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.
This week, Tom and KC compare and contrast the relative advantages of giant Customer Fulfillment Centers (CFCs), of the type being built by Kroger in partnership with Ocado, with the smaller - and some would say, more manageable and accessible - Micro-fulfillment Centers that a number of retailers have opened and even more are considering.
If you're interested in listening to this Innovation Conversation, you can do so here (or can download this file):
Amazon announced this morning that it is expanding the use of its Amazon One - described as "a fast, convenient, contactless way for people to use their palm to enter, identify, and pay" - to a Whole Foods store in Seattle, with plans to "add Amazon One as an option to seven additional Whole Foods Market stores in the Seattle area over the coming months."
The Amazon One system currently is operating at a number of the company's bricks-and-mortar stores in the Seattle market - three Amazon 4-Star stores, two Amazon Books units, five Amazon Go stores, one Amazon Go Grocery store, and one Amazon Pup-Up store.
According to the announcement, "Customers who are new to using Amazon One can sign up at any Amazon One kiosk or device in participating stores, and enrollment takes less than a minute. After they insert their credit card, customers hover their palm over the device and follow the prompts to associate that card with the unique palm signature being built in real-time for them by our computer vision technology."
Amazon also is offering the technology to other retail businesses, saying on its website that "if you’re a business that wants to provide your customers a seamless service, faster payments, and a personalized experience - contact us to learn more about how Amazon One can help." Amazon says it is "in active discussions with several potential customers."
This approach is consistent with how Amazon also has been licensing out its Amazon Go technology to outside retailers.
The company addresses security concerns by saying that "at Amazon, nothing is more important to us than earning and maintaining customer trust. We take data security and privacy seriously, and any sensitive data is treated in accordance with our long-standing policies. With this in mind, we designed Amazon One to be highly secure. For example, the Amazon One device is protected by multiple security controls, and palm images are never stored on the Amazon One device. Rather, the images are encrypted and sent to a highly secure area we custom-built for Amazon One in the cloud where we create your palm signature."
KC's View:
Pretty much from its inception, a core value at Amazon has been the reduction of friction for the customer … and there are few things that create more friction in the traditional shopping experience than checking out. Together with Amazon Go's Just-Walk-Out technology, this is a major effort at creating an infrastructure that differentiates Amazon from everybody else. Except, of course, the companies to which it chooses to license the technology.
It's interesting to watch how these efforts take shape.
The Seattle Times is reporting that Amazon is opening a salon in London that looks to impose high technology onto the act of getting a haircut.
According to the story, "The salon will include tablets at every chair, a screen to virtually 'try on' hair colors and a station to display information about different products when a customer physically points at them … The salon is only open to employees to start — a traditional Amazon strategy."
Amazon reportedly is teaming with a local stylist to give it some street cred in the follicle department, but the story makes the point that this likely is more about pushing the limits on computer vision, rather than hair care. The more Amazon can use technology to make life easier and more convenient for shoppers, it believes, the better it is for Amazon.
Bloombergreports that Walmart+ customers, who are paying $98 a year to belong to a program positioned to compete with Amazon Prime, are largely not using a number of the benefits that Walmart built into the program, instead seeing the appeal largely as being free shipping.
According to the story, "About three out of four users don’t take advantage of perks such as less-expensive fuel and Scan & Go technology that allows store shoppers to pay for items on their phone, according to a survey this month of 264 Walmart+ members by industry researcher Field Agent … The most common reason respondents gave for not using the other benefits? They simply weren’t aware of them."
The story goes on: "Based on their experience so far, 77% of Walmart+ members surveyed plan to renew their membership, Field Agent found. That’s below the 93% first-year renewal rate of Amazon.com Inc.’s Prime service, according to estimates by Consumer Intelligence Research Partners. Almost nine out of 10 Walmart+ members surveyed by Field Agent are also Prime members.
"Walmart has said it will roll out more perks, but so far its biggest move was to eliminate the $35 minimum to get free shipping on non-food orders."
KC's View:
These numbers certainly confirm something that has been obvious for a long time - free shipping matters.
