business news in context, analysis with attitude

Published on: December 9, 2021

It pains KC to say so, since he is a NY Jets fan, but the New England Patriots and their coach, Bill Belichick, scored some serious business lessons during Monday Night Football this week.

Published on: December 9, 2021

by Kevin Coupe

The other day I took note of a Wall Street Journal report that "an activist investor is urging department-store chain Kohl’s Corp. to consider a sale of the company or a separation of its e-commerce business."

I commented:

Seems pretty clear to me that while it might increase short-term shareholder value, spinning off the e-commerce business would not position Kohl's as having the kind of customer-centric value that a retailing business needs to go the distance.   As for selling the company … well, I'm not qualified to pass judgement on that suggestion, but my guess is that if a hedge fund is suggesting it, such a deal may be good for the fund's bottom line and not necessarily in the best interests of the retailing entity.

Save me from the craven manipulations of hedge funders and investment bankers who know absolutely nothing about retailing.  If these clowns get their way, the thing they are most likely to achieve is turning Kohl's into Sears.  

Now, CNBC has a piece in which Mickey Drexler, who has served as CEO of Gap and J. Crew and founded Old Navy and Madewell, says "he doesn’t understand how the latest Wall Street idea for retail —spinning off growing online operations — will solve more issues than it ends up creating."

“It doesn’t make sense to me," he says, adding, “I don’t know what I would do if I had a brick-and-mortar along with a separate online company.  They are so embracing of each other."

Exactly the point I was making.  (Though Drexler has more street cred than I do.)

The larger and Eye-Opening point, I think, is that consumers are less and less differentiating between formats and segments - they are thinking about what they need and want, and are responding to integrated retail brand experiences that are consistent, compelling and provide a clear value proposition.

I repeat.  Breaking up a retail company by spinning off an e-commerce business may make short-term sense for investors, but it damages the retailer's ability to compete long-term.  If you want to own the customer, you have to own the total experience.

Published on: December 9, 2021

Wonder, the upscale, made-to-order food truck business that is majority-owned by serial digital entrepreneur Marc Lore, is "planning a massive expansion, with hundreds of millions of dollars from investors, to go from 60 trucks today to more than 1,000 by the end of 2022," the Washington Post reports.

Lore, of course, is known as the person who has made hundreds of millions of dollars, first by building Quidsi and selling it to Amazon and then building Jet and selling it to Walmart.  MNB reported earlier this year that Lore had invested "an undisclosed amount" in Wonder, which its founder, Scott Hilton, described as being a "part food truck, part ghost kitchen" business.  Hilton is former colleague of Lore's from their time together running Walmart's e-commerce business in the US.

The Post reports that Wonder has been testing out its concept - "showing up at people’s houses to cook them food at their curb when beckoned through a smartphone application" - in suburban New Jersey, but now its leadership has judged it ready for a broader rollout.  "Wonder plans to focus its near-term expansion mostly on the suburbs of greater New York City, where Lore grew up," the Post writes.  "In the long term, Lore and Hilton say the business is structured to operate efficiently nationwide, setting up a handful of large commissaries that can serve multiple cities, with trucks having to make only periodic trips back to central facilities to stock up. Wonder’s model has the potential to be more profitable than the notoriously low-margin app-based delivery business, they said, because of this vertical integration."

Here's how the service works, according to the Post:

"One of Wonder’s first moves was to strike deals with prominent restaurants, including Bobby Flay Steak and Nancy Silverton’s Pizzeria Mozza, or working directly with high-profile chefs like Marcus Samuelsson to develop Wonder-exclusive brands. Generally, delivery networks pitch restaurants on the chance to reach new customers, then earn money by taking a fee on each delivery.  Wonder, by contrast, pays restaurant owners and chefs a single fee for the exclusive right to act as the off-premise arms of their business … Once Wonder has gotten a restaurant on board, its own chefs — it currently has about 60 on staff — work with the restaurants to create a version of the food that can be made quickly in the back of its mobile kitchens.

