business news in context, analysis with attitude

Published on: June 22, 2021

by Michael Sansolo

The road to relevance is never smooth, especially when the fundamentals that built a business or industry all change. It takes a bold company to understand, accept and act upon a foundation badly in need of an overhaul.

But occasionally it happens.

Right now we are seeing this is a number of places. Take General Motors, which seems hell-bent on leaving the model of internal combustion engines behind.  Or more amazingly, consider Victoria’s Secret, which is suddenly going full speed in the opposite direction of the formula the company used to build itself.

Possibly those two companies (and there are others) have actually taken a look at other giants like Kodak and realized the risk in innovation is worth the reward of remaining relevant and profitable.

The news on Victoria’s Secret seems especially worth considering, at least until time tells us whether the shift is successful. 

“When the world was changing, we were too slow to respond,” said Martin Walters, the former head of Victoria’s Secret’s international business and chief executive of the brand since February. “ We needed to stop being about what men want and be about what women want.”

(One also has to believe some impetus behind this move could come from the company’s new board - the subject of Kevin’s FaceTime video last Thursday. CEO Waters is now the only man on that board, which hardly seems radical for a company that makes apparel for women.)

An incredibly high profile demonstration of this new commitment will be pretty apparent shortly in the company’s massive fleet of stores, its advertising and its entire image. Victoria’s Secret is dumping the ideal of supermodel figures and switching to more normal body types. What’s more, the company is replacing its lineup of models (the “angels”) with women who have achieved success in a wide range of fields.

Among them is soccer star Megan Rapinoe, who has been outspoken in her past criticism of the image of femininity and sexuality that Victoria’s Secret marketed. Like it or not, hiring her is one bold step.

Let’s be honest here. It’s highly unlikely that General Motors or other car companies would be actively working on electric engines if they didn’t see business opportunities in them or tremendous risk is staying their current course.

And Victoria’s Secret would not be changing its entire approach if business were still booming for bejeweled bras.

But it’s still pretty remarkable to see companies willing to embrace such a sharp level of change instead of following the usual path of sticking to the aspects that built their original success.  And the lesson, I’d argue, in these stories is pretty straightforward. That is: sometimes even the most successful business model needs to be questioned and we all need to examine the most sacred cows in business. It might be time to turn them into burgers.

It’s a question you should probably ponder regularly inside your companies. We all know the world is constantly changing. Consumers are changing, competition is changing and expectations are changing. So rather than rage over whether this is political correctness or cancel culture run amok, ask yourself (as Kevin has written repeatedly here at MNB), is the change outside our company moving faster than the change inside? 

If the answer is yes, you need to get cracking. In fact, you should have started already, but let that go and get working right now.

Again, we might not know for years if drivers are going to accept electric powered Ford F-150s or Chevy Corvettes. Nor will we know if Victoria’s secret to success will be worth following. But we do know that corporate graveyards of full of once great companies that simply don’t exist today because they stuck with a model way, way past it’s expiration date.

If you don’t believe me; go visit an A&P store or Sears or Kmart. And remember that at one point, all three of them were dominant.  Certainly it won’t be a Kodak moment.

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: June 22, 2021

While in the current retail climate there may not be safety in numbers, it does seem as if coalitions, alliances, partnerships or mergers/acquisitions can give retailers competing against the big guys the ability to prove that 1 + 1 can + 3.  Scale matters, as Scott Moses, managing director at PJ Solomon, likes to say.  Having a larger ecosystem matters.  And there's no time like the present to figure out what that looks like.

Published on: June 22, 2021

Albertsons said yesterday that it is partnering with delivery service DoorDash to offer on-demand delivery of more than 40,000 SKUs from close to 2,000 of its stores under various banners.

According to the announcement, "Consumers can shop right on the DoorDash app to fulfill all of their grocery needs … In addition, in select markets, customers can order groceries through their local Albertsons Cos. store’s website for same-day delivery powered through DoorDash Drive, DoorDash’s white-label fulfillment platform that powers direct delivery for any business."

And, Albertsons said:  "The partnership includes both immediate and long-term initiatives, including supporting the expansion of Albertsons’ first-party grocery delivery business with DoorDash Drive, launching a custom loyalty program, expanding delivery hours, and offering a unique selection including specialty items, prepared meals, meal kits and new concepts.

"In addition, DoorDash and Albertsons Cos. are offering a first-ever digital gaming experience, giving users the chance to play and score savings on future grocery orders."