As for the other stuff … well, I'd guess that if gas prices keep rising, the appeal of fuel discounts may become a lot more tangible. Walmart may have to put some elbow grease into marketing it as a benefit, but it could be worth the effort.
From the beginning, Amazon always has taken the approach that it wants to make Prime so attractive and compelling that it would be virtually irresponsible not to belong. Walmart+ clearly isn't there yet … but there are ways for it to add additional benefits so that the offering will be more attractive.
Walmart always has had a different ethos than Amazon; it wants to sell you more stuff, while Amazon wants to be inextricably intertwined in every facet of your life. (I'm not saying one or the other approach is best … they're just different.)
One thought. I was curious - to be honest, I just couldn't remember - and so I checked this morning to see if one had to be a Prime member to use Amazon's Subscribe & Save service. The answer was no … but if Walmart were to develop its own automatic replenishment offering and then link it (at least in the beginning) to being a Walmart+_ member, that might be really interesting.
CNN reports that there has been an other mass shooting - this one at a Long Island, New York, Stop & Shop, where three people were shot and one killed.
According to the story, "The shooting happened in a manager's office on an upper level of a Stop & Shop grocery in the community of West Hempstead, New York. A couple hundred people were inside the store, police said." The person killed reportedly was the store manager.
A suspect - who worked at the store collecting shopping carts - has been arrested by local police.
KC's View:
The sad thing is that I had to look up how many people have to be involved in such an incident to make it a "mass shooting."
The answer is "three."
Which means we can add this to the list, which reflects its own kind of epidemic.
State Press reports that Starbucks is working with Arizona State University to open a research center that will focus on "sustainability and better serving its communities."
According to the story, "The ASU-Starbucks Center for the Future of People is slated to open this December at the Tempe campus and currently comprises over a dozen faculty members from multiple schools at ASU with plans to expand and create opportunities for student involvement. The team members specialize in a variety of disciplines including engineering, design and sustainability … The center aims to develop new proposals for sustainable practices like greener store designs and sustainable, appealing food options. The projects would be developed by both ASU and Starbucks teams, then piloted in ASU's Starbucks locations."
State Press points out that the arrangement builds on an existing relationship between Starbucks and ASU: Starbucks "has nine licensed stores across ASU's four metropolitan Phoenix campuses and the Starbucks College Achievement Plan, which offers eligible Starbucks employees full tuition for ASU's online degree program."
"A U.S.-driven effort to reach a global accord on taxing big tech companies’ overseas profits is getting bogged down over ensnaring one firm in particular: Amazon.com Inc.
"A Treasury Department proposal, which was distributed to other governments earlier this month and has been seen by Bloomberg, would subject about 100 of the largest and most profitable companies to greater taxation in countries where the firms’ users and consumers are located, as opposed to the countries where they’re headquartered.
"The idea is that the new rules would apply to any large companies that exceed certain numbers, yet to be determined, for their annual revenue and profit margin … The global talks, led by the Organization for Economic Cooperation and Development, are trying to address many countries’ concerns that tech giants -- and other multinationals -- aren’t being properly taxed under the current system of rules."
But … there's a "but."
"Amazon’s unusual status as a low-margin tech giant is emerging as a sticking point in negotiations," Bloomberg writes. "Seattle-based Amazon recently reported a global operating margin across its businesses of 5.5%; that compares with Facebook’s margin of 45.5% and 27.5% at Google parent Alphabet Inc."
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, we've now had 32,536,470 confirmed Covid-19 coronavirus cases, resulting in 582,456 deaths and 25,105,535 reported recoveries.
Globally, there have been 143,692,078 coronavirus cases, with 3,061,037 resultant fatalities, and 122,074,565 reported recoveries.(Source.)
• In the US, 51.1 percent of adults 18 and older have received at least one vaccine, with 33.3 percent being fully vaccinated, according to the Centers for Disease Control and Prevention (CDC).
• The New York Times reports this morning that getting more people vaccinated will "take hard work — and some creative changes in strategy … State health officials, business leaders, policymakers and politicians are struggling to figure out how to tailor their messages, and their tactics, to persuade not only the vaccine hesitant but also the indifferent.