"The food is partially prepared in a centralized facility, a 40,000-square foot kitchen that Wonder refers to as its commissary. Then, a customized Mercedes Sprinter van, or 'mobile kitchen,' is dedicated to each restaurant, staffed by a single employee who responds to orders made through Wonder’s app. The driver travels to the destination, parks at the curb, heats up the food in specialized ovens, and carries it to the customer’s front door. Wonder says its target delivery time is about 30 to 40 minutes."

Some background context from the Post piece:

"The company has raised  an astonishing amount of money for a food truck business that currently covers a geographic area with about 17,000 households. Lore declined to comment on Wonder’s fundraising or finances, but two people familiar with the company say it has raised over $500 million from investors including NEA, Accel and Alphabet Inc.’s GV; one of them said that about $100 million of that is structured as debt that could be converted to equity.

"Lore started Wonder in 2018 while he was an e-commerce executive at Walmart. He had his brother, Chad, take the lead at the company until Scott Hilton, who has worked with Lore since the Diapers.com days, took over as chief executive officer in 2019. Lore had been acting primarily as an advisor, but is now joining the company as the CEO and chairman of parent company Wonder Group, which will focus on building a business-to-business meal kit service and expanding internationally."

Published on: December 9, 2021

From Axios:

"JPMorgan Chase Global Research says in a forecast to clients: '2022 will be the year of a full global recovery, an end of the global pandemic, and a return to normal conditions we had prior to the COVID-19 outbreak.'

"Marko Kolanovic, chief global markets strategist and co-head of Global Research, says that forecast 'is warranted by achieving broad population immunity and with the help of human ingenuity, such as new therapeutics expected to be broadly available in 2022.'

Axios writes that "the bullish report also sees 'a return of global mobility, and a release of pent-up demand from consumers (e.g. travel, services)'."

Published on: December 9, 2021

From the Wall Street Journal this morning:

"Worker filings for unemployment benefits hit the lowest level in more than half a century last week as a tight labor market keeps layoffs low.

"Initial jobless claims, a proxy for layoffs, fell to 184,000 in the week ended Dec. 4, the lowest level since September 1969, the Labor Department said Thursday. That was close to a recent record total of 194,000 recorded in late November.

"The prior week’s level was revised up to 227,000. The four-week moving average, which smooths out weekly volatility, fell to 218,750."

Meanwhile, the Washington Post reports that "some 4.2 million Americans quit their jobs in October as churn in the labor market continued to mark the economic recovery nearly two years into the pandemic, according to a report released today by the Bureau of Labor Statistics.

"The number of people who left jobs for other opportunities in October made up 2.8 percent of the workforce, the BLS said in its monthly Job Openings and Labor Turnover survey. In contrast, the survey found 11 million job openings, only slightly less than the record from July.

"A record 4.4 million Americans quit their jobs in September. Workers took advantage of the surge in job openings across the country. August’s numbers, at 4.3 million, were also a record at the time. In contrast, in February 2020, before the big wave of pandemic-related layoffs began, 2.3 percent of workers quit their jobs. So the October data remain extremely elevated.

Published on: December 9, 2021

The Associated Press reports that "Italy’s anti-trust authority on Thursday fined Amazon 1.13 billion euros ($1.3 billion), accusing the company of exploiting its dominant position against independent sellers on its website in violation of European Union competition rules.

"The fine is one of the largest leveraged in Europe against the online retail giant, which expanded in particular in Italy during a coronavirus lockdown that prevented residents from going to stores to buy items considered nonessential … Amazon said it 'strongly disagreed' with Italian regulator’s decision and would appeal, calling the fines and proposed remedies 'unjustified and disproportionate.' It noted that more than half of annual sales in Italy are from small and medium businesses that have access to other channels to sell their goods."

