retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: June 2, 2021

    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.

    Tom and KC consider the implications of Instacart's new "Priority Delivery" offering, which could have the impact of making it more indispensable - and therefore, more addictive - to retailers, while discussing the economics of the delivery app business drawing investors to ther sector.  And, they look at - and find wanting - one analyst's suggestion that speed and convenience may be less appealing to shoppers than regularly scheduled, milkman-style deliveries.  The focus:  getting retailers to think about trip types and how consumers interact with favored retailers.

    If you're interested in listening to an audio version this Innovation Conversation, you can do so here (or can download this file):

    Published on: June 2, 2021

    JBS, the world's largest meat supplier, has been hit with a ransomware attack  that "company officials have called an extortion attempt by a criminal group that is likely based in Russia," the Washington Post reports.

    The New York Times writes that "the culprit behind the JBS attack has not been publicly identified. Cybersecurity specialists said Tuesday that blogs and online channels frequented by major ransomware groups had gone quiet — most likely, they said, because the group responsible was waiting to see whether JBS would pay."

    According to the Post story, the attack "forced JBS to suspend operations at some of its processing plants … But experts say it’s too soon to determine how the cyberattack will impact the global supply chain, a significant concern for an industry that has been battered by a wave of disruptions that began even before the coronavirus pandemic.

    "Cyberattacks have become commonplace, but the hack against JBS is the latest high-profile incident to highlight the massive vulnerability of corporations, government agencies and civil society groups, as suspected foreign hackers become more brazen in their demands."

    The story says that JBS detected the attack on its networks on Sunday, and is unaware of any impact on its systems or data.  JBS also said i notified federal authorities on Sunday.

    The Post writes that "the FBI is investigating the attack and the U.S. Department of Agriculture has reached out to several major meat processors to alert them of the situation. Officials are assessing the cyberattack’s effect on the nation’s meat supply, she said, as the administration works to mitigate its impact."

    CNN reports that "JBS released a statement Tuesday night indicating most of its food plants will be open Wednesday.  'Given the progress our IT professionals and plant teams have made in the last 24 hours, the vast majority of our beef, pork, poultry and prepared foods plants will be operational tomorrow,' said Andre Nogueira, CEO of JBS USA.

    "The company also said 'JBS USA and Pilgrim's were able to ship product from nearly all of its facilities to supply customers.'

    The Times provides some context:

    "One recent breach leveraged software called SolarWinds to infiltrate more than 250 federal agencies and businesses. It has been considered the most serious attack because it got to the question of whether the United States can trust its supply chain of software. SolarWinds, the United States has said, was the work of the S.V.R., one of Russia’s premier intelligence agencies.

    "Last week, the S.V.R. was blamed for a breach that hijacked the company that distributes emails on behalf of the United States Agency for International Development, sending links containing malware to organizations that have been critical of Mr. Putin.

    "But ransomware attacks have taken on additional urgency after hackers hit Colonial Pipeline last month. The pipeline’s operator shut down its systems after the attack, triggering price surges, panic buying and jet-fuel shortages. The company later acknowledged paying $4.4 million to recover its data.

    "The Colonial Pipeline attack was the work of a ransomware operator called DarkSide, which Mr. Biden said was based in Russia."

    KC's View:

    I have no expertise in this area, so all I can do is offer what I suspect is the growing, possibly prevailing, consumer/citizen feeling  of the moment - which is that this stuff is scary, and I keep wondering what's next, and how much r=worse it will be.

    Published on: June 2, 2021

    Bloomberg reports that while Instacart has what it calls "an audacious plan to replace its army of gig shoppers with robots," its plans have stalled out, with not a single client supermarket having signed on to test it.

    Here's how Bloomberg frames the story:

    "The plan, detailed in documents reviewed by Bloomberg, involves building automated fulfillment centers around the U.S., where hundreds of robots would fetch boxes of cereal and cans of soup while humans gather produce and deli products. Some facilities would be attached to existing grocery stores while larger standalone centers would process orders for several locations … Under one proposal, Instacart would create a network of stand-alone fulfillment centers that would handle more than 3,500 orders a day with more than 100,000 units sold, according to documents reviewed by Bloomberg. More than 700 robots and about 160 people would do the work, with the machines fetching most of the items and workers gathering fresh and perishable food. The installation would cost $20 million, with annual maintenance costs of $380,000 a year. A second option is a smaller 25,000-square foot attached to a store that would handle more than 700 orders a day totaling 22,000 items. It would have more than 150 robots, 40 workers and would cost $6.5 million to set up and $270,000 a year to maintain, according to the documents.

