing one can say is, "We do it that way because we've always done it that way."

    It is critical to put ourselves and our businesses in the situation where we feel a little uncomfortable.  If we don't feel that way from time to time, we aren't working hard enough, and we certainly aren't working smart enough.

    So here's a suggestion.  Gather your folks around you, and ask them to cross their arms.  Then ask them to do it the other way … and from there, engage in a discussion about what you could do in your business that is a) totally customer-centric, and b) would force the business to operate outside its typical and traditional boundaries.

    We can learn this by crossing our arms.  But in the end, what we really have to do is extend our arms - to new ideas.

    That's what is on my mind this morning and, as always, I want to hear what is on your mind.

    For past MNB videos, click here.

    Published on: February 27, 2020

    In a move designed to directly compete with a similar service offered by Amazon to its Marketplace vendors, Walmart is launching a new initiative in which, for a fee, it will store, pack and ship items being sold on its website by third-party vendors.

    According to CNBC, "Through Walmart Fulfillment Services, third-party vendors that sell clothing or other items in Walmart.com’s marketplace can pay to have the retailer handle the logistics of getting items to a customer’s door. They currently have to use a third-party to handle fulfillment or do it themselves … Walmart said sellers and customers will benefit from the new service. It said sellers will pay a low fee to store and ship goods and be able to drive up profitability. Customers will have more brands to choose from, faster shipping and easier returns. The company did not say how much it will charge sellers, but said it would be 'one of the lowest-priced services on the market'."

    The service will be going head-to-head with the Fulfillment by Amazon (FBA) service offered by its rival.

    KC's View:
      This story makes me wonder about the degree to which Walmart might be creating filters that will make sure that its third-party vendors are not selling counterfeits, not price gouging, etc…  It needs to be concerned about those issues anyway, but even more so if it is going to be in the fulfillment business.  That's one lesson it should learn from Amazon, which is constantly plagued by questions about these issues.

    Published on: February 27, 2020

    Venture Beat reports that Amazon is testing two different artificial intelligence- driven systems that it hopes will help the company deliver better customer service.

    According to the story, "One fields requests from customers automatically and without human intervention, while the other helps human service agents respond more quickly and easily … the automated agents use machine learning rather than rules and refer requests they can’t handle to human representatives, enabling them to tackle a broader range of interactions. That’s as opposed to Amazon.com’s old flow chart system that specified responses to particular inputs."

    This is, Venture Beat suggests, where the world is going:  "Amazon’s chatbot adoption is on trend - Gartner predicts they’ll power 85% of all customer service interactions by the year 2020, and there’s a good reason for the continued growth. Roughly 62% of customers are open to the use of AI to improve their experiences and an estimated 30% of U.S. service positions could be automated through chatbots, saving an estimated $23 billion in annual salaries."

    KC's View:

    I was preparing to write a wistful, elegant commentary yearning for the time when people would talk to people because that was the best way to really discern what matters to the customers, because algorithms can only take you so far.

    But then I got to the part about how $23 billion in annual salaries could be saved by using AI for such interactions, and at that point I gave up.  That's real money … and if two-thirds of shoppers are open to the chatbot experience, who am to get all sentimental?

    Published on: February 27, 2020

    Bloomberg Businessweek has a story about Walmart's new  healthcare clinics, which represent "the retailer’s attempt to grab a bigger slice of the nation’s $3.6 trillion in health spending by harnessing its greatest asset—the 150 million people coming through its 4,756 stores each week. While Walmart hasn’t said how many clinics it plans to build, it’s signaled that the health center expansion is one of its top growth initiatives. The move pits Walmart against rivals such as CVS Health Corp., which is rolling out its own 'HealthHubs,' and creates a new front in Walmart’s battle against Amazon.com Inc., which also wants to disrupt the U.S. health-care system."

    Here's how Walmart is approaching the clinics:

    "In addition to medical, dental, and eye care, the centers also provide X-rays, hearing checks, and diagnostic lab tests for things like blood glucose and lipids. The range of services can improve the quality of care: If a patient comes in to see the dentist only to learn his toothache is caused by a sinus infection, he can immediately be handed over to one of the center’s physicians.

