business news in context, analysis with attitude

Published on: December 2, 2020

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.

Today, Tom and KC discuss the management and leadership principles advanced in "No Rules Rules: Netflix and the Culture of Reinvention," co-authored by Netflix co-founder Reed Hastings and Erin Meyer.  Among the management innovations that Hastings and Meyer write about are Netflix's culture of removing controls (there are no vacation or expense policies), of dispersing decision-making through the organization, and the importance of having stars (adequate performers, they write, are rewarded with a generous severance check).  The goal, Hastings says, is to lead through context, not control … and Tom and KC analyze how applicable these tenets are to legacy organizations, and the ways in which the book can be used to stimulate conversations in a wide variety of companies.

And … they also chat a bit about the late Tony Hsieh, who brought his own unconventional approach to leadership and employee empowerment to Zappos.

"No Rules Rules: Netflix and the Culture of Reinvention," by Reed Hastings and Erin Meyer, is available on Amazon, from the iconic independent bookstore Powell's, and at your local bookseller.

Published on: December 2, 2020

by Michael Sansolo

It’s an accepted piece of business wisdom that the cost of attracting a new customer is at least five times the cost of retaining a loyal one. Yet, it’s a rule that seems to get broken endlessly.

My incredibly practical wife of 37 years ran into this in a sad way recently and for once, I’m not to blame. For four decades she has had a membership in the Automobile Club of America (AAA) even though we’ve likely used it less than 10 times - total.  Nonetheless, it gives us peace of mind and through the years, we’ve extended that membership to our children.

This past weekend she was shocked to discover on-line that AAA has an offer for family memberships that is substantially lower than what we have been paying. So she called them to ask why.

It won’t surprise you to hear that the reduced rate is an introductory package for new members only. Indignant, she asked why such a discount wasn’t offered to loyal customers like her. Of course, she was told, AAA couldn’t do that, though her question was immediately answered with a one-year discount.

But again she was indignant. Why, she asked the salesperson, did a loyal customer need to complain to find out about a rate that was lower? There was no answer to that. (In the course of this call, we did a quick Google search on automotive services similar to AAA and found there are now millions of competitors. My wife reminded them of this as well.)

Sadly, this isn’t a unique situation. Introductory rates are common on cellphone and cable plans, just as they were in the past on magazine subscriptions.  And even though this is common knowledge, marketers rarely, if ever, seem to address it.  (In one episode of “Friends,” Chandler revealed the female name he was then using to continue to get an introductory rate for TV Guide. Clearly the strategy was hardly a secret.)

Happily, this isn’t a problem in most retail sectors, especially food. If there are any targeted specials they usually aim at regular shoppers who sign up for loyalty cards or apps. But it’s a lesson that should be considered regularly and the question needs constant consideration:

How are we treating out best customers better?

Through the years I’ve heard many facets of this discussed, ranging from whether temporary price cuts reward cherry pickers over loyal shoppers or even whether express checkouts should be set aside for large, profitable orders, rather than the smallest orders.  (MNB had an item on Tuesday about how Meijer rewarded curbside - and existing - customers with special gifts and discounts.)

The entire question needs consideration in a new light given the growing power of database marketing and suggestive selling. Today’s apps are far more flexible and personal than the loyalty cards of just a few years back, which should make it easier than ever to identify and reward loyal customers with specials or even information that enhances the shopping trip.

Hopefully, the industry will use that information wisely to enhance (and not annoy) our best shoppers. But while we do that, let’s keep in mind the lessons of cable, cell phone and automobile services and remember that because loyalty is so hard to earn it need be nurtured and respected.

The flipside is that like AAA you could earn a D from your loyal customers, which isn’t good for anyone.

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com.

His book, “THE BIG PICTURE:  Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available here.

And, his book "Business Rules!" is available from Amazon here.

Published on: December 2, 2020

The Washington Post offers this assessment of the Thanksgiving weekend and how consumer purchasing figures are not heartening for a robust holiday season in the nation's stores.

"Fewer Americans shopped during Black Friday weekend, and those who did spent less than they did a year ago," the Post writes.  "It’s the latest example of how the pandemic has upended consumer habits and created new challenges for retailers.