    "Under the plan, the supermarket chain would forecast demand and handle inventory, while Instacart would process customer orders and line up delivery drivers. A separate technology partner would provide the automation.  The company has been working with the U.K. logistics consulting firm Bis Henderson to evaluate proposals from various robotics outfits and had planned to open the first facilities at the end of this year to test the concept and assess the potential savings, according to the documents."

    The story says that one question for Instacart is whether it "can pull this off before grocers figure out how to do it themselves. In a potentially ominous sign, chains are already starting to bring pieces of their e-commerce operations in-house and partnering with venture-backed upstarts looking to muscle in on Instacart’s turf. Kroger, meanwhile,  opened its first robot-powered fulfillment center in partnership with Britain’s Ocado Group Plc in March."

    KC's View:

    It occurs to me that Instacart is likely to be looking for ways to get retailers to pony up funds to help build out all this infrastructure, but I would think that these folks would or should be more than a little resistant;  after all, one of the purposes of all this stuff is to create a mechanism that will help Instacart be even more competitive with those clients at some point.

    The question retailers need to ask themselves is if all this investment in Instacart's view of the world makes them close to or further away from their shoppers.

    Published on: June 2, 2021

    The Washington Post  has a story about how "subscriptions boomed during the coronavirus pandemic as Americans largely stuck in shutdown mode flocked to digital entertainment and signed up for regular home delivery of boxes of items such as clothes and chocolate. But what really set the past year apart was the increase in subscriptions in the hard-hit services sector. Owners of restaurants, hotels, home-repair companies and others upended their traditional business models to try subscriptions and often found more interest — and revenue — than they anticipated."

    The  Post notes that "the subscription economy was on the rise before the pandemic, but its wider and deeper reach in nearly every industry is expected to last, even after the pandemic subsides in the United States. The UBS financial services firm predicts that this 'subscription economy' will grow to $1.5 trillion by 2025, more than double the $650 billion it’s estimated to be worth now."

    The story notes that "Subscriptions are not a new concept. The idea of paying a recurring fee for a farm share or a wine -of-the-month club has been around for decades, but analysts say the rise of smartphones and rapid home delivery in the past decade have made customers increasingly willing to try new products and shop in different ways."

    "We are shifting from a transactional economy to a relationship-driven one,” said Adam Levinter, author of 'The Subscription Boom,' tells the Post.  "A subscription is a recurring touch point with the customer. It’s that constant reminder that people have a relationship with the brand."

    KC's View:

    Subscriptions and auto-replenishment - which, to my thinking, is the next best evolution from subscriptions - are ways that businesses can create stronger and more sustained relationships with their shoppers - the data is consistent and accessible, and provides ways for retailers to build on an established foundation.

    If I were a retailer, I'd be looking for any way possible to make these concepts work for me.

    Published on: June 2, 2021

    Fox Business reports that Amazon has quietly changed its terms of service to allow customers to file lawsuits against it, as opposed to being required to go to arbitration.

    The reason for doing so was considerably less quiet:  "Plaintiffs' lawyers flooded Amazon with more than 75,000 individual arbitration demands on behalf of Echo users. That move triggered a bill for tens of millions of dollars in filing fees, according to lawyers involved, payable by Amazon under its own policies … The claims against Amazon followed news reports in 2019 that Alexa devices stored recordings of users. When consumers filed proposed class actions saying the practice violated laws against recording without both parties consenting, Amazon successfully argued the claims belonged in arbitration."

    The story notes that "arbitration agreements are buried in the contracts consumers sign to do everything from buying a cellphone to using a ride-hailing app. Many employers also require arbitration for adjudicating issues like pay disputes or discrimination claims. The U.S. Supreme Court has repeatedly upheld and strengthened the rights of companies to mandate arbitration."

    Amazon has not commented on the change in its service terms, but continues to maintain that its Alexa-powered devices only record when it use, and that customers have the option of deleting all recordings.

    KC's View:

    Must be something to get to the point where you actually want lawsuits because the alternative is too expensive.

    Published on: June 2, 2021

    The New York Times has a piece about how Toyota started, and other companies embraced, the Just-In-Time movement:

    "From fashion to food processing to pharmaceuticals, companies have embraced Just In Time to stay nimble, allowing them to adapt to changing market demands, while cutting costs.

    "But the tumultuous events of the past year have challenged the merits of paring inventories, while reinvigorating concerns that some industries have gone too far, leaving them vulnerable to disruption. As the pandemic has hampered factory operations and sown chaos in global shipping, many economies around the world have been bedeviled by shortages of a vast range of goods — from electronics to lumber to clothing."