    "Whatever a patient needs, she knows the price upfront—a huge departure from how health care usually works and a way to avoid the surprise billing by providers that can stick even patients with health insurance with unexpectedly high out-of-network charges … Walmart set those prices by estimating the cost of common services, including copays and deductibles, then coming in well under that, often half as much. It also is legendary at squeezing costs out of business processes."

    In other words, always low prices.

    Fascinating … and you can read the entire story here.

    KC's View:

    The story makes the entirely fair point that Walmart will have some explaining to do if it is going to get people to start putting their healthcare needs in its hands to this degree.  But I think that in a nation where health care costs continue to be out of control, and where it seems to be impossible to reach any sort of political consensus about how to address the issue, it may not be all that hard, especially in places where options are limited.

    Published on: February 27, 2020

    CNBC reports that the Conference Board's consumer confidence index for February came in at 130.7, up slightly from January's 130.4, but below the anticipated 132.6.

    At the same time, the "Conference Board’s present situation index, which accounts for consumers’ assessment of the current business and labor environment, dropped to 165.1 from 173.9 in January, dragging down the overall confidence."

    The story notes that "the confidence index’s weaker-than-forecast print comes a day after the stock market had its worst day in two years, with the Dow Jones Industrial Average falling more than 1,000 points, amid concerns over the coronavirus’ impact on the global economy."

    KC's View:

    At the moment, if there is anyone out there thinking that the current situation won't have an impact on the global economy, not to mention consumer confidence, I'd like to know what they are drinking or smoking.

    Published on: February 27, 2020

    The National Retail Federation (NRF) is forecasting "that retail sales during 2020 will increase between 3.5 percent and 4.1 percent to more than $3.9 trillion despite uncertainty from the lingering trade war, coronavirus and the presidential election …  2020 retail sales should total between $3.93 trillion and $3.95 trillion. Online sales, which are included in the total, are expected to grow between 12 percent and 15 percent to between $870.6 billion and $893.9 billion."

    NRF says that "preliminary results show that retail sales during 2019 grew 3.7 percent over 2018 to $3.79 trillion, just short of NRF’s forecast of at least 3.8 percent growth, which had to be based on incomplete data because of last year’s government shutdown. The total includes online and other non-store sales, which were up 12.9 percent at $777.3 billion, beating NRF’s forecast of up to 12 percent growth."

    It gos on:  "The forecast assumes that coronavirus does not become a global pandemic, but business confidence and retail sales could be impacted if factory shutdowns in China continue, particularly if delivery of holiday season merchandise is affected."

    KC's View:

    That last sentence could be the understatement of the year.

    Published on: February 27, 2020

    The Chicago Tribune reports that Amazon has plans to open a 30,000 square foot grocery store in Naperville, Illinois, about 30 miles west of downtown Chicago.

    Details about the store have not been announced;  it is unknown (except, of course, to Amazon insiders) whether this will be similar to the grocery store format that Amazon is planning to open in Woodland Hills, California (which hasn't exactly been an open book, either) or the new Amazon Go Grocery checkout-free store that opened this week in Seattle.

    All that is known is that Amazon has applied for a liquor license for the location … that the location used to be a Dominick's, and then an LA Fitness … and that it is about three miles from an Amazon-owned Whole Foods.

    KC's View:
      It could be like Woodland Hills.  It could be like Seattle.  Or it could be something else again.  Not sure I'd take odds on any of these options.

    Published on: February 27, 2020

    Wired reports on how the spreading Covid-19 coronavirus epidemic has led to a worldwide demand for face masks - which, humanity sometimes having questionable ethics, means that there is price gouging in the marketplace.

    On Amazon, for example, "prices for the devices have sharply increased in recent weeks, and the company has warned sellers not to raise them to exorbitant levels - or risk getting kicked off the site."  And "authorities in Italy, which has seen what is so far the biggest outbreak of the disease in Europe, were opening an investigation into 'insane' online prices for medical supplies."

