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    Published on: March 11, 2020

    Tom Furphy and Kevin Coupe catch up via Skype for this week's Innovation Conversation, in which they chat about how much culpability online retailers have when products are sold via their marketplaces … the organizational realignments being made in Walmart's bricks-and-mortar and e-commerce businesses and what that teaches us about modern retailing … prizing long-term customer value vs. transaction-based retailing … and how sometimes things done years ago can be new again.

    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: March 11, 2020

    Random and illustrative stories about the global pandemic, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  From the Washington Post:

    "The coronavirus outbreak that is quickly spreading throughout the country is forcing major American companies to rethink how they approach paid sick leave. More than 30 million U.S. workers — many of them low-wage service employees at restaurants, stores and airports — lack access to sick pay, raising fears that the epidemic could escalate if symptomatic workers do not feel that they can afford to take time off."

    As the Trump administration works with Congress to formulate an economic package that will address these issues, "companies such as Walmart, Uber and Apple are among those announcing new policies that they say are designed to keep employees and customers safe from the coronavirus."

    Some of the companies cited in the Post story:

    - "Retail giant Walmart said Tuesday that it will not penalize workers who call in sick after an employee at a Kentucky store tested positive for the coronavirus. Employees who are diagnosed with covid-19 or placed in quarantine will receive up to two weeks of pay and will not be asked to dip into their paid leave during that time, the company said … If they’re not able to return to work after that time, additional pay replacement may be provided for up to 26 weeks for both full-time and part-time hourly associates."

    - "The parent company of Olive Garden and Eddie V’s said Monday that it would begin offering up to 40 hours of paid sick leave annually to all hourly employees, making it one of the only major restaurant chains to do so. Executives said they had been considering the benefit for a while, but sped up the timeline because of the growing threat of the coronavirus."

    - "Ride-hailing companies Uber and Lyft were among the first to announce coronavirus-related sick pay for affected drivers, who are technically independent contractors and have not previously qualified for paid leave or benefits. Uber this weekend said it will provide 14 days of sick pay for any drivers or delivery workers who are sick with the coronavirus or are required to be isolated, though it did not offer details on how it could calculate that pay."

    - "Apple this week said it will begin providing unlimited paid leave to hourly employees, including those at its retail stores, who become sick with cold or flu symptoms similar to covid-19. The company is also urging corporate employees to work from home, and said it has 'increased cleaning protocols' at its stores."

    "App-based grocery delivery service Instacart said it would offer up to 14 days of paid leave for any employee or contractor diagnosed with covid-19 or under mandatory quarantine by public health authorities. The company has more than 200,000 shoppers around the country, the vast majority of them independent contractors, who do not qualify for other types of paid sick leave … The company said it will also begin offering sick pay to its in-store shoppers — a small segment of its workforce that picks groceries but does not deliver them. Those workers, the company said, can earn one hour of sick pay for every 30 hours they work."

    A lot of businesses may find themselves short of employees at a time when they already were facing a hiring crunch.  Which means that some of them - the smart ones - may have to start making dramatic enhancements to employee benefits packages if they are to remain viable and employers of choice.

    •  The Seattle Times reports that Washington State Governor Jay Inslee announced that the state will restrict gatherings - including meetings, concerts, and sporting events - of more than 250 people as a way of slowing the spread of the COVID-19 coronavirus.

    The move is not expected to close the public schools, at least for now, though "many school districts have already begun canceling trips, assemblies and other large-scale events in an attempt to prevent exposure and spread of the virus."

    The Times writes that "initially the prohibition would be imposed only in Snohomish, King and Pierce counties, according to The Herald of Everett. The largest concentrations of confirmed coronavirus cases are in King and Snohomish counties."

    •  Reuters reports that Amazon "has extended its work-from-home advisory to include employees in New York and New Jersey, the company said Monday … Its remote work recommendation for employees able to do so includes its Seattle headquarters, the San Francisco Bay Area and greater Milan, Italy through the end of March, the company said."

