business news in context, analysis with attitude

Published on: October 20, 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.

This week, Tom and KC focus on three stories that have appeared on MNB (two of them today).  First up, they look at the one-third loss of market share suffered by Alibaba in China, and ponder whether this could provide a roadmap for hoe to compete with Amazon in the US.  And, they talk about the planned collaboration between Amazon and Starbucks for a coffee shop using Just Walk Out technology.  Finally, a consider the implications of Instacart's acquisition of Caper AI, a smart shopping cart company.

If you'd like to listen to The Innovation Conversation as an audio podcast, click below.

Published on: October 20, 2021

Bloomberg reports that Instacart said yesterday that it is acquiring startup smart cart company Caper AI for $350 million, a move that will give it ability to offer its client retailers the ability to provide checkout-free shopping.

According to the story, Caper AI "uses image-recognition cameras and weight sensors to automatically detect items as they’re placed in the cart, eliminating the need to individually scan groceries. The “smart” carts are also equipped with a payment terminal that allows customers to check out without having to wait in line."

The Caper AI carts currently are being used in select Kroger and Wakefern stores, the companies said.  Both companies also are clients of Instacart.  The carts also are being used by other retailers in Canada, Spain and France, they said.

Bloomberg writes that Instacart "is gearing up to go public just as competition in grocery delivery in the U.S. grows with DoorDash Inc. and Uber Technologies Inc. ramping up services of their own … Instacart also recently acquired FoodStorm, which offers order-ahead and catering technology for retailers."

Published on: October 20, 2021

Business Insider reports that Amazon and Starbucks have been working on the launch of a new format store - codenamed "Verde" - that would combine elements of a Starbucks coffee shop and the food sold in an Amazon Go store, using Just-Walk-Out checkout-free technology.

According to the story, the format "was designed to build a lounge-style cafe that offers both Starbucks's craft beverages and Amazon's assortment of baked goods and hot foods, without the hassle of having to wait in line to check out, according to Amazon's internal document obtained by Insider.

"The initial layout of the store shows Amazon Go's food section within a cafe that has a lounge seating area. Customers would have to use separate apps for pay — Starbucks's app for drinks and Amazon's app for food — though the companies eventually want to build an integrated solution. The store was expected to have a newly created brand."

The story notes that it is unknown if the two companies are still working on the project, or if there is a potential launch date.  While the original plan was for a Q4 2020 opening, it seems likely that obstacles created by the pandemic got in the way.

However, a number of stories about "Verde" observe that it seems indicative of Amazon's broader intentions about both the use of checkout-fee technology and bricks-and-mortar retail.

From Business Insider:  

"The plan further demonstrates Amazon's ambition to expand the JWO technology behind its cashierless Go stores into new areas … The potential partnership could give Amazon new monetization channels for the JWO technology, as its cashierless Go stores still largely remain unprofitable, according to two people familiar with the matter, who spoke on the condition of anonymity to discuss sensitive topics. An Amazon-branded cafe would be the e-commerce giant's latest foray into physical stores, which already includes grocery stores, bookstores, and a hair salon, among others."

From GeekWire:

"The reported talks reflect Amazon’s ambitions to take the technology well beyond its own stores and initial third-party implementations. Starbucks’ apparent interest also shows the potential value of the technology to other retailers and venues, noting that Starbucks considered it 'a top ten initiative' at the time, supporting its goal of eliminating lines."

Published on: October 20, 2021

USA Today reports that Target "is doubling the number of “Apple at Target shop-in-shop experiences” and expanding from 17 to 36 stores in time for holiday shopping.

"The new concept, which launched in February, doubles Apple’s footprint in select Target stores and brings displays for iPhone, iPad, Apple Watch, AirPods, the HomePod mini, Apple TV, AppleCare and other accessories together in one space. Target’s tech employees also are trained by Apple."

The story goes on:  "The mini Apple stores that opened in February include five Texas and four Florida locations along with one location apiece in California, Delaware, Massachusetts, Minnesota, New Hampshire, New York, Oklahoma and Pennsylvania.

"The new Apple shops are coming to 19 stores in three states. Texas is getting the Apple update in nine stores, Florida in seven stores and Minnesota in three stores."

Target also "is expanding its 'Disney Store at Target' concept to 100 more stores by the end of 2021. It's also been opening additional Ulta Beauty at Target shops."

Published on: October 20, 2021

Amazon said yesterday that sales in its third-party marketplace now account for about 60 percent of all its retail sales.  In addition, the company said that third-parties "sold more than 3.8 billion products, averaging 7,400 every minute … averaged more than $200,000 in sales, up year-over-year from about $170,000 … and "had nearly $2.2 billion in international export sales, up year over year from nearly $1.5 billion."

The report comes as Amazon prepares to host its Accelerate 2021 virtual conference for the marketplace community, and as it deals with increased pressure from legislators and regulators over its treatment of third party sellers and misuses data when creating its own private label products.