    The Times goes on:

    "Just In Time has amounted to no less than a revolution in the business world. By keeping inventories thin, major retailers have been able to use more of their space to display a wider array of goods. Just In Time has enabled manufacturers to customize their wares. And lean production has significantly cut costs while allowing companies to pivot quickly to new products.

    "These virtues have added value to companies, spurred innovation and promoted trade, ensuring that Just In Time will retain its force long after the current crisis abates. The approach has also enriched shareholders by generating savings that companies have distributed in the form of dividends and share buybacks.

    "Still, the shortages raise questions about whether some companies have been too aggressive in harvesting savings by slashing inventory, leaving them unprepared for whatever trouble inevitably emerges."

    You can read the entire story here.

    Published on: June 2, 2021

    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 34,136,738 total cases of the Covid-19 coronavirus, resulting in 610,436 deaths and 27,940,918 reported recoveries.

    Globally, there have been 171,935,794 total coronavirus cases,  with 3,575,702 resultant fatalities and 154,415,761 reported recoveries.  (Source.)


    •  The Centers for Disease Control and Prevention (CDC) says that 62.8 percent of the US population age 18 or older has received at least one dose of vaccine, with 51.7 percent being fully vaccinated.


    •  The New York Times reports that "Moderna on Tuesday became the latest pharmaceutical company to apply to the U.S. Food and Drug Administration for full approval for its Covid-19 vaccine for use in people 18 and older. F.D.A. approval would allow the company to market the shot directly to consumers, and could also help raise public confidence in the vaccine.

    "Full approval could also make it easier for schools, employers, government agencies and the U.S. military, which has encountered resistance to coronavirus vaccines, to mandate vaccinations."

    The Times adds that "last month Pfizer and BioNTech applied to the agency for full approval of their vaccine for use in people 16 and older.

    "Moderna’s vaccine was authorized for emergency use in December, and as of Sunday, more than 151 million doses had been administered in the United States, according to data from the Centers for Disease Control and Prevention."

    Published on: June 2, 2021

    •  C-store chain Sheetz announced that "it will be enabling digital currency payments via Flexa, the leading pure-digital payments network, to provide customers with the ability to pay for items inside the store or fill up their cars, trucks, and RVs at the pump using digital currencies like bitcoin, ether, litecoin, dogecoin, and more," making it the "first convenience store chain to accept Bitcoin and other digital currencies in-store and at pump."


    •  The Seattle Times reports that "drivers for the hundreds of Amazon delivery contractors in the U.S. ferrying packages to customers’ doorsteps sustain injuries at higher rates than any other link in the commerce giant’s logistics chain, according to a new report from a national labor organization.

    "Amazon’s contract delivery drivers are also hurt at higher rates than competitor UPS, according to the report, from the Strategic Organizing Center. The labor union coalition analyzed injury data collected by the federal Occupational Safety and Health Administration.

    "The report’s findings represent the most detailed look yet at injuries sustained by workers tasked with the crucial 'last mile' of Amazon delivery."

    Published on: June 2, 2021

    •  The Giant Company announced that its nutritionists have launched "a fun-packed, foodie road trip planned all summer long with virtual classes highlighting food favorites and foods inspired from spots across the United States. These free, live classes via Zoom are available for chefs of all ages throughout June, July and August."

    Different virtual trips are planned for mini chefs (ages 6 and under), Junior chefs (ages 7 to 18), and for family dinner preparation.


    •  Transport Topics reports that "Albertsons Cos. completed the nation’s first delivery of a refrigerated grocery load with zero-tailpipe emissions technology by deploying a Volvo electric truck and an Advanced Energy Machines electric trailer.

    "The May 28 delivery of frozen food to a store in Irvine, Calif., represents a step forward in the effort to commercialize electric trucks and other green transportation equipment, local and state environmental regulators said at a news conference after the delivery … The nation’s second-largest grocery chain recently acquired two Volvo VNR Electric trucks to use at its distribution center in Irvine, Calif."


    •  MarketWatch reports that "7-Eleven Inc. plans to build at least 500 charging stations for electric vehicles in the U.S. and Canada by the end of 2022.

    "In a statement Tuesday, the convenience-store chain, which is owned by Japan’s Seven & I Holdings Co. 3382, 2.90%, announced a massive expansion of its current 22 charging stations in 14 stores across four states. Direct Current Fast Charging ports will be installed at about 250 7-Eleven locations, creating one of the largest retail fast-charging networks in the U.S., the company said."

