business news in context, analysis with attitude

Published on: October 29, 2021

Empty shelves created by a disrupted supply chain can be a problem for retailers.  Or, they can be an opportunity.  KC thinks they should be the latter … and it isn't hard to imagine how. 

Published on: October 29, 2021

Amazon yesterday said that its Q3 sales were up 15 percent to $110.8 billion, compared with $96.1 billion during the same period a year ago, while profit during the period dropped by almost 50 percent, to $3.2 billion from $6.3 billion a year ago.

In explaining the drop in profit, CEO Any Jassy said, "“We’ve always said that when confronted with the choice between optimizing for short-term profits versus what’s best for customers over the long term, we will choose the latter—and you can see that during every phase of this pandemic.

"In the first several months of COVID-19, Amazonians played an essential role to help people secure the requisite PPE, food, and other in-demand items needed, and we worked closely with businesses and governments to leverage AWS to maintain business continuity as they responded to the pandemic. Customers have appreciated this commitment, which is part of what’s driving this past quarter’s AWS growth acceleration to 39% year over year; but, it’s also driven extraordinary investments across our businesses to satisfy customer needs—just one example is that we’ve nearly doubled the size of our fulfillment network since the pandemic began."

Jassy then predicted Q4 investments that will impact Amazon's profits:  "In the fourth quarter, we expect to incur several billion dollars of additional costs in our Consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs - all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season. It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners."

Published on: October 29, 2021

The National Retail Federation (NRF) yesterday issued its annual predictions for the end-of-year shopping season, saying that "holiday spending has the potential to shatter previous records," forecasting that "holiday sales during November and December will grow between 8.5 percent and 10.5 percent over 2020 to between $843.4 billion and $859 billion. The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with a previous high of 8.2 percent in 2020 to $777.3 billion and an average increase of 4.4 percent over the past five years."

The prediction goes on:  "NRF expects that online and other non-store sales, which are included in the total, will increase between 11 percent and 15 percent to a total of between $218.3 billion and $226.2 billion driven by online purchases. In comparison, that number is up from $196.7 billion in 2020."

“The outlook for the holiday season looks very bright,” NRF Chief Economist Jack Kleinhenz said. “The unusual and beneficial position we find ourselves in is that households have increased spending vigorously throughout most of 2021 and remain with plenty of holiday purchasing power.”

Published on: October 29, 2021

United Fresh Produce Association and the Produce Marketing Association (PMA) yesterday addressed their previously announced merger into a new organization that will be called the International Fresh Produce Association (IFPA) by unveiling their new volunteer leadership.

“I’m excited to have the opportunity to lead and collaborate with this board of directors,” said Bruce Taylor, chair of the new organization and CEO of Taylor Farms. “This group, in partnership with staff, will help set the strategic tone and direction as we deliver against the seven strategic priorities shared when the new organization was announced in March. I can’t wait to get started.”

The priorities include "a commitment to all sectors of the fresh produce and floral supply chains; a commitment to growing demand and profitability; and a commitment to global engagement."

More information is available here.

Published on: October 29, 2021

Facebook CEO Mark Zuckerberg said yesterday that the company is reorienting itself to what is called the "metaverse" - which is a term used to describe a virtual and interconnected world  - and changing its corporate name to Meta.

The Facebook name will continue to be used for the company's prime social media product, but Zuckerberg will serve as CEO of the parent company.

“From now on, we’re going to be the metaverse first. Not Facebook first,” Zuckerberg said yesterday. “Facebook is one of the most used products in the world. But increasingly, it doesn’t encompass everything that we do. Right now, our brand is so tightly linked to one product that it can’t possibly represent everything we are doing.”

The Washington Post reports that the move is "part of a strategic shift to emphasize the development of its virtual world while its main social network business is in crisis" and "comes amid a broader effort to shift attention away from revelations that it knew its platform was causing a litany of social harms."