Published on: October 20, 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 45,996,507 total Covid-19 coronavirus cases … 748,652 deaths …and 35,710,331 reported recoveries.

Globally, there have been 242,334,746 total cases, with 4,928,962 fatalities and 291,675,344 reported recoveries.  (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 77.2 percent of the US population age 12 and older has received at least one dose of vaccine, with 66.8 percent being fully vaccinated.

The CDC says that 14.9 percent of the US population age 65 and older has received a booster dose of vaccine.

Published on: October 20, 2021

•  The Verge reports that "Facebook is planning to change its company name next week to reflect its focus on building the metaverse, according to a source with direct knowledge of the matter.

"The coming name change, which CEO Mark Zuckerberg plans to talk about at the company’s annual Connect conference on October 28th, but could unveil sooner, is meant to signal the tech giant’s ambition to be known for more than social media and all the ills that entail. The rebrand would likely position the blue Facebook app as one of many products under a parent company overseeing groups like Instagram, WhatsApp, Oculus, and more. A spokesperson for Facebook declined to comment for this story."

Published on: October 20, 2021

•  Coborn’s said yesterday that it has signed a purchase agreement to acquire three Tadych’s Econofoods grocery stores in eastern Wisconsin and three locations in the Upper Peninsula of Michigan, the company’s first expansion into that state. The stores are operated by the Tadych family under the Tadych’s Econofoods banner, and will continue to carry that name after the acquisition has closed.

Terms of the deal were not disclosed.

The transaction is expected to close in early December, subject to customary closing conditions. With this acquisition and the opening of a brand new Coborn’s Marketplace store in Buffalo, MN in November, Coborn’s, Inc.’s portfolio of grocery stores will expand to 66 locations in Minnesota, Wisconsin, South Dakota, North Dakota and Michigan. 

•  Publix Super Markets announced that it is teaming up with Sarasota Memorial Hospital – Venice "to provide bedside delivery of prescription medications to patients prior to discharge. When the hospital opens in November, patients can choose to have their prescriptions filled and delivered to their hospital room, a free service designed to ease the transition from hospital to home.

“Publix Pharmacy is always looking for ways to provide premier service to our customers, whether it’s inside our stores or through collaborations with local hospitals,” said Publix Vice President of Pharmacy Dain Rusk in a prepared statement.  “Providing bedside delivery to Sarasota Memorial Hospital – Venice will give patients the opportunity to conveniently obtain the medications they need before leaving the hospital.”

•  The New York Times reports that as Starbucks employees in the Buffalo area consider unionization, with the complaints that include "increased use of productivity goals, inadequate attention to training and periods of understaffing or high turnover," imported managers from other locations have descended on the affected stores.

The goal of the executives, the worker say, is "to intimidate workers, disrupt normal operations and undermine support for the union."

Starbucks says that "the additional managers, along with an increase in the number of workers in stores and the arrival of a top corporate executive from out of town, are standard company practices. It says the changes, which also include temporarily shutting down stores in the area, are intended to help improve training and staffing — longstanding issues — and that they are a response not to the union campaign but to input the company solicited from employees."

Starbucks is not unionized anywhere in the US.

•  From the Financial Times:

"A group of international companies including Amazon, Ikea and Unilever have committed to using only zero-emission ships to transport their cargo by 2040, in the biggest step yet to decarbonise ocean shipping.

"The pledge by nine multinationals should give shipping groups and others confidence to invest in the ships, infrastructure and fuels needed to eliminate the sector’s greenhouse gas emissions … Decarbonising shipping will involve investing billions of dollars in redesigning fleets and producing new fuels such as green ammonia, methanol and hydrogen at scale.

"Amazon said its goal would apply to any cargo it handled, including that of third-party sellers which turn to the US company to handle logistics. They make up most of the sellers, with many based in China."

Published on: October 20, 2021

Yesterday we took note of a CNBC report that Walmart plans to give its Walmart+ members advance access to its Black Friday deals, which, if outside estimates are to believed, has the potential of making some 32 million US households feeling a little more joyful about the end-of-year holiday shopping season.

I commented, in part:

I think it is fair to suggest that this is antithetical to Walmart's traditional way of thinking, which would've wanted to treat all customers the same.

The thing is, not all customers should be treated the same.  Best customers should get better access, better prices … and if a retailer can get the customer to pay for that treatment, so much the better, because they're even more invested in getting maximum benefit out of their membership.

One MNB reader responded:

I saw your comments on Walmart’s new first crack policy. I couldn’t agree LESS with you.

Having worked for Walmart for over 18 years as a VP and listening to Sam Walton and David Glass speak daily about EDLP, I can assure you that both would not have approved.

Walmart got off the tracks years ago when they got behind Amazon and tried to catch up. They threw out EDLP to do their online business and stopped their price matching program. They watched Amazon venture into many non-retail venues that were profit centers and found they had none. So the answer has been, whatever Amazon does we will do, or at least try.