    •  The annual Hall of Flowers B2B cannabis trade show - scheduled to take place in Southern California this year for the first time - has been postponed.

    Scheduled for April 1-2, Hall of Flowers organizers said the decision was guided by recommendations from state and county public health officials.

    "Looking ahead, retail and attendee registration will roll over to the next Hall of Flowers," organizer said.  "For our Brand partners, all contracts will also carry over to the next event.

    "We want to assure you that we are already developing our contingency plan to reschedule this postponement and will announce the dates as soon as they are secured."

    •  CNBC reports that Apple has reopened 38 of its 42 stores in China that were closed last month because of the coronavirus outbreak there.

    According to the story, "Three stores in Tianjin, a major city in northwest China, and a retail location in Suzhou, a city west of Shanghai, remain closed."

    Some of the reopened stores are operating with limited hours.

    More than 3,000 people in China have died from the COVID-19 coronavirus.

    CNBC writes that "China is a critical market for Apple. The iPhone-maker warned that it would not meet the already wider-than-usual revenue guidance it gave for the March quarter of $63 billion to $67 billion … It’s unclear how badly supply has been hit so far. Foxconn, Apple’s partner in China which makes the iPhone, was forced to shut down its factories at the height of the outbreak. Just last week, the tech giant told investors that it had already returned to 50% of 'seasonal required capacity' and expects to be back to full capacity by the end of the month."

    We can only hope that this is a harbinger of some good news going forward.

    •  Advertising Age reports that "the coronavirus continues to alter daily work life, with a multitude of companies taking major steps to prepare for worst-case scenarios.

    "Coca-Cola is asking all of its employees at its Atlanta headquarters to work from home today so that it can 'conduct a large-scale preparedness drill,' a spokeswoman told Ad Age. 'This is simply a drill to evaluate our business continuity plans and ensure that we would be able to operate effectively if we should ever need to close our offices at any time in the future.'

    In addition, Hershey Co. is “discouraging participation in large group meetings internally and externally until further notice,” according to a spokesman. And plenty of companies are tightening their travel policies. Ford, for instance, has restricted all travel, both foreign and domestic, until April 17.

    "General Mills has restricted all business travel to Italy, mainland China, South Korea and Iran. It says any other travel should be limited to business essential work, and when possible, meetings should be virtual or postponed. Fiat Chrysler Automobiles 'has instructed its employees that travel should be pre-approved by a member of the leadership team including both domestic and international trips,' according to a spokeswoman."

    •  The Seattle Times reports that "Amazon executives approved a $5 million fund to support small businesses around its Seattle headquarters struggling with a dramatic slowdown since the company instructed its employees to work from home if they could."

    The company said that it "will provide cash grants to businesses with fewer than 50 employees or less than $7 million in annual revenue that serve the public, rely on foot traffic, and have a physical presence 'within a few blocks of our Regrade and South Lake Union office buildings'."

    At the same time, "Amazon pledged $1 million, joining Microsoft and other corporations, in establishing a fund with the Seattle Foundation aimed at softening the economic blow on people without health insurance or sick leave, residents with limited English proficiency, communities of color, and health care and gig economy workers."

    Good for Amazon.  The number of small businesses, especially restaurants, that have opened in the South Lake Union area to serve Amazon and other tech companies is enormous, and I can only imagine the pain they are feeling now.  

    •  Among the colleges and universities that reportedly have cancelled some or all in-person classes, moving lectures online, because of the coronavirus pandemic:

    Harvard University, Princeton University, Columbia University, Yale University, Stanford University, UC Berkeley, UC San Diego, UC Santa Cruz, University of Southern California, University of San Francisco, San Jose State University, Santa Clara University, Palo Alto University, University of Washington, Seattle University, Seattle Pacific University, Northeastern University Seattle Campus, Bellevue College, Bellingham Technical College, Cascadia College, Everett Community College, Lake Washington Institute of Technology, Pacific Lutheran, University of Puget Sound, Washington State University Everett, New York University, Fordham University, Hofstra University, the Massachusetts Institute of Technology, Amherst College, Syracuse University, American University, Rutgers University, Skidmore College, St. John’s University, The New School, Touro College, Yeshiva University, Monmouth University, Rowan University, Stevens Institute of Technology, Sacred Heart University, the University of New Haven, Rice University, Duke University, University of Florida, Vanderbilt University, Johns Hopkins University, University of Maryland in Baltimore County, Loyola University of Maryland, Stevenson University, Towson University, Ohio State University, Grinnell College, Midland University of Nebraska, and Trinity College (in Dublin, Ireland).

