business news in context, analysis with attitude

Published on: March 2, 2020

by Kevin Coupe

I like smart, funny advertising.  I especially like it when smart, funny advertising is just a little subversive.

One of the last ones that appealed to me this way was one engineered by actor Ryan Reynolds late last year for his Aviation Gin brand - he used an actress who had been part of a controversial Peleton campaign and quickly put her in a gin ad that wasn't just smart, but also quick - which meant that it got a lot of attention.

Which is sort of the point for an ad.

Reynolds' newest Aviation Gin ad features an actual person, Arlene Manko, who over the weekend celebrated her 84th birthday.  Except that, because she was born on Leap Day - February 29 - Saturday actually was her 21st birthday.  Which meant, for the purposes of the ad, she'd finally achieved legal drinking age.  (And made her "first" drink - you guessed it - Aviation Gin.  Natch.)

"I had seven kids in 10 years, did you think sometimes I didn't want a drink," she says.

I think the ad is funny, wise and memorable - an Eye-Opener.  And a great way to start off a week in which pandemics and politics - not necessarily in that order - probably will be top of mind.  (New rule of thumb:  Ryan Reynolds makes most things better.)

Enjoy.

Published on: March 2, 2020

From this morning's Wall Street Journal:

"Gourmet grocers are losing their edge as natural foods become mainstream.

Supermarket chains and discounters are selling more fresh, natural and organic foods at lower prices, drawing shoppers who used to seek out those products at specialty grocers. Kroger Co. has said it is now one of the nation’s largest sellers of organic produce, meat and other goods, while discounters Aldi and Lidl are adding more fresh food and opening more U.S. stores.

"Meanwhile, Whole Foods Market has cut prices on hundreds of items including organic produce since Amazon.com Inc. acquired the company three years ago … As a result, specialty grocers are having a hard time convincing customers to pay a premium to shop in their stores. And without the revenue and reach of bigger chains, they have also been hesitant to match price cuts or to invest in new services like delivery."

The Journal lists the companies negatively affected by the market shifts - Earth Fare, Lucky’s Market and Fairway Market (each of which has filed for bankruptcy recently), and companies such as New Seasons Market and Sprouts that have seen what used to be a differentiated product mix commoditized by larger, better capitalized competitors.

Published on: March 2, 2020

CNBC reports that Walmart has named Jamie Iannone to be its new COO for US e-commerce, reporting to both Marc Lore, CEO of Walmart’s US e-commerce business and founder of jet.com, and  John Furner, CEO of Walmart US.

Iannone  most recently was CEO of Walmart's SamsClub.com business, as well as EVP, membership and technology.

CNBC writes that Iannone "is switching roles as Walmart seeks to grow its acquired and incubated digital brands and turn e-commerce into a profitable business. Its e-commerce business has largely been fueled by online grocery orders, but it’s looking to build upon that momentum with expanded sales of apparel and other general merchandise."

Published on: March 2, 2020

The Wall Street Journal this morning features a fascinating debate about the issue of whether Amazon should be held responsible for the sale of dangerous and/or counterfeit products on its site.  The Journal offers both perspectives:  "Edward Janger, a professor at Brooklyn Law School, argues that under bricks-and-mortar legal precedents, Amazon should be held liable for unsafe third-party products. Eric Goldman, a professor at Santa Clara University School of Law, argues that it isn’t feasible to apply such precedents to Amazon."

Here's how the arguments break down…

From Janger:

"Amazon has denied liability, claiming that it is not a seller of the products purchased on its site from third-party merchants. It maintains that it in those cases it is neither a retailer nor a merchant warrantor, just an information conduit and immune as an internet-services provider. With two notable recent exceptions, courts have gone along, absolving Amazon of liability.

"The courts that have ruled for Amazon are wrong, and wrong in historic fashion.

"For the past seven decades, an unchallenged principle of American tort law has been that anybody in the distribution chain of a product - the manufacturer, the distributor or the retailer - should be held responsible for personal injury or property damage caused by a product defect … Amazon is the latest in a long line of merchants that have sought to structure their businesses to place themselves beyond the reach of tort liability. Their position is clear: a formal lack of ownership of the products sold means they should not be held responsible for harm caused by potentially dangerous defective products.

"In our opinion, Amazon’s leverage over its relationships with its suppliers and its approach to customers render this claim untenable."

From Goldman:

"Unlike many other retailers, Amazon lets merchants decide what goods to sell, and Amazon doesn’t always take physical possession of those goods. Thus, Amazon cannot easily inspect or test those goods. Even when merchants choose Fulfillment by Amazon (where Amazon warehouses and ships the physical items), the volume and diversity of merchant offerings makes inspection and testing functionally impossible … And if Amazon were required to vet every product or merchant, it might decide to take a drastic step - shutting down its marketplace and converting into a traditional retailer for everything it sells."

He goes on:  "Amazon already acts as a retailer for many items, so it could move some merchant-supplied items into its retailing mix and cut the rest. But it would devastate the site’s merchant community. And other merchant sites like eBay couldn’t easily make that switch and would be at a competitive disadvantage, exacerbating Amazon’s leverage over the retail market … There are good reasons to be nervous about holding Amazon legally responsible. Imposing liability for unsafe products almost certainly will keep many completely legitimate and safe items from reaching consumers and accelerate industry consolidation."