"Roughly 186 million shoppers purchased something online or in-store from Thanksgiving through Cyber Monday, down from 190 million a year ago, the National Retail Federation said Tuesday. Shoppers spent an average of $312, a 14 percent drop from $362 in 2019."

Indeed, the spreading out of holiday sales, with many companies beginning them as early as October, almost certainly contributed to the weekend's slowdown:  "In-store shopping fell 55 percent on Thanksgiving and 37 percent on Black Friday, compared with a year ago."

And, though "e-commerce sales notched new highs, online sales growth was not as pronounced as analysts had expected. Americans spent a record $10.8 billion online on Cyber Monday, up 15 percent from last year, making it the largest online shopping day in U.S. history, according to Adobe Analytics. The group, which tracks online sales at 80 of the nation’s 100 largest retailers, had forecast growth between 15 and 35 percent."

"It’s going to be a tough holiday season for most retailers,” Paula Rosenblum, managing partner at RSR Research, tells the Post, adding, "This is a very bifurcated recovery.  The savings rate is high, but evictions are back on the table and there’s no stimulus money on the horizon. For many people, this is not going to be a pretty Christmas."

Published on: December 2, 2020

Fast Company reports that Amazon is saying that the 2020 holiday season has been "our biggest yet," disclosing that "between Black Friday and Cyber Monday, small- and medium-size independent businesses selling on Amazon’s platform had over $4.8 billion in worldwide sales—a 60% increase from last year."

Of course, when Amazon talks about its 2020 holiday season, it is talking in broader terms than in years past - this year, the story says, Amazon says that the holiday shopping season actually began in October, right after the Prime Day promotion.

"Over 71,000 small- and medium-size independent businesses selling on Amazon’s platform have made over $100,000 since Amazon’s holiday season began in October," the story says, and "those small- and medium-size businesses have sold, on average, 9,500 products per minute during Amazon’s holiday season to date."

Fast Company has this additional note about the holiday weekend:

"Amazon may be the largest e-commerce company in terms of market share, but it was edged out by Walmart for first-time app downloads on Black Friday. Amazon saw 106,000 installs on November 27 versus Walmart’s 131,000, Sensor Tower reports."

This is, the story says, "a small but notable feather in Walmart’s cap as it seeks to gain ground against its digital-native rival in a world where consumers are growing accustomed to life without physical stores."

But … the story says this isn't just about the pandemic:  "This is the second year in a row that it bested Amazon in downloads on Black Friday. And a report from eMarketer in March already forecast that Walmart would pull ahead of eBay this year to become the No. 2 e-commerce company in terms of U.S. market share."

Published on: December 2, 2020

The Los Angeles Times has a piece about how Nasdaq is considering a new proposal that would mandate that any companies listed on its exchange have at least two board members reflecting a sense of diversity.  The rule, if adopted, would require companies to have at least one woman as a board member, and one who is either a minority or a member of the LGBTQ community.

And if companies cannot meet that mandate, they would be delisted from the exchange.

In its proposal, the Times writes, "Nasdaq observed that most large institutional investors have been pressuring corporate managements for more diverse boards … In its rule proposal, Nasdaq cited academic studies finding that gender-diverse boards are associated with lower likelihood of manipulated earnings or other corporate wrongdoing, including securities fraud."

The Times continues, "Goldman Sachs, one of the leading underwriters of corporate stock offerings, said in January that it won't take a company public unless it has at least one woman or minority director. By 2021, the minimum will be two directors.

"And California has imposed mandatory diversity standards on companies headquartered within its borders. The state has required public companies based in the state to have at least one woman director as of the end of last year and as many as three by the end of 2021."

The story goes on to point out that "a study published in September by the proxy advisory firm Institutional Shareholder Services found that progress in adding minority directors to the boards of Standard & Poor's 500 companies was 'glacial' relative to progress in adding women directors. 

"Women accounted for 27.4% of all S&P 500 company directors, ISS found, an increase of more than nine percentage points since 2015. But only 16.8% of directors were from unrepresented racial or ethnic backgrounds, a gain of only 3.2 percentage points over the same period."

The Times points out that there are some very prominent companies where straight white men are in the minority on their boards, including Apple, Microsoft, Alphabet (the parent of Google) and Facebook.