"The work will be labor intensive, much of it may fall on private employers and the risk is that it will take so long that the nation will not be able to reach herd immunity — the point at which the spread of the virus slows — in time to stop worrisome new variants from evading the vaccine.
"If you think of this as a war,” said Michael Carney, the senior vice president for emerging issues at the U.S. Chamber of Commerce Foundation, “we’re about to enter the hand-to-hand combat phase of the war.”
• From the Wall Street Journal this morning:
"The recent rise in Covid-19 cases in the U.S. has largely been driven by a handful of states, many of them the same places that first emerged as hot spots a year ago. Through Monday, about 75% of the previous week’s new cases in the U.S. came from Michigan, Florida, New York, Pennsylvania and New Jersey.
"Covid-19 cases and the rate of new cases per 100,000 people are re-surging in several states that, for long stretches, had kept the pathogen relatively at bay. Outside of the period from Thanksgiving to New Year’s, Michigan, Pennsylvania and New Jersey haven’t seen levels this high during the pandemic. And outside of that same holiday period, New York hasn’t had this many new cases since spring, and Florida not since the summer.
"Public-health officials and epidemiologists say the increasing caseloads in many parts of the country can be attributed to a constellation of factors, including the spread of more transmissible variants; a rise in infections among younger, often unvaccinated, people; relaxed prevention efforts and loosened restrictions on indoor dining and masking; as well as pandemic fatigue."
• Reuters reports that CVS Health will "offer three over-the-counter COVID-19 tests at its drugstores as well as online, expanding access to home testing as the United States speeds up its vaccine rollout.
"The company said the tests include a home test by Australian diagnostic test maker Ellume, Abbott Laboratories' BinaxNOW antigen self-test and LabCorp's home collection kits, all of which do not require a prescription, and can be used by individuals with or without symptoms.
"The move comes at a time when schools and offices in the United States are increasingly seeking to return to physical operations, as the country steps up its vaccination drive."
• And finally, an effective PSA promoting vaccinations from singer Brad Paisley:
• Variety reports that Netflix plans to spend more than $17 billion on content during 2021, up from $11.8 billion last year. The 2020 number actually was a drop from the $13.9 billion spent in 2019, owing to production delays caused by the pandemic.
The number raises the stakes on Netflix's biggest streaming competitor, Amazon - which the other day said that spent $11 billion on TV series, movies and music for its Prime services last year, an increase of 41% from $7.8 billion in 2019.
Variety also writes that "Netflix’s subscriber growth cooled in the first quarter of 2021 after record pandemic-fueled gains last year: The streamer added about 2 million fewer customers than it previously expected. For Q1, the company reported a gain of 3.98 million in net global streaming subscribers. That was below its previous guidance of 6 million. Meanwhile, Netflix predicted even lower gains for the current quarter — it expects to add just 1 million members in Q2, with roughly zero growth in the U.S./Canada and Latin America regions. As of the end of March, Netflix had 207.4 million paid streaming customers worldwide, up 13.6%."
• From the Boston Globe this morning, a story about how Ahold Delhaize-owned Hannaford Supermarkets says that "none of its food is tossed into landfills, which would make it the first large-scale grocer in New England and New York to achieve zero food waste … Hannaford has 183 grocery stores throughout the Northeast, and over the past year, the Scarborough, Maine-based chain has diverted 65 million pounds of unsellable food products to pantries, farms, and anaerobic digestion facilities, where the waste is converted to energy."
The Globe writes that "the waste reduction is part of a global effort undertaken by its parent company, Ahold Delhaize, of the Netherlands, which also owns the Food Lion, Giant, and Stop & Shop chains. But Hannaford executives say their approach to reducing waste is leading the industry here in the United States."
• BJ's Wholesale Club has made it official - Bob Eddy, who stepped into the CEO role on an interim basis after the unexpected passing of Lee Delaney, has been named president/CEO on a permanent basis.
At the same time, BJ's said that Laura Felice, currently Senior Vice President, Controller, has been appointed Executive Vice President, Chief Financial Officer, replacing Eddy in that role.