    Examples from the Wired story:

    "The top best seller in Amazon’s 'Medical Face Masks' category, a package of 100 generic blue disposable masks, is going for $15, almost four times what it cost only a few weeks ago, according to data from Keepa, a company that tracks prices on Amazon. More expensive are so-called N95 respirators, which unlike looser-fitting masks keep out small airborne particles and are most often used to protect against airborne transmission.

    "The price of a box of 20 particulate respirators made by 3M and sold by independent merchants has almost quadrupled from $17 to $70 since the end of January. A package of 20 respirators made by Honeywell, another major supplier, and also sold by third parties has quintupled from $12.40 to $64. Representatives from both 3M and Honeywell said they haven’t raised list prices for their products but can’t control how much third parties charge."

    KC's View:
      The thing is, we all know that there also will be shortages of the masks, which probably will make prices go up even more.  And, there will be companies that will be out there peddling ineffective masks just to make a buck.  (Those folks ought to go to jail if they do it knowingly.)

    Ironically, the Centers for Disease Control and Prevention (CDC) in the US is saying that masks are not necessary unless a) you are infected, or b) you are caring for someone who is infected.  Far more important, the CDC says, is frequent and thorough hand-washing.

    Of course, some clown will probably read that and then raise the price of soap.

    Published on: February 27, 2020

    The American Customer Satisfaction Index (ASCI) is out with its annual report on consumer satisfaction with retailers around the country, finding that overall things have not gotten any worse:  "Following two straight years of decline, the retail sector steadies as customer satisfaction inches back a mere 0.1% to a score of 77.3 (on a scale of 0 to 100)."

    According to the report, "Half of the retail industries show no change in their customer satisfaction scores in 2019."  The only place where things have gotten measurably better is in online retail, "the only industry to improve, climbing 1.3% to 81 and continuing to show a much stronger level of customer satisfaction overall."

    Two excerpts from the report:

    •  Supermarkets:  "Following a slight dip last year, customer satisfaction with supermarkets is steady at 78. There’s also a crowded field at the top of the category.

    "Trader Joe’s no longer has sole possession of the lead after falling 2% to 84. It’s now joined by Wegmans, which slips 1%, and Texas-based grocer H-E-B, which climbs 2%, as all three rank first for satisfaction across the entire retail sector.

    Aldi (down 1%), Costco (unchanged), and Publix (down 1%) meet just below the leaders with scores of 83. BJ’s experiences the largest gain in the industry, soaring 4% to 82.

    "Sam’s Club is unchanged at 80, tying it with ShopRite (up 1%). Target’s grocery business also earns a score of 79 following a 1% bump, while Amazon’s Whole Foods chain is steady at 79. Hy-Vee (down 1%) and Meijer (unchanged) match the industry average of 78. Ahold Delhaize loses 1% to 77.

    "Giant Eagle, Southeastern Grocers, and Supervalu are flat at 76. Save-A-Lot dips 1% to meet with Albertsons Companies, whose score is unmoved at 75. Walmart stays alone at the industry’s rock bottom with a 73 despite rising 1%."

    •  E-commerce:  "Only three companies turn in scores above the industry average, with Amazon, which saw its Prime membership reach 150 million, re-staking its claim as the industry standard after climbing 1% to 83. Etsy and Nordstrom tie for second place, both up 1% to 82.

    "Costco loses its one-year grip on first place, sliding 2% to 81. It’s joined by HP Store (up 1%), Kohl’s (unchanged), Newegg (up 1%), and Nike (unchanged).

    Macy’s and Wayfair (both unchanged) sit just below the industry average at 80.

    "They’re closely followed by eBay and Overstock, both down 1% to 79.

    Seven companies score 78: Apple (down 3%), Best Buy (up 1%), Dell (down 1%), Gap (unchanged), Home Depot (down 1%), Lowe’s (down 1%), and Target (down 3%). Walgreens (down 1% to 75), Walmart (unchanged at 74), and Sears (unchanged at 73) make up the bottom three."

    Published on: February 27, 2020

    The New York Times reports that a number of food and beverage companies are under fire for misleading consumers about how much sugar is in their products.