    •  From the Sacramento Bee:

    "A prominent Northern California mega-church whose members believe their prayers heal the sick and raise the dead is advising the faithful to wash their hands, urging those who feel sick to stay home, canceling missionary trips and advising its faith healers to stay away from local hospitals.

    "Bethel Church leaders say they’re in close contact with local health officials, but they’re not yet canceling services for the 6,300 people who attend services each week in Redding, one of the largest regular gatherings in far Northern California."

    Really?  Because you'd think that battling a little coronavirus wouldn't be such a big deal for a sect that believes it can raise the dead.  It's enough to shake my faith in their belief.

    Published on: March 11, 2020

    The St. Louis Post Dispatch reports that drugstore chain CVS is going to acquire 110 in-store pharmacies operated by Schnuck Markets, and will rebrand and operate 99 of them.

    Eleven in-store and specialty Schnuck pharmacies are slated to be closed, with prescription files transferred to local CVS locations.

    Terms of the deal were not disclosed.

    While Walgreen is the dominant drugstore chain in the region, the Post Dispatch notes that this deal gooses CVS's local presence, as well as builds on a growth strategy conceived more than five years ago.

    "In 2015, CVS Health Corp. bought Target’s 1,672 pharmacies and clinic businesses for about $1.9 billion to operate as a store-within-a-store format. There are six CVS pharmacies in local Targets — on Hampton Avenue in south St. Louis, on Rusty Road in south St. Louis County, and in Brentwood, Kirkwood, Belleville and Fairview Heights."

    In a statement, chairman/CEO Todd Schnuck said, “As Schnucks continues to expand our emphasis on health and wellness, this collaboration with CVS is an opportunity for us to align with a company that has a similar focus.  This partnership allows us to continue to provide quality pharmacy services to our customers in a manner they’ve come to expect, while supporting our mission to nourish people’s lives."

    KC's View:

    It is interesting to watch how CVS and Walgreen - to varying degrees and with different approaches - are working with other retailers to grow their footprint.  For CVS, it is deals like the ones with Target and Schnuck that probably will make those pharmacies less of a drain on resources on those retailers.  For Walgreen, it is deals like the one it has with Kroger that turns its drugstores into pickup points for people who order from Kroger';s website, as well as creating small Kroger food sections inside its drugstores.

    Which makes me wonder if Schnuck could work a deal with CVS that would allow it to create curated food sections inside area CVS stores.  It could make a lot of sense.

    Published on: March 11, 2020

    The Boston Globe has this assessment of some local Amazon-owned Whole Foods stores:

    "The lettuce is wilted. Parsley, dead. Broccoli florets fading to yellow. Something gray and fuzzy is going on in the middle of a container of strawberries. Staff carts filling online orders are clogging aisles. Watch out! They’re glued to their phones and hardly look up. Rows of shelves are empty … Now, with shoppers stocking up for what might be quarantine regulations because of coronavirus, shelf-stable pantry items are emptying at a quick pace and not getting refilled. But actually, long before virus panic, shelves were restocked very slowly."

    The Globe  goes on:  "Yes, you can still get cellophane noodles and Korean chili paste in just about any market, along with smoked paprika, sriracha, harissa, herbes de Provence, barrel-aged feta, Reggiano Parmigiano, hand-cut pasta, and more. But the shopping experience is deteriorating …"

    The question posed by the Globe is not so much whether the Whole Foods experience has declined since its acquisition by Amazon, but the degree to which it has declined.