The company also announced that Paul Cichocki, currently Executive Vice President, Membership, Analytics and Business Transformation, has been named Executive Vice President, Chief Commercial Officer.
Bill Werner, currently BJ's Senior Vice President, Strategic Planning and Investor Relations, has been appointed Executive Vice President, Strategy and Development.
I've always been intrigued by the ways in which Amazon has utilized its third-party Marketplace to grow its retail footprint, using it to extend its already rather long tail to one of considerably greater scope and depth - to the point where its Marketplace represents more than half its total retail sales.
Now, with Amazon having provided proof of concept, there are a number of companies in various stages of developing their own Marketplace offerings - Walmart, Kroger, and Albertsons among them.
This prompts questions. Does it make sense for other retailers to do the same? Should size be the determining factor in whether a retailer decides to open and link to a Marketplace on its website? And what's the ROI on such a strategic move?
All good questions, I think … which is why I was pleased to be asked to host/moderate an online session next week on the subject of "The Business Case For An Online Marketplace." Setting the table will be Scott Compton, Senior Analyst, Digital Commerce, with Forrester, who will lay out the challenges and opportunities.
The session is set for next Thursday, Apr 29, 2021 at 2 pm EDT/ 11 am PDT.
I hope you'll join us for this complimentary webinar, sponsored by VTEX. My goal is to make sure the session is both illuminating and entertaining, while asking the questions that you'll want answered. And if I don't - you'll be able to.
For information about how to register for this session, click here.
Yesterday we reported that the Retail, Wholesale and Department Store Union (RWDSU) is formally challenging its loss at the Amazon warehouse in Bessemer, Alabama, where employees overwhelmingly voted to reject an organization effort.
One MNB reader wrote:
Why would the union pick rural Alabama for an important vote? My guess is Amazon provides some of the best jobs in the area so it seems workers have little to gain by voting union. There are bound to be Amazon distribution centers in more pro-union places where they could make an easier case.
Regarding how Aldi is testing out a bulk merchandising approach to pasta and rice that is designed to cut down on packaging, one MNB reader wrote:
I think the direction is good. The implementation maybe not so. There are reasons that bulk sections are of old. Sanitation, infestation, spillage, and hopefully the manager/employee won’t scoop up the stuff that falls out and put it back in the bin to save shrink. Why not go to bio packaging? That way everyone wins. The consumer, the planet, and the retailer.
Also maybe not well-timed during a pandemic.
Yesterday I did a FaceTime commentary about how a recent viewing of The Godfather, Part Two, surprised me when I noticed that Hyman Roth - portrayed as an aging Jewish gangster - is shown celebrating his 67th birthday. It suggested to me how both the realities and perception of aging have changed, not to mention life expectancies.
MNB reader Joe Axford replied:
Great movie reference KC, I've seen Godfather II many many times, and never noticed his age on the cake, and I'm a detail guy(retail is detail, right?). Anyway Mr. Roth definitely looked like he was in his seventies to me. Being a 60 year old man, I don't see it in myself, because everyone my age looks old to me. Still a boy at heart I guess!
Me, too.
And MNB reader John Rand weighed in:
So Hyman Roth was “only” 67….
Seems to me one of the more obvious implications of longer life spans is that more older people are still alive. Absurdly obvious you say?
Well yes but..
In a thousand ways retailers rarely understand how to parse the difference in shopping between disparate groups, age being only one factor. But as the world rushes to embrace technology of all sorts (communication, transportation, medicine) the uptake from different cohorts is always different both in speed of adoption and in some cases, refusal to adopt.
Just look at all the Covid vaccination troubles some old people had, navigating websites to get appointments.
At one point, a few years ago, I heard a demographic analysis of how the U.S., pretty much for the first time, had 3 consuming “generations” in the market at the same time. Since then we pretty much lost one (the WW2 generation) but gained two new ones. Although I personally hate the construct of “generations”, always preferring to use 10 year cohorts for analysis, the lesson is still clear.
Neither retailers not suppliers have ever been particularly good at nuance, at variety, at hitting multiple targets with multiple variable approaches.
Time to learn. There are a lot of old dogs out there who may not take well to a steady diet of new tricks.