“We are committed to expanding our delivery experience in order to meet our customers’ needs whenever, wherever and however they want,” said Chris Rupp, Chief Customer and Digital Officer at Albertsons. “Our partnership with DoorDash is the next step in our digital transformation to help make our customers’ lives easier and help answer the perennial question, 'What’s for dinner tonight?'"

Bloomberg writes that the deal puts DoorDash in direct competition with Instacart, which also delivers for Albertsons:

"DoorDash dominates U.S. food delivery and increased its market share over rivals such as Uber Technologies and Grubhub amid the shift to ordering from home as the coronavirus pandemic shuttered indoor dining. However, even as cities reopen, demand for food delivery has remained resilient, with DoorDash nearly tripling revenue during the first quarter. Since then, DoorDash has pushed into new business lines such as retail — through a partnership with Bed Bath & Beyond in May and most recently PetSmart — as well as expanded convenience-store offerings, in an effort to capture more customers now accustomed to fast, on-demand delivery."

Published on: June 22, 2021

From the Seattle Times this morning:

"Amazon systematically attempts to channel 6% of its office employees out of the company each year, using processes embedded in proprietary software to help meet a target for turnover among low-ranked office workers, a metric Amazon calls 'unregretted attrition,' according to internal company documents seen by the Seattle Times.

"The documents underscore the extent to which Amazon’s processes closely resemble the controversial management practice of stack ranking - in which employees are graded by comparison with each other rather than against a job description or performance goals - despite Amazon’s insistence that it does not engage in stack ranking. The documents also highlight how much of Amazon’s human resources processes are reliant on apps and algorithms, even among the company’s office workforce.

"And they provide the most detailed picture yet of how Amazon uses performance improvement plans to funnel low-ranked employees out of the company. The company expects more than one-third of employees on performance improvement plans to fail, documents show. Amazon has previously said that its performance improvement plans aren’t meant to punish employees."

The paper points out that "many companies have abandoned stack ranking in recent years after employee backlash. Critics of the system contend it contributes to pay and promotion discrimination, generates a toxic workplace culture and harms innovation."

The Times writes that Amazon continues to maintain that it does not use stack ranking, though it also has made similar statements over the years and then resumed a policy of "unregretted attrition."  Which human resources experts say is essentially the same thing.

Published on: June 22, 2021

CNBC reports that "as Target kicks off a rival sales event to go head-to-head with Amazon Prime Day, the big-box retailer is spotlighting its grocery department. It is adding discounts and promotions to nudge customers toward its aisles of cereal, meat and soda.

"Target rolled out Deal Days to compete with Prime Day in 2019, but this will be the first time Target is using the event to promote groceries."

The reason?  Target wants to keep some of the groceries sales gains that it earned during the pandemic, when people by and large stopped going to restaurants.  Now that people are going out to eat again, Target wants to remind them that eating at home remains a viable and cost-effective option.

CNBC writes:  "Deal Days discounts will be widespread at Target, but it will have a special grocery-related promotion: It will hand out $10 gift cards to customers who spend $50 or more on food and beverages while using one of its same-day services like curbside pickup and home delivery service, Shipt. The company declined to share specific items that will be on sale."

CNBC notes that Target isn't alone:  "At least two of Target’s competitors will dangle grocery deals, too: Walmart and Amazon. Walmart is also adding groceries for the first time to Deals for Days, its annual sale, according to a company spokesperson. It will cut prices on foods like ribs, watermelon, ice cream and coffee.

'Amazon plans to sell some groceries for $1, and its wine brand, Cursive, will be on sale. Whole Foods will discount seasonal items like lemonade and Caprese pizza, a company spokesperson said."

Published on: June 22, 2021

The New Yorker has a profile of Lina Khan, the thirty-two-year-old associate professor at Columbia Law School who just has been named to chair the Federal Trade Commission (FTC), where she is expected to take a muscular approach to enforcing antitrust laws, especially as they apply to big tech companies.

An excerpt:

"The daughter of Pakistani immigrants to the United States, Khan first came to public attention in 2017, when, as a student at Yale Law School, she published a lengthy article in the Yale Law Journal which argued that Amazon shouldn’t be excluded from antitrust scrutiny simply because it had a history of cutting prices. To the many retail businesses that have been decimated by Jeff Bezos’s juggernaut, Khan was merely stating the obvious. But her article represented a challenge to the policy orthodoxy that has dominated the world of antitrust law for decades … Rather than engaging in arcane arguments about prices in particular markets, as many antitrust lawsuits have done, Khan took a historical approach.