Good debate.  Check it out here.

Published on: March 2, 2020

The New Yorker has an article worth looking at - a graphic nonfiction piece suggesting that even as China serves as ground zero for the coronavirus pandemic. something interesting is happening there.

"As more than seven hundred and fifty million people are under some sort of travel restriction," the piece says, "Xiachufang has become a kind of LiveJournal.  The kitchen has become a place of solace … The question "What and how do you cook under quarantine" is being answered from millions of isolated dorm rooms, apartments, and houses across the country and a new cuisine, with its own rules, norms and tastes, is emerging."

People are finding, under difficult circumstances, that cooking at home with limited resources actually is "rebuilding that lost social connection with what's at hand and what's possible."

You can read it here.

Published on: March 2, 2020

Joseph Coulombe, who in 1967 invented a retail phenomenon called Trader Joe's that started as one store in Pasadena, California, and now has more than 500 around the US, has passed away.  He was 89.

Coulombe famously looked at the retail landscape of the late sixties and decided that in order to compete, he had to do something different;  he believed that there was a demographic in the country that had more education than money, and that he could appeal to an increasing globalism of outlook that would make them more interested in specialty foods and wines that they couldn't get elsewhere.

Los Angeles Magazine  described Trader Joe's as having “grafted the gourmet store onto the convenience store onto the health food store onto the liquor store."

Coulombe sold Trader Joe's to Germany-based Aldi Nord in 1979, though he remained as CEO until being succeeded by John V. Shields Jr., who gave Trader Joe's a national footprint.

But some thing never changed.  Coulombe told the Los Angeles Times in 2011 that he envisioned the stores being “for overeducated and underpaid people, for all the classical musicians, museum curators, journalists."

Published on: March 2, 2020

I got a number of emails over the weekend from MNB readers who wanted to draw my attention to a New York Times interview with Laurene Powell Jobs - Steve Jobs' widow, the 35th-richest person in the world with a net worth of some $27.5 billion, and a person who, in the words of the Times, has become "increasingly ambitious with her business and philanthropy" - in the paper's weekly "Corner Office" column.  It was, they told me, worth reading.

In the past few years, the story says, Jobs has "acquired Pop-Up Magazine and major stakes in the Atlantic magazine and in Monumental Sports, which owns the Washington Wizards and Mystics basketball teams and the Washington Capitals hockey team. She is working with the former education secretary Arne Duncan to reduce gun violence in Chicago. At the Sundance Film Festival this year, a new documentary studio backed by Ms. Powell Jobs made a splash.

"It’s a diverse set of concerns, and reflects her belief that issues like poverty, education, personal health and environmental justice are all interconnected."

It is an interesting profile of a business person:  "In an era of tweets, she speaks in long, discursive paragraphs that weave together personal narrative, politics and her views on social change. She invokes Dante, Ralph Waldo Emerson and Ross Perot without irony. Her ideas are nuanced, and she doesn’t pretend to have easy solutions to complex problems."

I agree with the MNB readers who sent me the interview.  It is worth reading, and you can check it out here.

Published on: March 2, 2020

•  Just days after it was reported that Walmart is launching Walmart+, an attempt to mimic Amazon's highly successful Prime program, food delivery service Grubhub is planning to offer its own version.  The name:  Grubhub+.

Motley Fool reports that Grubhub is hoping that the program "will keep its 'promiscuous' customers more chaste and loyal, which in turn will help stop the decline in its market share."  Grubhub+ is described as a "monthly subscription program, which is similar to Amazon's Prime service in that members will enjoy free, unlimited food delivery from partner restaurants for a fee of $9.99 per month … Grubhub is also offering 10% cash back on every delivery, meaning the service will pay for itself if $100 per month in food is delivered."

Motley Fool suggests that there is a "fatal flaw in the Grubhub+ subscription rationale. People don't care who delivers their food, just that it is delivered quickly. The prospect of paying $10 a month for a service they might not use, depending upon what dining mood strikes them, may not appeal to customers."

Published on: March 2, 2020

•  The Wall Street Journal reports that Walmart and Verizon "are in discussions to outfit the retailer’s stores with antennas and other equipment to create 5G wireless service, a high-profile test of the next-generation networks."

Two stores are said to be in line for a test of the system, which would, if put into place and rolled out, "would be part of an effort inside the country’s largest retailer to remake its roughly 4,700 U.S. stores into hubs that draw shoppers for medical treatment and other services, not just groceries and clothes. Walmart also could use the 5G services to improve cameras alerting staff to shoplifters or scanning shelves for out-of-stock inventory."

Published on: March 2, 2020

•  From the New York Times:

"As the coronavirus spreads and people clamor to protect themselves from getting sick, the United States, like other countries, is seeing high demand for items like masks and hand sanitizer.

"Most health officials and disease specialists say one of the best preventive measures against the coronavirus or any other outbreak is frequent washing of hands, using soap and water to scrub fronts, backs and between fingers for at least 20 seconds.