Any change in Nasdaq's rules would have to be approved by the US Securities and Exchange Commission (SEC), and the Times suggests that because the proposal is unlikely to get on the SEC's agenda until after the Biden administration takes office, it is likely to get a friendly hearing.

Published on: December 2, 2020

Marketing Daily has a report about a new study from Burke Inc. and Seed Strategy that breaks down the population "into eight distinct segments with different attitudes and purchasing patterns" influenced by the pandemic.  They are:

• "The Wayfinders (Concerned youth who fear missing out on what they want their life to be today and in the future)."

• "The Determined (Young Americans trying to maintain their independence and current lifestyle, despite a setback)."

• "The Isolated (Worried seniors who have reluctantly sheltered in place to protect their health)."

• " The Frazzled (Stressed families struggling to juggle work, childcare, and financial obligations)."

•  "The Enlightened (Secure older adults who use their experience to help others navigate these challenging times)."

• " The Protective (Vulnerable family units staying safe at home due to health concerns)."

• "The Bold (Independent thinkers who want businesses to get back to 'normal' despite the risk)."

• "The Empathetic (Thriving households that feel a serious responsibility to care for both their family and their community)."

Chief Research Officer Jamie Baker-Prewitt tells Marketing Daily, "Despite the occurrence of a sweeping, global, historic health crisis, all American consumers aren’t experiencing it in the same way.  The variations in experiences relate to life circumstances, including household composition, personal health, age, and other factors, as well as individual belief systems and psychographics. 

"Across these segments, perceptions and behaviors are different, and the stickiness of changes during the pandemic will likely vary based on a number of personal and environmental factors.  Some people will find that their new habits have become their new normal.

"For example, online shopping and consumption of entertainment from home might become so routinized that people see no reason to return to their previous ways of living … We expect the existence of these consumer segments to be stable through the pandemic and even beyond, because they have durable elements underpinning them: life circumstances, core beliefs, and psychographics, for example.  We do expect that the size of the segments will shift, and time will tell how many of the pandemic-'induced' behavior changes remain once a vaccine is widely available and societal restrictions subside."

Published on: December 2, 2020

Hy-Vee yesterday announced "the launch of its new Hy-Vee Plus premium membership, which offers customers added savings and exclusive benefits and services across all areas of the store, both in-store and online. The cost of the program is $99 per year.

"The Hy-Vee Plus premium membership will offer exclusive benefits such as select monthly offers and coupons; free Hy-Vee Aisles Online grocery delivery (a $9.95 per order savings); free Hy-Vee Aisles Online two-hour express pick-up (a $9.95 per order savings); a personal concierge service; and more.  Customers currently enrolled in the existing $99 Hy-Vee Aisles Online membership program, which offers customers free grocery delivery, will automatically be upgraded to a Hy-Vee Plus premium membership at no additional cost."

One interesting component of membership:  "Members will have exclusive access to 'Red Line,' a designated telephone number available for premium members only, staffed by a team of Hy-Vee experts and personal shoppers."

Published on: December 2, 2020

CNBC reports that as part of a new 10-year deal, "Sephora will open hundreds of beauty shops inside Kohl’s stores in coming years in a deal that rivals Target’s recent partnership with Ulta Beauty.

"Some 200 Sephora at Kohl’s locations will open by next fall, rising to at least 850 sites by 2023, the companies announced Tuesday. Sephora will also launch on Kohl’s website next year, offering more than 100 beauty brands, some of which are exclusive to Sephora."

According to the story, "The Sephora shops on Kohl’s will be about 2,500 square feet, offering most of the same services found at other Sephora stores, including help with makeup application, and replacing Kohl’s current beauty assortment.

"Kohl’s employees trained by Sephora will staff the locations, which will be positioned near the front of the store and occasionally accessible by a separate entrance, Gass said. The Sephora logo will join Kohl’s outside the stores."

The deal is said to be similar to one made recently between Target and Ulta, reflecting a desire on the part of all these entities to add luster and shopper appeal to bricks-and-mortar locations that may be made endangered by accelerated consumer trends toward e-commerce.