"In her article, she pointed out that the creators of America’s bedrock antitrust laws - the Sherman Act of 1890 and the Clayton Act of 1914 - had broader goals than reducing prices. 'Congress enacted antitrust laws to rein in the power of industrial trusts, the large business organizations that had emerged in the late nineteenth century,' Khan wrote. 'Responding to a fear of concentrated power, antitrust sought to distribute it.'

"She went on to compare Amazon to the vast railroad combines that Cornelius Vanderbilt and other robber barons put together by squeezing out smaller rivals and giving preferential deals to favored customers. The article concluded, 'In order to capture these anticompetitive concerns, we should replace the consumer welfare framework with an approach oriented around preserving a competitive process and market structure'."

If you want to get a sense of how the battle is going to play out, click here.

Published on: June 22, 2021

With brief, occasional, italicized and sometimes gratuitous commentary…

•  The Seattle Times has a piece about what is a kind of unusual position being taken by Rep. Pramila Jayapal (D-Washington) these days:  her Ending Platform Monopolies Act, introduced this month as part of a broad and bipartisan package of bills aimed at big tech, would have an enormous impact on Amazon - which happens to be the largest private employer in her home state.

"Jayapal’s proposal would allow the federal government to sue to force the Big Four tech firms to sell off lines of business deemed a 'conflict of interest'," the Times reports. "That would mean Amazon could no longer run its marketplace for third-party sellers while also competing against them with its own products. Similar divestments would be required of the other top tech firms, and all could face massive daily fines for noncompliance.

"Jayapal, vice chair of the House’s antitrust subcommittee, said the big tech companies cannot be trusted to police themselves, and that even beefed-up federal regulation may be insufficient, making forced breakups a necessity.

"'Look, this isn’t about Amazon. This is about the monopoly powers of the Big Four tech companies,' Jayapal said in an interview. 'It’s an irresistible urge for companies that are operating on multiple platforms with conflicts of interest and competing business to use power in ways that will suppress competition'."

The Times notes that "while millions of third-party sellers benefit from selling on Amazon’s marketplace platform, some have come to view it as a deal with the devil, saying the company squeezes them — and drives up prices for competitors — by controlling virtually every aspect of e-commerce transactions."

But the Times also writes that "Mark McCarthy, a senior fellow at the Brookings Institution who has tracked the big tech debate, said there are pluses and minuses to the antitrust approaches outlined in the legislation proposed by Jayapal and others. Forcing the separation of Amazon and its third-party marketplace could yield some negative impacts, he said.

"'There are consequences for this that might not be all that good for consumers and merchants,' he said, saying shoppers would have a harder time finding products and sellers might lose out on customers."  A better solution, he said, might be to pass legislation that would strictly prohibit discriminatory behavior by big tech companies.

I continue to worry that in terms of e-commerce, restrictions could be put on companies that are not being put (at least so far) on their bricks-and-mortar brethren.  How many suppliers have been squeezed by Walmart over the years, long before there was e-commerce?  Don't Kroger and Albertsons exert an enormous amount of control over the transactions that take place in their stores?  Doesn't virtually every retailer with a robust private label offerings make choices about how to formulate those lines based on how national and regional brands sell?

I recognize that Amazon does this better than most because it is more sophisticated than most … but I also think that this is the normal course of retailing.  Better and more nuanced regulation and stronger enforcement make sense, but not necessarily the wholesale disruption of the segment.

On the other hand, e-commerce companies dined out for a long time on policies that allowed them to not collect and pay sales taxes to states … and so maybe this is karma.

•  Bloomberg reports this morning that "Uber has agreed to buy the remaining 47 percent stake in Chile’s online grocer Cornershop it doesn’t already own for about $1.4 billion in shares.

"Uber first took a majority stake in Cornershop, the largest home delivery platform in Mexico and Chile, in 2019 in a bid to extend its geographic reach and bolster profits by bundling food delivery with rides."

•  Bloomberg reports that Amazon "has placed an order for 1,000 autonomous driving systems from self-driving truck technology startup Plus and has acquired the option to buy a stake of as much as 20%, Plus said in a regulatory filing."

•  Tesco has announced that it is expanding its Whoosh one-hour delivery service, which was piloted in Wolverhampton, to London and Bristol, adding it to 11 new Tesco Express locations in those communities.

CEO Ken Murphy has said that the pilot gave the company "some very interesting data."

May I just say that "Whoosh" is a great name for a delivery service?