Walmart seems to be okay with not charging for having associates at 15.00+ an hour do my shopping while shelves go un-stocked and they block the aisle while picking orders.  They don’t care that I have to check myself out without a hello or thank you.  (Besides it being on the receipt.  Not to mention having 4-5 associates in yellow vest standing in the checkout area WATCHING…)

Sam's vision was to bring value to small town America, the same prices that were in Dallas would now be in Bentonville for ALL, not cutting in line, no early hour for the chosen few. So I get all the games that are going on, but that doesn’t mean you have to follow them over the cliff…   There are so so many areas that Walmart is behind the industry like check out, item selection, pricing, etc., because they're trying to make sure they can still see Amazon taillights off in the distant.

Write it down, 4-5 years Walmart will follow the rest of the retailers down the path of failure. 

Wow.  That's dire.

Let me pose a question here, one that anyone can answer.  (I have no idea what the answer is.)  Would sam Walton's approach to retailing have been successful ins 2021?  Or would he have been so reflective of days gone by that he might not have been able to adjust?

Just curious.

Another MNB reader had a different take on the Walmart+ program:

Thank you for pointing this critical issue out!  I am always shocked that companies are so obsessed with gaining new customers that they offer lavish rewards (how many free phone ads for new service do you see??) while completely ignoring their current customer base.  There is such a great opportunity which I think the grocery industry has been very effective at executing with loyalty programs.  Another good step forward!

Got the following email from MNB reader Steve Ritchey:

My older brother is a retired college Associate Dean and Clinical Professor.  Last year, due to the pandemic and his health concerns, (he has an autoimmune disorder so he and his wife were extremely vigilant about being out in public).  They turned to online ordering and either curbside pickup or home delivery for their grocery needs.  When they found something hard to find they would tell me and I would locate it in one of the many stores I called on then and still call on.

Now that things have eased up a bit, and both he and his wife are fully vaccinated, they can go to the grocery stores again.  But, they choose not to because by ordering online and doing curbside pickup, they spend less.  They plan their meals on Fridays, place an order and he picks it up on Saturday.  It requires planning, but he says they save a noticeable amount on their grocery bill.

Those of us in retail know that supermarkets are set up to  entice you to spend more money while in their stores.

I also wonder how many people, due to being at home, unable to shop, and maybe being short of money due to the pandemic, have learned they don't really need the latest and greatest widget or gadget, or electronic toy to be happy, where in past times, they considered such things necessities. 

I've been in CPG sales long enough to realize that the reasons people behave and make purchase decisions are more than plentiful, and we could spend the rest of our lives enumerating them.  I just thought I might point out the story of someone close to me.

On the subject of how to eliminate the coin shortage problem, one MNB reader wrote:

A terrific program for resolution that can be used for cash and credit / debit transactions is “Round Up for Charity”.  Wouldn’t a national program that is implemented which gives consumers a choice for a contribution rather than getting change?  It could be industry specific such as food banks for our industry. 

Only problem could be that your favored charity might be different from mine - and I can think of some places where I definitely would not want my money to go.

And, responding to Michael Sansolo's column this week about how sustainability concerns seem to cut across all demographics, a conclusion reached by a study done by the Coca-Cola Retailing Research Council, MNB reader Craig Craig Espelien wrote:

I have been helping a new startup in the food waste elimination space, Phood Solutions,  and have dug deep into what this costs the industry. Waste from grocery stores makes up a large percentage of what goes into municipal landfills and has an immense negative impact on profit (from my numbers and the Phood Solutions approach, there is about $3.7 billion the industry can drop to the bottom line by understanding where this waste is coming from, digging into the analytics of what is causing it and eliminating the waste before it ever occurs). This does not include the roughly 30 tons of carbon created by getting this now excess food from the farm to the trash.

The numbers are staggering - but can be applied in a way to helps everyone understand that our first move from trash to compost - which was once considered the end-all-be-all of food waste containment is simply re-apportioning trash from bad trash to good trash (see the EPA’s Food Waste graphic below). At Phood, we seek to eliminate it altogether starting in deli, moving to produce and then into other fresh departments (we play at the top of the pyramid - reduce the volume of surplus food generated).

As an example, roughly one-third (~35%) of all food in the US goes to waste. When you compare this to roughly 12% of people in the US experiencing a significant level of food insecurity we see that by simply (and I do not mean it is simple or easy) figuring out how to stop the waste from occurring, we could feed our own hungry three times over.

We do not pretend to be the only solution - but we are focused on being part of the solution and one that helps shine a light on the problem and address three key areas:  Feed the hungry … Save the planet … Help retailers make more money

The CCRRC report is amazing - and has been sent to our entire team!

Published on: October 20, 2021

In the National League Championship Series, the Los Angeles staged a dramatic eighth inning comeback and defeated the Atlanta Braves 6-5.  The Braves still have a 2-1 game lead in the best-of-seven series.

In the American League Championship Series, the Houston Astros staged a similar late-game rally to defeat the Red Sox 9-2.  The Red Sox and Astros now are tied at two games apiece in the best-of-seven series.