    Whole Foods argues the legitimacy of the question:  "Our goal is to ensure that our customers have an exceptional experience and access to the same high quality products, regardless of whether they shop in our stores or online," says a Whole Foods Market spokesperson.  "When products are out of stock for any reason, we work as quickly as possible to find solutions and provide alternative options that meet our unparalleled quality standards … As Whole Foods Market continues to grow, we are working diligently to continue to meet the expectations of our customers, and we rely on their feedback to make sure we are doing so."

    But one customer quotes a B.B. King song:  The thrill is gone.” He tells the Globe, “Everything used to be pristine. It’s not like that now.”

    KC's View:

    I've gotten enough email from MNB readers frustrated with the Whole Foods experience to know that this is not an isolated case.  To be honest, I haven't seen it much at my Whole Foods - there have been some out-of-stocks in recent days, but not much more than that.

    But I do believe that these are criticisms that Amazon and Whole Foods need to take seriously, need to address.  Denial, it seems to me, is not a reasonable option.

    Published on: March 11, 2020

    In Minnesota, the Star Tribune reports that Hy-Vee will close all of its four online fulfillment centers - in Eagan, Des Moines, Omaha and Kansas City, Mo.

    Online orders now will be picked up in Hy-Vee stores.

    "Our customers want a full assortment of products, personalized shoppers and same-day pick up at the store, which we are unable to fully provide when we process orders at a fulfillment center," Hy-Vee spokeswoman Christina Gayman said in a prepared statement.

    Some context from the Star Tribune:  "Hy-Vee's online ordering system called Aisles Online was launched in 2015. The Eagan, Omaha and Kansas City centers opened last year. The Eagan facility was about 90,000 square feet.

    "About a year ago, Hy-Vee dropped plans for a distribution center in Austin, Minn., to focus on online ordering. Consumers can also use delivery services from Instacart and Shipt for Hy-Vee orders."

    KC's View:

    Interesting - and perhaps counterintuitive - move at a time when so many companies are opening micro-fulfillment centers and dark stores, believing that store-pick becomes both a distraction and an impediment to actual consumers shopping the stores.

    Published on: March 11, 2020

    Fox News reports that McDonald's iconic Big Mac - two all-beef patties, special sauce, lettuce, cheese, pickles, onions, on a sesame seed bun - will now be available as a Double Big Mac - four all-beef patties, special sauce, lettuce, cheese, pickles, onions, on a sesame seed bun.

    And, the story says, it also will be offered as a Little Mac - one all-beef patty, special sauce, lettuce, cheese, pickles, onions, on a sesame seed bun.

    The new options were developed - and will be available nationwide for a limited time - to give fans “new ways to enjoy the burger they love,” said Linda VanGosen, vice president of menu innovation, in a press release.

    KC's View:

    Over the years, I've been pretty critical of McDonald's and its food.  And I must admit that it probably has been decades since I've had a Big Mac, which was a go-to when I was young,.

    So I can't really explain it, but I suddenly have a hankering for the Double Big Mac.  

    And I can't get that jingle out of my mind…

    Published on: March 11, 2020

    Good piece in Fast Company building on a story we had earlier this week on MNB about how Amazon now will license out its Amazon Go checkout-free technology to other retailers, and asking a series of questions that it believes should be relevant both to competitors and shoppers.

    "If Just Walk Out takes off," Fast Company writes, "it could upend the entire brick-and-mortar retail system even without shifting ever-greater amounts of shopping online. Yet in announcing the new program, Amazon has chosen not to discuss many fundamental issues, such as how it’ll affect jobs and what it will do with all the data it collects. The company declined to answer most questions for this story, instead referring to a brief question-and-answer section on its website."

    You can see the questions and answers here.


    Published on: March 11, 2020

    Nielsen is out with a report saying that "now that 44% of American households are actively buying food both on- and offline, the industry needs to focus more on the consumer and less on the physical channel …  at the end of 2019, more than 54 million U.S. households had transitioned to true omnichannel shoppers. That’s up 14% from just two years earlier, and it means that it’s time to put the consumer - not the channel - at the center of the equation."