It is, of course, not Sephora's first time at this particular beauty bar.  Sephora made a similar deal with JC Penney more than a dozen years ago, but its presence wasn't enough JC Penney avoid the long and seemingly intractable decline upon which it has been involved.

Published on: December 2, 2020

Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

•  In the United States, there now have been 14,108,606 confirmed cases of the Covid-19 coronavirus, resulting in 276,979 deaths and 8,333,255 reported recoveries.

Globally, there have been 64,208,879 confirmed coronavirus cases, with 1,487,013 fatalities and 44,457,096 reported recoveries.  (Source.)

• Breaking news from the Wall Street Journal this morning:

"The U.K. became the first Western nation to grant emergency-use authorization for a Covid-19 vaccine, clearing a shot developed by Pfizer Inc. of the U.S. and BioNTech SE of Germany to be distributed in limited numbers within days.

"The two-shot vaccine is also being reviewed by the Food and Drug Administration in the U.S., where a similar authorization could come later this month and a rollout before the end of the year.

"The U.K. green light punctuates a monthslong sprint by the two drugmakers, which teamed up earlier this year and then pulled ahead of two other Western pharmaceutical giants, each with its own promising shot. Vaccines typically take years to bring to market."

•  From the Washington Post:

"Americans heard the pleas to stay home. They were told what would happen if they didn’t. Still, millions traveled and gathered during last week’s Thanksgiving holiday, either doubting the warnings or deciding they would take their chances.

"Now, like any partygoer waking from a raucous weekend - feeling a bit hung over and perhaps a tinge of regret - the nation is about to face the consequences of its behavior and will need to quickly apply the lessons before heading into the doubleheader of Christmas and New Year’s.

"Health experts point to several key takeaways: Many states were overwhelmed by unexpected surges in testing — with many families hoping a negative result might make their planned gatherings a little safer. Some airports were not prepared for the huge crowds that had not been seen since the beginning of the pandemic, making it difficult for travelers to maintain social distancing.

"But perhaps the most obvious lesson: Public health messaging needs to be retooled, as whole swaths of the country are simply tuning out the warnings from officials and experts."

•  The Washington Post reports that "the number of coronavirus patients hospitalized nationwide approached 100,000 on Tuesday, pushing doctors and nurses to their breaking point."

And the Wall Street Journal added, "The number of people hospitalized with Covid-19 in the U.S. set yet another record, with patients in the ICU also hitting a fresh high, according to the Covid Tracking Project, as the fall surge continues to strain healthcare systems across the country."

•  The Boston Globe reports that the Center for Disease Control and Prevention (CDC) Advisory Committee on Immunization Practices is recommending that "health care workers and residents of long-term care facilities be the first to receive vaccines for the coronavirus.

According to the story, "There have been at least 243,000 confirmed COVID-19 cases among health care workers, with 858 deaths, according to the CDC. And long-term care facility residents and staff have been decimated by the virus. They account for 6 percent of cases and 40 percent of all coronavirus deaths in the United States.

"The two top-priority groups add up to about 24 million people, officials said. Pfizer and biotech firm Moderna are expected to produce 40 million doses of their two-dose vaccines, or enough for about 20 million people, by the end of the year."

The Wall Street Journal adds, "U.S. health regulators are expected to decide in the coming weeks whether to authorize the emergency use of two Covid-19 vaccines, one from Pfizer Inc. and BioNTech SE and another from Moderna Inc. The companies have been manufacturing doses, but it could take several months to make enough to vaccinate the broader population."

Published on: December 2, 2020

•  From CNBC this morning:

"Walmart said it will drop its online shipping minimum for customers who belong to its membership program, Walmart+.

"Starting Friday, Walmart+ members will get free next-day and two-day shipping — even if they have just one item from the company’s website in their basket. Walmart typically requires customers to spend $35 or more to get free shipping."

•  From the International Business Times:

"Walmart is shaking up its operations with a series of layoffs that will occur in the first part of 2021.  The layoffs will affect 1,241 employees located in Arkansas and New Jersey that will go into effect on Jan. 31, 2021."

The story notes that "Walmart is headquartered in Bentonville, Arkansas, and also has offices in Hoboken, New Jersey, from when it acquired Jet.com in 2014, which was then transitioned under Walmart.com’s organizational structure."