    According to the Times, "A recent study that examined millions of grocery store purchases in the United States found that dubious claims about sugar, salt and fat were common. Many fruit juices that claimed to be low in sugar, for example, tended to have added sugars and more sugar than comparable juices with no claims on them. Some breakfast cereals labeled low in calories had more calories than the cereals that did not make calorie claims. And sports, energy, tea and coffee drinks with low-sodium claims had almost 17 percent more sodium than similar products with no sodium claims on them."

    There have been lawsuits:  "In October, Kellogg agreed to pay $20 million to settle a class-action lawsuit that accused the company of falsely advertising some of its most popular breakfast cereals as heart healthy and lightly sweetened, such as Raisin Bran and Smart Start. A number of other companies, including Clif Bar, Mondelez, General Mills, Whole Foods, Jamba Juice and Post Foods, have faced similar lawsuits over the level of sugar in their products."

    The Center for Science in the Public Interest (CSPI) has been pushing the US Food and Drug Administration (FDA) to tighten its oversight of sugar content in food products.  Others have called the lawsuits "frivolous," the Times writes.

    KC's View:
      You'd think that these sorts of things would be cut and dried, but alas, they are not - largely because the government seems to have not been specific enough in its rules about what qualifies as "healthy" or "low in sugar."

    The Times says that CSPI wants the FDA to set a threshold of less than three grams of added sugar per serving.  Not being a dietitian, I have no idea if that is reasonable, but it sounds good to me.  So let's try to get a consensus of experts to agree on what a reasonable number is - it shouldn't be too hard, based on conventional wisdom about how much sugar people should consume on a daily basis - and then let's set the rule and go about enforcing it.

    Then, here's the deal.  You break the rule, and you get fined.  Break it a lot and you get fined a lot.

    Published on: February 27, 2020

    •  E-commerce and delivery company Instacart is in trouble with the state of California, with the city of San Diego suing the company, charging that some of its workers has been mis-classified as independent contractors when they should be employees - with access to wages, benefits and legal protections.

    At issue is whether Instacart is complying with a new law called AB5.

    The judge in the case issued an injunction against Instacart, though he also temporarily stayed it;  Instacart says it will appeal.

    According to the piece, "San Diego’s lawsuit originally asked for Instacart’s workers to receive compensation retroactively, including payment for things such as minimum wage, overtime pay, meal breaks and expense reimbursement. The suit also alleges Instacart evaded paying state and federal payroll taxes … Although the injunction sends a warning to Instacart and similar companies, it won’t have an immediate effect. The court tossed out the suit’s original request for a mandatory injunction, which would have required Instacart to make payments and take other steps to comply with the law."



    •  The New York Times reports that the City Council there, concerned that food delivery apps such as Grubhub and Uber Eats were charging restaurants usurious commissions and sometimes billing for calls that did not result in orders, is planning to consider legislation that would more tightly regulate the industry.

    According to the story, lawmakers "will soon consider a package of bills that is believed to be the first local effort to regulate commissions, phone fees or some other aspect of the on-demand food delivery economy.  The bills propose that food delivery apps be limited to charging restaurants no more than 10 percent commission, and require them to be licensed through the city’s Department of Consumer Affairs. By creating a licensing mechanism, the city would be empowered to discipline companies found in violation of rules such as false advertising or deceptive practices."

    Published on: February 27, 2020

    •  The BBC reports that Walmart may sell off a majority stake in its Asda Group in the UK, after having fielded inquiries about its availability.  It says it is talking to "small number of interested parties."

    Walmart tried to do something similar last year in a proposed merger with Sainsbury's, but antitrust regulators blocked the deal because of concerns about the impact on prices.

    The BBC writes that "Walmart purchased Yorkshire-based Asda in 1999. The company is among the top three supermarkets in the UK, with an estimated 15% of the market.  However, in recent years, it has seen increased competition from low-priced German competitors such as Aldi and Lidl."