•  "The U.S. online grocery market posted $7.0 billion in sales during May, down 16% versus a year ago," according to the newest Brick Meets Click/Mercatus Grocery Shopping Survey.  "The drop in sales was driven by declines in several key performance indicators including monthly active users, order frequency, and average order value. Despite these reductions, total online sales in May remained 3.5 times higher than pre-COVID levels (2.0 billion in total sales for Aug. 2019 per prior Brick Meets Click research)."

Published on: June 22, 2021

With brief, occasional, italicized and sometimes gratuitous commentary…

• From the Washington Post this morning:

"Retail workers, drained from the pandemic and empowered by a strengthening job market, are leaving jobs like never before.

"Americans are ditching their jobs by the millions, and retail is leading the way with the largest increase in resignations of any sector. Some 649,000 retail workers put in their notice in April, the industry’s largest one-month exodus since the Labor Department began tracking such data more than 20 years ago.

"Some are finding less stressful positions at insurance agencies, marijuana dispensaries, banks, and local governments, where their customer service skills are rewarded with higher wages and better benefits. Others are going back to school to learn new trades, or waiting until they are able to secure reliable child care."

Retailers are complaining a lot about their inability to find employees.  But it may be, as Shakespeare would say, that the fault is not in the stars, but in themselves.  When it came to becoming employers of choice, other industries stepped up to a degree that many retailers did not.

• Axios reports this morning that "Sweetgreen, one of the earliest 'better for you' quick-serve restaurant chains, has filed confidentially for an IPO … the company has been a rumored IPO candidate for years, and now is coming out as a post-pandemic growth play." 

According to the story, "Expect Sweetgreen to hype how it correctly identified a coming consumer trend upon launch in 2007, and that its hundred-plus stores have only scratched the surface of what it believes could be a Chipotle-sized opportunity.

ROI: The company raised around $670 million in VC funding, including a round earlier this year at nearly a $1.8 billion post-money valuation."

• The New York Times this morning reports that "Smithfield Foods was one of the first companies to warn that the country was in danger of running out of meat as coronavirus infections ripped through processing plants in April 2020 and health officials pressured the industry to halt some production to protect workers.

"Now, a lawsuit filed last week by Food and Water Watch, a consumer advocacy group, accuses the giant pork producer of falsely stoking consumer fears and misleading the public.

"The suit says the nation was never in danger of running out of meat. It claims there were ample supplies in cold storage, while at the same time pork exports to China, in particular, were surging. The suit was filed in Superior Court in Washington, where a law allows a nonprofit group to sue on behalf of consumers without needing to show that they suffered direct harm."

The Times writes that "Smithfield defended its safety efforts while criticizing the consumer advocacy group. 'The advocacy organizations who make these claims have a stated goal of dismantling the efforts of our hard-working employees, who take great pride in safely producing food products,' Keira Lombardo, Smithfield’s chief administrative officer, said in a statement."

Published on: June 22, 2021

• The Private Label Manufacturers Association (PLMA) announced that it has appointed Peggy Davies as president of the organization.  Davies has been serving as interim president since the 2020 passing of longtime president Brian Sharoff.

• Instacart announced that it has hired Laura Jones, most recently Uber's Global Head of Marketing, as its new VP of Brand & Marketing.

Published on: June 22, 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 US, there now have been 34,419,838 total cases of the Covid-19 coronavirus, resulting in 617,463 deaths, and 28,767,507 reported recoveries.

Globally, there have been 179,614,313 total cases, with 3,890,270 resultant fatalities and 164,314,061 reported recoveries.  (Source.)

https://www.worldometers.info/coronavirus/

• The Centers for Disease Control and Prevention (CDC) says that 65.4 percent of the US population age 18 and older now has received at least one dose of vaccine, and 55.9 percent is fully vaccinated.

Published on: June 22, 2021

…will return.

Published on: June 22, 2021

The New York Times reports this morning:

"The Supreme Court unanimously ruled on Monday that the N.C.A.A. could not bar relatively modest payments to student-athletes, a decision that underscored the growing challenges to a college sports system that generates huge sums for schools but provides little or no compensation to the players.

"The decision concerned only payments and other benefits related to education. But its logic suggested that the court may be open to a head-on challenge to the ban by the National Collegiate Athletic Association on paying athletes for their participation in sports that bring billions of dollars in revenue to American colleges and universities.

"In a concurring opinion, Justice Brett M. Kavanaugh seemed to invite such a challenge.

'Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate,' Justice Kavanaugh wrote.  'And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The N.C.A.A. is not above the law'."