    Published on: June 2, 2021

    •  SpartanNash Company announced the appointment of Douglas Hacker as Chairman on its Board of Directors.

    The announcement notes that Hacker "previously served as a Director of Nash Finch since 2005, prior to its merger with SpartanNash in 2013. He has acted as SpartanNash’s Lead Independent Director since May 2018, and his appointment as Chairman follows former Chairman Dennis Eidson’s retirement."

    Published on: June 2, 2021

    MNB reader Bill Purcell provides this perspective on the delivery wars:

    The rise of sub-1 hour delivery for grocery is less about the fact that Uber and Doordash have delivery capabilities and more about a major shift "back-to-the-future" in what consumers want and coupled with the changes that will be fueled by an explosion of yet-to-come-out-of-stealth-mode technologies and $100b+ in Venture Capital spending.

    On the back-to-the-future part -- our great-grandparents never shopped only once a week or so for food to eat at home.  They didn't stock up for a couple of weeks, and then deplete their pantry in the same way we do today, and as most grocers' e-commerce systems are designed to support.   Their practice was to shop almost every day for same-day consumption at local bakers, butchers, green grocers, etc. Large swaths of urban Europe, Latin America, and Asia have at least partially kept this immediate consumption shopping habit.

    Supermarkets originally were seen as more convenient -- the daily chore became a weekly one, and with some price advantages.  But if immediate-consumption on-demand grocery e-commerce was available and affordable, what shifts in consumer behavior will occur?

    If you look at food consumed at home trends generally, you need to include what has happened to eat-at-home-from-restaurants, not just grocery.  The stats are telling.  About 60% of consumer now get takeout or delivery on average 2.4 times per week.  Ordering apps have grown 300-400% over the last few years.  Restaurant ordering apps exceed $40 billion now and are expected to grow to $365B globally by 2030.

    And here's what is super-significant for the Grocery and CPG industry.  Virtually 100% of that consumer shift for restaurant services is accompanied with sub-1 hour delivery services.  This has conditioned a generation of consumers and shaped their wants and expectations.  Virtually none of those billions of restaurant app orders started with the consumer saying --  "On Tuesday morning I want to place an order for Thursday dinner delivery".  Instead, the consumer decides what to eat within an hour of eating.  Yet that multi-day ecommerce order-> delivery -> consumption pattern remains baked-in as the norm in the grocery industry -- the weekly pantry-loading order delivered a day or so after ordering and consumed during the week.

    Even if the grocery industry hasn't caught wind of an upcoming surge in demand for sub-1 hour on-demand grocery delivery, the venture capital industry sure has.  By my count, since Covid started, VCs have invested well over $100 billion in the sub-1 hour e-grocery ecosystem -- I'm not referring to companies like Instacart -- a whole new generation of e-grocers and tech providers.  Much of that money has been invested in e-grocery startups like GoPuff and Gorillas, but multiple billions of VC funding have been directed to technology companies who are making the next generation of tools that can enable these sub-1 hour services to operate profitably -- faster plus lower costs.

    Aside from the newly funded startups, Uber, Doordash, and others are investigating these same next-generation e-grocery technologies. Most traditional grocers have yet to even see or hear about many of these "Generation 3 e-grocery" tech innovations.  Many of these new next-gen tech providers are staying in stealth mode while they quietly work with the new e-grocery competitors / usurpers.  While eventually these next-gen e-grocery tech "arms merchants" will sell to traditional chains as well, the traditional grocery industry is leaving the door wide open for these competitors to get a foothold, shape consumer behavior, and steal share on what could be a significant and growing segment of consumers.

    Some chains have already woken up.  In the UK, where the sub-1 hour phenomenon has already started to take root, Tesco just announced their start of a one-hour delivery service called "Whoosh" and Sainsbury is already rolling out their equivalent called "Chop Chop" to 50 markets this month. 

    With hyper-funded Uber, Doordash, and Instacart all jumping into this sub-1 hour grocery market now, plus the impact of over $100 billion of VC money fueling new e-grocery disruptors and technologies, the next few years should be pretty interesting!  

    And something else will happen over those same next few years in which sub-1 hour e-grocery evolves.  While generational definitions vary, by some classifications it means that the average first-time mother will be a member of Gen-Z within the next years (and, just to make you feel old, we'll see the first Millennial grandparents!).  Gen Z is consumer cohort who, thanks to the efforts of the restaurant apps, has known nothing but 1 hour, on-demand delivery of food.