    Indeed, the report notes that a study produced by Nielsen and FMI "forecasts that 74.7 million U.S. households will be omnichannel shoppers by 2025. And between now and then, each additional million omnichannel households will add another $8.4 billion in sales."

    KC's View:

    The report reiterates something we say around there a lot - that "the evolution of fulfillment and auto-replenishment infrastructures will be primary growth drivers toward 2025."

    Retailers that don't think about consumers first and operations second, and that don't look to address the auto-replenishment opportunity (that Amazon has exploited so cannily with Subscribe & Save), may find themselves in a competitively untenable position.

    Published on: March 11, 2020

    •  The Spoon reports that InFarm "is bringing its in-store vertical farming systems" to Empire-owned stores across Canada, including Sobeys, Thrifty Foods, and Safeway Canada.

    The story says that "the partnership will launch this coming spring and put InFarms’s high-tech farm pods in stores across that country … With InFarm, that means growing those leafy greens and herbs inside the produce section of stores. The company’s indoor farms come in the form of enclosed pods that use the hydroponic grow method, meaning plant roots are submerged in a nutrient-enriched water supply and no soil is involved. Cloud-based software controls the temperature, watering schedule, and light and humidity levels of the farms, adjusting those elements based on plant type."

    Among the benefits of the system, the story says, are the fact that "zero pesticides are used in the grow process, and greens can be harvested onsite, reducing carbon emissions since food doesn’t have to be transported to the store from a distribution center."

    •  CNBC  writes that "Taco Bell will convert three of its traditional restaurants into Cantinas this year as part of a test to see if suburban consumers enjoy the more upscale locations as much as urbanites.

    "The Yum Brands chain opened its first Cantina in 2015 as a way to appeal to customers who were spending their money on food from fast-casual chains and to build a footprint in urban areas with more expensive real estate. Now, the locations are a key building block in Taco Bell’s goal to become a $20 billion brand, and the chain is continuing to toy with the concept."

    The story notes that Taco Bell "has opened more than 30 Cantinas in the United States. Its Las Vegas Cantina, which also serves as a wedding chapel for devoted fans, is the chain’s busiest location in the world. Taco Bell plans to open a Cantina in Times Square by this fall. The chain did not share which suburbs will convert traditional locations to Cantinas in the test."

    Published on: March 11, 2020

    A note from MNB reader Monte Stowell:

    My wife sent me out to buy 2-3 packages each of hand sanitizer bottles and 2-3 packages of wipes for each of our cars. After spending an entire morning going to Costco, Fred Meyer, Safeway, Target, Walmart, etc., my hunt ended up with nothing. It is laughable that retailers are putting limits of 4-5 each of the aforementioned items.  You cannot buy those amounts when there is literally zero product on the shelf. The average case pack has 8-12 units, and the stores are lucky if they get a couple of loads a week, thus it is a true treasure hunt to find these high demand items. Also, the demand for bath tissue reminds me of the so called TP shortage in 1973 when Johnny Carson made a remark about there being a TP shortage. There is no shortage of this item when the consumer demand exceeds the ability of the manufacturer to supply.  When there is hoarding by the consumer, it takes a long time for the supply chain to get back into normalcy of having these sanitizers and TP back on the shelf. In the meantime, happy hunting.

    Regarding how some movie theatres are trying to compete in a streaming world, one MNB reader wrote:

    Every time I have gone to a movie over the past year, I find myself amazed at the poor customer service for food and beverage.  The limited number of lines are 6-8 people deep and the act of scooping popcorn or pouring a soft drink take a shocking amount of time.  The movie is going to play regardless of whether the audience is 5 people or 100 people.  The ability to more effectively serve at the counter is the path to improved profit, especially at the ridiculous prices charged.  The first theater to figure this out has a real opportunity to appropriately differentiate.