The Post writes: "A whistleblower has come forward with tens of thousands of documents demonstrating how the company was aware that it caused polarization in numerous countries, led people down misinformation rabbit holes, and failed to stop a violent network that led to the January 6 insurrection. In response, lawmakers around the world have threatened new regulation for the tech industry, as well as demanding more information from Facebook on what it knew and when.

"The documents were obtained by a consortium of news organizations, including The Washington Post, and were provided to Congress and the Securities and Exchange Commission in response to a whistleblower lawsuit.

Facebook has said that the Facebook Papers are a 'coordinated effort to selectively use leaked documents to paint a false picture of our company'."

The New York Times writes:  "Facebook’s name change is largely cosmetic. It will begin trading under the stock ticker MVRS beginning on Dec. 1. The company will also rebrand some of its virtual-reality products as Meta, shifting away from the original brand name of Oculus.

"The company was not restructured and no executive changes were announced. Mr. Zuckerberg also remains chief executive and chairman. He holds majority voting power over any changes that could affect the future of the company."

Published on: October 29, 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…

•  Here are the current US Covid-19 coronavirus numbers:  46,685,145 total cases … 763,784 deaths … and 36,565,948 reported recoveries.

The global numbers:  246,441,852 total cases … 4,999,550 fatalities … and 223,280,567 reported recoveries.   (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 78 percent of the US population age 12 and older has gotten at least one dose of vaccine, while 67.4 percent of that group has been fully vaccinated.  The CDC also says that 66.7 percent of the total US population has gotten at least one dose of vaccine, and that 57.6 percent has been fully vaccinated.

The CDC reports that in the daily short time that they have been available, vaccine booster shots have been received by 20.5 percent of the US population age 65 and older.

Made my appointment yesterday for the booster shot.  Can't get it soon enough, as far as I am concerned.

•  From the New York Times this morning:

"Citigroup told employees on Thursday that it would require vaccination against Covid-19 as a condition of employment in the United States, making it the first major bank to issue such a mandate.

"'It has become crystal clear that Covid-19 will not be going away anytime soon,' Sara Wechter, the company’s head of human resources, wrote in a LinkedIn post describing the new policy.

"Ms. Wechter cited two catalysts for the decision. First, because the bank does business with the federal government, it has an obligation to comply with President Biden’s executive order requiring vaccination for people working on government contracts. And mandating vaccinations will also allow the bank to 'ensure the health and safety of our colleagues as we return to the office,' she wrote."

Published on: October 29, 2021

•  Amazon announced yesterday that it is ending the Key In-Car Delivery program that allowed it to deliver packages directly to customers' car trunks.

CNBC reports that Amazon suspended the program last March with plans to revive it at some point, but now has decided to end it and focus on its in-garage delivery program, which it sees as having broader potential.

The CNBC story says that "Amazon launched its in-car delivery service for some Prime members with select vehicle models in 2018. The offering was an extension of Amazon Key, the company’s array of services that enable delivery drivers to leave packages in garages, homes and businesses. In-car delivery was compatible with vehicles from carmakers like Ford, Volvo and Hyundai.

"Amazon has pitched these services to Prime members as a way to keep their packages or groceries safe from weather, damage and theft. The services have also raised concerns around the prospect of giving a stranger access (albeit, limited entry) to your car, home or garage."

•  From CNBC:

"Amazon’s first TV sets, which you can talk to and control without a remote, go on sale this week … It’s a good TV for the money, and Alexa can be useful, but the software interface doesn’t look as sharp as it should on a 4K TV.

"Amazon has traditionally sold Fire TV Sticks and Fire TV Cubes that plug into existing sets, or partnered with other device makers who integrate its Fire TV software. Usually, there are buttons on the remotes that let you use Alexa to control the TV. With the Omni Series, however, Amazon brings its Alexa assistant right into the TV."

The cost of the 65-inch Amazon Fire TV Omni Series television - $830.