    Published on: February 27, 2020

    •  From CNN:  

    "Coca-Cola says coronavirus has disrupted its supply chain, and artificial sweeteners from China could be in shorter supply if the outbreak continues to spread … The company did not specify which sweetener or sweeteners were affected by the supply and export delays. A spokesman for Coca-Cola declined to comment beyond its annual report."

    In its financial filing, Coke said,  "We have initiated contingency supply plans and do not foresee a short-term impact due to these delays.  However, we may see tighter supplies of some of these ingredients in the longer term should production or export operations in China deteriorate."

    A shortage of diet beverages?  That could be just the ticket for rioting in the streets.



    •  The Wall Street Journal reports that "Anheuser-Busch InBev SA reported lower profit for the fourth quarter, blaming higher costs and lost market share in the U.S. to hard seltzer makers … AB InBev’s fourth-quarter net income dropped 75% to $114 million, from $456 million a year earlier. Revenue edged down 1.3% to $13.33 billion."

    The story says that "in the U.S., its largest market, Budweiser and Bud Light continued to lose market share. The company indicated its rivals have done a better job of capitalizing on a shift to hard seltzers. The fizzy alcoholic drinks are booming in the U.S."

    Published on: February 27, 2020

    One MNB reader wanted to weigh in on the subject of libraries, their role in communities, the sustainability of their business model, and the elimination of late fees:

    As a child growing up in the 70s & 80s with 2 librarians as parents and very limited financial resources for our family of 5, we spent a lot of time in libraries and thinking about them.  I remember not understanding why my parents’ careers were not worth as much as other kids’ parents, which was also tied into hearing many discussions between my parents as they discussed how hard it was to get resources for salary increases/new acquisitions/materials/technology/etc. let alone think of any kind of facility expansion despite the obvious need.

    As I remember, it wasn’t that long ago that libraries were always first on the chopping block when cities or institutions had to balance the budget – service hours to cut, staff hours/positions reduced, no new materials AT ALL, full scale branch closure and on.  In fact, I remember my mother telling me that she started to cry as she left what was then the recently opened Seattle Public Library because she did not believe there was a world where any leader would provide the funds to build a new library from scratch, and certainly not one that people would want to spend an entire day in (as I did 5 years later).

    Libraries have evolved wholeheartedly from the institutions many of us may remember as kids, as they grew tired of always being forced to beg for funding and knew they had to make themselves an integral part of their communities – which your other commenter clearly recognized.  I also just cannot believe that any library or librarian would be so bold as to believe they have an unassailable business model (they would probably cringe at the idea of being a business model in the first place) – they know better having been through the huge sea changes already.

    As for waiving fees – if they can, then great, but if they need that small amount of revenue generated by them, then maybe figure out a way to keep them.  What do we learn by borrowing something and not wondering if anybody else needs it?



    Regarding Walmart's decision to bring together the merchandising teams from its online and bricks-and-mortar businesses, one MNB reader wrote:

    Walmart tried this about 3 years ago and it didn’t work.  It appears they went back to the drawing board and are taking it with a little more caution.  They will need to make the roles more clearly defined as it will be very difficult for one buyer to manage the categories, so it will be interesting.  It seems the first step will be the 2 group reporting up to one EVP in each area.  It is a big step.

    The challenges Walmart will face is if they start trying to reduce buyer count, as they have done in other areas of the business.  Right now, people are working at maximum capacity due to the large number of layoffs over the past 3-4 years, which brings greater anxiety.  One really good piece is having Scott McCall as the CMO as he can help reduce that anxiety due to his personality and leadership.

    One thing for certain at Walmart is change.  Not always good and not always bad.



    Yesterday we took note of a CNN story about the efficacy of The Costco Connection, which has a circulation of around 14.3 million copies per edition, making it America's fourth-highest distributed magazine.

    I commented:

    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.

    One MNB reader objected to my "dead tree" phraseology:

    Kevin, That is so cold to all of us who still read on paper!!!!!! But it sure caught my attention.

    Another was not impressed:

    I toss out the Costco magazine as soon as it comes in.  Forced circulation numbers are meaningless.

    Published on: February 27, 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.