"If soap and water aren’t available, health professionals say, then hand sanitizer can be used, as long as it contains at least 60 percent alcohol and the gel is squirted onto the hands and rubbed briskly all over them for about 20 seconds.

"In some cases, the demand is outstripping inventory."

The demand issues, the Times says, extend from Walmart to Amazon, CVS to Walgreen, as well as smaller retailers around the country.  KVUE-TV News reports that in Texas, H-E-B posted a notice on its website saying, "To be fair to all customers, we are placing a limit of four on many hand sanitizers, wipes and similar items."

•  The Washington Post reports that "the union representing more than 10,000 Safeway grocery store workers is moving closer to a strike that could disrupt operations at 116 D.C.-area locations, union representatives said Friday, as a disagreement with the company’s private equity-owned management over pensions remains unresolved … To trigger a strike, a majority of Local 400 members would have to reject the company’s offer, and then two-thirds would have to vote to strike. The vote is scheduled for March 5, and a strike could begin the next day."

The Post writes that "the pension dispute at Safeway is in many ways a microcosm of the broader retail industry, where automation, outsourcing and thinning profit margins have weakened the hand of organized labor. Pensions have been phased out across the business world as financial managers favor employee-managed 401(k) plans that entail fewer long-term liabilities for managers."

In addition, the story says, increased competition - from Amazon, discounters such as Lidl and Aldi - and private equity ownership that prizes efficiency over effectiveness also have contributed to what the unions perceive as a climate hostile to store employees.

•  While New York State's single-use plastic bag ban was scheduled to go into effect yesterday, regulators there have agreed to delay enforcement until April 1, pending the result of a lawsuit filed on Friday.

The Wall Street Journal reports that "at a court hearing, a lawyer representing the state’s Department of Environmental Conservation agreed not to levy any fines related to the ban, according to a court order.

"A plastic-bag manufacturer and an association of New York City bodega owners sued the DEC, saying regulations about exactly which types of bags were banned were inconsistent with the law adopted last year."

The Journal writes that "the ban applies to all retailers who are required to collect sales tax, though exceptions exist, including for prepared food from restaurants and food-delivery companies. Grocery stores and delis can still offer plastic bags for unpackaged produce and prepared foods, but they won’t be available at the checkout line … Some localities, including New York City, passed laws requiring retailers to charge 5 cents for every paper bag a customer uses in an effort to encourage reusable bags or totes. Several grocery chains in the state have said they would also start charging a nickel for each paper bag that is used."

•  The Associated Press has a report on yet another casualty of climate change.

Ice wine.

According to the story, "A warm winter means that, for apparently the first time in the history of German winemaking, the country's fabled vineyards will produce no ice wine — a pricey, golden nectar made from grapes that have been left to freeze on the vine.

"The German Wine Institute said Sunday that none of the country's wine regions saw the necessary low temperature of minus 7 degrees Celsius, or 19 degrees Fahrenheit."

There are other places where it has been cold enough to make ice wine, the story notes, such as Canada's Niagara Peninsula, northern Michigan and Ashtabula County, Ohio, near Lake Erie.

At least for now.

Published on: March 2, 2020

Breaking news from CNBC:

"Jack Welch, a railroad conductor’s son who became chairman and CEO of General Electric and led it for two decades, growing its market value from $12 billion to $410 billion, has died. He was 84."  The cause was renal failure.

Published on: March 2, 2020

Last week we took note of a CNN report about a new study in the scientific journal Environmental Science & Technology saying that it is more eco-conscious to go to the store than to order online.  Because of how people shop, click-and-collect was seen as more environmentally sensitive than shopping in-store, which is better than ordering online for delivery.

MNB reader Dan Jones wrote:

The CNN report on greenhouse gasses is only looking at part of the equation.

To buy items from Brick and Mortar retail there are additional greenhouse gas considerations beyond the last mile:

• Fuel to move case from warehouse to retail store.

• Fuel for night crew to drive to store and do the job of restocking shelves.

• Cost to keep the store lit and heated at night to welcome customers the next day

These are all incremental to the Amazon experience – and it does not address the other impacts like the size of the store parking lot.

On a separate issue, one MNB reader responded to an observation I made last week:

I too have noticed Amazon cutting back on packaging a little bit. But I am amazed at the over packaging from Target on recent orders. My family has a standing order for paper towel and toilet paper that comes once a month from Target. Every month we get a box roughly 3x the size of each item, shipped separately, and the excess space is filled up with no less than 15 cells of air pillows (and sometimes many more). All for an item that basically could be shipped with no packaging and little risk of damage.

Interesting.

The Amazon shift was really evident yesterday when we got a box full of Subscribe & Save items, which in the past might have come in three or four different shipments.  This time, they pulled it all together.

The next step?  I think that they don't need to deliver Subscribe & Save replenishment items on Sunday;  I didn't need them that badly, and they certainly didn't need to have that USPS truck on the road for me.  Maybe Amazon ought to consider asking shoppers if they need Sunday delivery for our orders … I like that it is available, for over time I've realized that it is a nice convenience but rarely necessary.

Published on: March 2, 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.