Published on: October 29, 2021

•  From the New York Times:

"Worker filings for unemployment benefits declined last week to their lowest level since the coronavirus pandemic began, as employers competed for employees in a tightening labor market.

"Initial unemployment benefits, a proxy for layoffs, decreased to 281,000 last week from a revised 291,000 a week earlier, the Labor Department said Thursday."

•  Yahoo Finance reports that Target CEO Brian Cornell says that the retailer "is well-prepared in the lead-up to the holiday shopping season to navigate the supply-chain challenges weighing on retailers and manufacturers of all kinds.  All it took was very, very careful forward planning."

According to the story "Cornell concedes that supply-chain challenges will be around for some time. 'I think we have been seeing supply-chain challenges throughout the pandemic. Whether that is closures in Asia or the slowdown of ports, the challenges with driver shortages in the United States. I don't think these issues are resolved overnight. Obviously we are very focused on making sure we play our role and move through the system. We are currently hiring 30,000 additional team members in our supply-chain system. I think this is going to take quite a bit of time to sort out'."

•  The New York Times reports that "Starbucks employees in upstate New York seeking to unionize notched a victory in their effort on Thursday, a day after the company, which is facing a staffing shortage, said that it would raise wages for U.S. employees.

"Workers at three Buffalo-area stores will vote on whether to form a union in a mail-in election ending Dec. 8, an official with the National Labor Relations Board ruled Thursday.

"In a win for the union seeking to represent the employees, the three stores will vote in separate elections, meaning that workers need only a majority of votes cast at a single location to form a union. The company had argued that employees at all 20 Buffalo-area stores should vote in a single election."

Meanwhile, as the Associated Press reports, "Starbucks on Thursday reported record quarterly sales thanks to its robust U.S. business that helped make up for weakness in China and other markets.

"The Seattle coffee giant said its U.S. same-store sales — or sales at locations open at least a year — jumped 22% in the July-September period. Stores saw higher traffic and customers spent more on pricier cold drinks, which made up 75% of U.S. sales, and food, which saw sales climb 35% in the fiscal fourth quarter."

Published on: October 29, 2021

•  FMI-The Food Industry Association announced yesterday that Christine Pollack has joined FMI as the association’s new vice president, government relations.  Prior to joining FMI, Pollack founded Pollack Consulting, and earlier in her career was vice president, government affairs at the Retail Industry Leaders Association (RILA).

FMI also said that its Senior Director, State Government Relations, Elizabeth Tansing, has been promoted to Vice President, State Government Relations.

Published on: October 29, 2021

In Thursday Night Football action, the Green Bay Packers defeated the Arizona Cardinals  24-21.

Published on: October 29, 2021

Yesterday I did a piece about how many hotels seem to be reducing services, either because of Covid-related restrictions or lack of staff, but aren't being transparent about it, and aren't cutting their prices.  I suggested that such anti-customer practices often are a mistake, and MNB reader Mark P. O'Brien responded:

We just returned from a two week fall vacation to New England.  We stayed in Marriott properties in Portland, Burlington, Lake Placid, the Cape area & Providence.

I’m retired so I don’t travel for business anymore but my wife and I were surprised at a few changes we noticed at Marriott properties.

Restaurant’s and bars closed due to not being able to find out retain staff. A general lack of staff. 

Lack of business travelers.  

Dogs:  It appeared to us that in order to survive Marriott has gone all out in welcoming dogs to appease the leisure traveler.  At times we felt like we were staying at a kennel at multiple locations.  One room we were given had what appeared to be a large amount of cat hair all over the bathroom floor. The door of the bathroom had what appeared to be cat scratches.  It looked like the cat had locked in the bathroom when the renter left the room.

My wife is allergic to cats.  In 5 minutes she was having reactions.  Front desk staff were good about getting us another good room but told us the room had just come off a month long rental.  We wondered how people with very severe pet allergies handle these changes? 

I hold Platinum Marriott status for what it’s worth but these changes have us questioning whether we want to remain with the brand.