The Times writes that "the news of the omnichannel operations layoffs come as Walmart makes changes to its fulfillment strategy. Last week, the retailer announced that it was preparing for the holiday season by fulfilling orders directly at more than 2,800 stores to ensure there weren’t delays in the shipping process."

Published on: December 2, 2020

•  From CNN:

"Subway is expanding to contactless curbside pick-up.  At participating restaurants, customers can opt in to get their favorite sandwich in a safe way.

"All they have to do is order on the Subway app or website and tell the restaurant once they arrive.  Then their sealed order will be delivered on a tray by a gloved and masked employee."

More than 11,000 Subway restaurants are said to be using the curbside pickup system.

Published on: December 2, 2020

With brief, occasional, italicized and sometimes gratuitous commentary…

•  The Private Label Manufacturers Association (PLMA) said yesterday that its previously announced virtual trade show, created because the pandemic made an in-person show impossible, will be a week long event.

"Over the course of five days, February 1-5, PLMALive! presents Private Label Week will introduce a succession of category-focused online exhibitions featuring leading suppliers of store brand food and nonfood products to American retail chains," the trade association said in a press release, adding, "The digital event will afford visitors located anywhere unparalleled opportunities to discover new products, and then establish live connections with leading suppliers for face-to-face video chat. The platform is open to search for products 24/7."

•  The New York Times  reports that the original Cronut - a croissant-meets-doughnut baked good that got a lot of attention when it was introduced by New York City's Dominique Ansel Bakery more than a half-dozen years ago - now will be available via mail-order for the first time.

According to the story, Dominique Ansel will feature his Cronut "on his website for delivery in the contiguous United States starting Dec. 3 and at least until the end of the year. The flavor of the month will be chestnut milk chocolate, filled with chestnut and milk chocolate ganache."

Forbes writes that Ansel said, “We’ve been working on trying to ship items for a while.  When Covid hit, I felt that the stigma on getting food shipped was erased and people were much more open to it, as well as more understanding of the higher costs that come with overnight shipping."

Does this seem a little late?  I know the Cronut was a huge deal a half-dozen years ago, but it sort of fell off the radar.  Is this about being better at shipping, or trying to inject a little life into a product at the end of its life-cycle?  Just asking…

Published on: December 2, 2020

•  The Kum & Go convenience store chain announced that chairman-CEO Kyle J. Krause will transition out of his roles there and will be succeeded by his son, Tanner Krause, who has been serving as the chain's president.

Kyle Krause will remain as chairman of the parent company, Krause Group.

Published on: December 2, 2020

One MNB reader had a thought about Rite-Aid's new format:

The only good thing is that they are trying something different.  If the majority of your draw is prescriptions, why put that dept. up front and limit exposure to the rest of your store?  Don’t you usually pick up “stuff” on the way to get your script and then pay for it all at the same time? 

Lower shelves and brighter lights are not going to make people shop more.  Lower prices and convenience may though.

Yesterday I had an exchange here with an MNB reader over a comment I made on Monday about how "the sports person of the weekend has to be Sarah Fuller,  the starting goalkeeper for Vanderbilt’s women’s soccer team, who found herself on Saturday kicking off for Vanderbilt's men's football team ."

He wrote:

It seems strange you failed to mention that kickoff went all the way to the 35-yard-line.

I argued that the story was that she played … not the specifics of the one kick Fuller got to make.  (Which the coach said ended up exactly where he told her to place it.)

And, I wrote:

The tenor of your remark suggests that you are not impressed with Fuller's effort.

Which is fine.  You are entitled.  (Which, as I write it, seems to have a double meaning, which also is fine.)  I still admire Fuller.  She did something special.  She set a terrific example.  She promoted the "Play Like A Girl" movement.  And she kicked the ball a helluva lot further and more accurately than I could.

The reader who emailed me the original comment had more to say on the subject:

I have a girlfriend.  I have ex-wives.  I have daughters.  I even had a mother.  But I still feel entitled to think that we should celebrate performance.  If trying and falling flat on your face is enough to qualify, then maybe Kendall Hinton should have been the story of the weekend.

Well … this may explain the ex-wives.