Sounds like a classic case of a brand not being loyal to the customer.

Another MNB reader wrote:

This is a disaster-in-the-making move to appease the street with a story of permanently optimizing the business model to favor balance sheet considerations over the guest.

Earlier in my career I spent seven years while at Ogilvy & Mather as the managing director on what was then our largest client in the Seattle office, Westin Hotels & Resorts. The word hospitality was near biblical inside this organization -- a business largely dedicated to guest experience. Every aspect of operations was designed to enhance guest care and earn – in those pre-digital days – word of mouth endorsement. General managers in hotels were indeed Generals and had vast power to enact any move deemed necessary to enhance guest experience and bring the delivery of “hospitality” to life in ways that at times seems magical. This was woven into the DNA of operations which filtered down into ethos, belief system and daily activity throughout the organization.

If you commoditize your industry to “heads in beds” or butts in seats as is the case in the airline industry, you dilute the value proposition over time. This allows disruptors to innovate in your category, come forward with guest centric solutions that will win hearts every time and steal your customers. Not surprised by this move. We can now observe the steady decline over time.

MNB reader Rich Heiland wrote:

My wife and I went to the Poconos last weekend. Hotels, even out of season, would have been in the $125 range for something comfy and decent. We got a small AirBnB cabin for $79. Had to make my bed and cook breakfast, but for nearly a $50 difference, and a more atmosphere, why not? Hotels seem to be acting like they have no competition. 

And, to be fair, MNB reader Steve Workman has had a different experience:

I am a Diamond Club Member with Hilton properties.  I have been traveling throughout the pandemic and have seen the adjustments made to the “Free” Breakfast and other amenities.  The most important thing to me when I stay at a Hilton property is that I feel like a Diamond Club member during my stay.  If you travel enough and patronize a particular chain enough, you deserve some recognition.

In my mind, Hilton has found a way to do that.  When I arrive, my “Diamond Member” parking space is still there.  When I check-in at the front desk, although I usually prefer the Digital Key option on the App, I feel welcomed and I am offered a choice of beverage, and snacks.  I am also offered daily cleaning of my room if desired, which I usually pass on because I think I can manage with not having my room cleaned and bed made for the 2 - 3 days of my stay.  I am also offered a $12 credit for breakfast daily for each adult staying in my room.  This is their way to avoid the contact of everyone at the “Free” breakfast section and yes I am sure it also involves a shortness of staff.

Either way, when I arrive and leave there Hilton property, I feel like I am acknowledged for my status, which is really all I need.  I also receive a survey after each stay, and that is always one of the questions on the survey. “Did you feel welcomed as a Diamond Club Member during your stay?”  In my opinion, Hilton has figured it out.  Not sure about the other Hotel Chains, as I am partial to Hilton.

Responding to my assertion that Instacart is actually disintermediating traditional retailers from consumer relationships, in part by going directly to manufacturers for deals and promotions, one MNB reader wrote:

I had this conversation yesterday, so it is interesting that it comes up here.  Retailers have a lot of power in the selling process and are a key role in connecting to the consumer.  However, that power by many, has been abused over the years through very unacceptable and exorbitant practices, all on the threat of the manufacturer of being delisted.  Now there is a new player in town that manufacturers are seeing the benefits of.  Retailers are becoming less important as e commerce grows.  Imagine what would happen to prices if, there were no slotting fees, no ad fees, no reset fees, no processing fees, and many other etc. fees,  if all these were to be directed toward actually driving sales.  A majority of retailers of today have positioned themselves solely as an expensive conduit to the consumer, which will not bode well for them in the future. 

And, on another subject, from MNB reader George Denman:

I can’t tell you how excited I am to hear that Dorothy Lane Markets has finally penned a deal to open their 4th store right here in Mason, OH. This is a stone throw from Kroger’s Arbor Square store, an upscale Walmart location, and a Whole Foods location. I have always been a big fan of DLM, from their award winning customer service ( no self-serve scans there) to some of the finest cuts of meat in the market to their Killer Brownies to my all-time favorite, Asiago cheese flute bread. I stopped at the Washington store location earlier this week, which for me is a 30 minute drive, to pick up the bread and one of their homemade 4 berry pies. I brought the pie into our Graeter's corporate office to share yesterday, always a risky move given Graeter’s has its own bakery, but the team enjoyed the delicious treat. Now if you like no-bake cookies DLM has them in both chocolate and peanut butter versions.

Published on: October 29, 2021

I've only seen five out of eight episodes - the last three haven't been released yet - but I'm finding "Dopesick," on Hulu, to be a harrowing viewing experience - scary, compelling, and riveting.

The series is based on a nonfiction book of the same name by Beth Macy, created and adapted by Danny Strong, that looks at the opioid crisis in America - specifically the development and sale of OxyContin by Purdue Pharma - and the deadly impact it had on people and families all over the country.

The screenplay largely focuses on three theaters - the boardroom at Purdue Pharma, where they plotted to sell hundreds of millions of dollars worth of the highly addictive painkillers … small town West Virginia, where the use of OxyContin wreaked havoc on people's lives … and the federal prosecutors struggling to understand and make their case.

If there is a problem with "Dopesick," it is that story is told in non-linear fashion;  in the beginning, the movement between years can be confusing.  But with a little time, it becomes clear that the technique is there to give context and draw a thick line between precipitating events and their often tragic results.

The cast is sterling - Michael Keaton, Peter Sarsgaard, Kaitlyn Dever and Rosario Dawson are as good as they've ever been, and Michael Stuhlbarg is chilling and amoral as Richard Sackler, scion of the family that control Purdue Pharma, a company where the only bottom line is the bottom line.  (One note - at one point in the series someone mentions that Purdue is located at 201 Tresser Blvd. in Stamford, Connecticut - which is right next door to a building where I used to work, less than five miles from where I live, and housed in a distinctive glass building one can see driving on I-95.  I was, to be honest, floored.)

"Dopesick" can be excruciating to watch because of how it details the toll that OxyContin addiction took on so many people.  I was only mildly informed about the opioid crisis, and I was unfamiliar with the book on which the series is based.  But I am finding it to be heartbreaking and mesmerizing … and I really recommend it to you.

One quick note:  If you're like me, you'll start Googling Purdue Pharma and some of the players in the story as you watch "Dopesick," and you'll see how it all turned out for the Sackler family.  That alone should make you sick - those bastards should've gone to jail for a long, long time.)

A few other quick things…

•  If you've not watched any or all of "Only Murders In The Building," the Steve Martin-Martin Short-Selena Gomez mystery series on Hulu, I totally recommend it.  Clever writing and engaging performances kept this from being "Murder They Wrote," and there were enough red herrings thrown in to keep any mystery fan engaged.  Plus, they did some really innovative things, such as the episode that was shown from the perspective of a deaf character and had virtually no dialogue.  Smart, adult, and the television version of comfort food.

•  I continue to be impressed by the degree to which the powers that be in the Star Trek universe continue to expand their brand in smart ways.  The second season of the animated series, "Star Trek: Lower Decks," has just concluded, and it managed to be both respectful and a little subversive about some of the franchise's most familiar tropes while focusing largely on the "lower decks" personnel who do all the grunt work.  And the newest animated series, "Star Trek: Prodigy," debuted yesterday, and it is a gorgeously rendered show designed to appeal to kids, focusing on a band of young penal colony escapees who find themselves running an abandoned starship (guided by a hologram version of "Star Trek: Voyager" Captain Kathryn Janeway, voiced by Kate Mulgrew - a great touch).  This strikes me as smart branding, all designed to give new energy to a continuing Star Trek renaissance.

That's it for this week.  Have a great weekend, and I'll see you Monday.

Stay safe.  Be healthy.

Sláinte!