The story notes that the EU has been aggressive in regulating and fining big tech companies on antitrust grounds, and that "the push is gaining steam worldwide as regulators and lawmakers take on digital giants over accusations of everything from stifling competition to failing to prevent harmful content from appearing on their platforms."

Published on: December 9, 2021

Crain's Chicago Business reports that "REEF Technology, which operates delivery restaurants and parking real estate and is backed by venture-capital firm SoftBank, is acquiring Chicago-based 2ndKitchen. Terms of the deal were not disclosed … 2ndKitchen delivers food from nearby restaurants to kitchenless businesses like bars, breweries and hotels. Using a physical kiosk and QR codes, patrons can view custom menus and order food directly to their table or hotel room."

REEF, the story notes, "has raised $1.5 billion in capital since launching in 2013."  So it has money to spend on acquisitions.  

It was just a few weeks ago that MNB took note of a Boston Globe story about REEF's business model:  Its "trailers, which it dubs 'vessels,' serve as a central dispatch for delivering food to customers who order through apps such as Uber Eats, DoorDash, and Grubhub. A single trailer, such as the one in South Boston, could prepare food for more than half a dozen restaurants, which license menu items to Reef, similar to a franchise model. Reef handles preparation and packaging and typically pays a fee to lot owners to park its trailers."

The story notes that "most of the brands Reef sells exist only online through ghost kitchens, such as Man vs. Fries, Sticky Wings, and Rebel Wings."

Published on: December 9, 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, there now have been 50,422,410 total cases of the Covid-19 coronavirus, resulting in 813,904 deaths and 39,815,866 reported recoveries.

Globally, there have been 268,278,580 total cases, with 5,298,634 resultant fatalities and 241,479,495 reported recoveries.   (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 75.9 percent of the US population age five and older, and 71.4 percent of the total US population, has received at least one dose of vaccine, while 64.2 percent of the five-and-older population and 60.4 percent of the total population has been fully vaccinated.

The CDC also says that 24.4 percent of the total US population and 26.3 percent of the 18-and-older population has received vaccine booster doses.

•  The Washington Post reports that "the push to vaccinate children against the coronavirus may be leveling off just one month after the pediatric shot became available, according to a study published on Wednesday by the KFF, a nonprofit organization focused on national health issues.

"Millions of parents across the country flocked to get jabs for their children once federal agencies gave the pediatric shot a green light in early November. The recommendation enabled children ages 5 to 11 to receive one-third the dosage of the Pfizer-BioNTech vaccine given to teenagers and adults — following the same regimen of two jabs administered 21 days apart."

The Post writes that "according to the study, an estimated 16.7 percent of children between the ages of 5 and 11 had received at least one dose as of Sunday — representing some 4.8 million kids. Only 4.3 percent have completed the two-dose Pfizer-BioNTech regimen.

"As with adult vaccinations, rates starkly vary across regions. Vermont, Massachusetts, Maine and Rhode Island have immunized at least 30 percent of children — the highest rates in the country. Meanwhile, most states with the lowest rates are in the South — including West Virginia, Mississippi, Louisiana and Alabama, where 6 percent, or less, of children have received the shot."

•  Bloomberg reports that "a World Health Organization panel said it’s best to give people two doses of the same Covid-19 vaccine, but mixing and matching is a good solution for countries facing supply constraints … Vaccine combinations, already used by some governments, could help low- and middle-income countries manage stockpiles and deal with vaccine shortages as the new omicron variant spreads."

Published on: December 9, 2021

•  The Seattle Times reports that when Amazon Web Services (AWS) suffered a major outage earlier this week, it had the result of making a lot of smart homes stupid.

Here's what happened:  "Robotic vacuum cleaners wouldn’t start. Doorbell cameras stopped watching for package thieves, though some of those deliveries were canceled anyway. Netflix and Disney movies got interrupted and The Associated Press had trouble publishing the news … The incident at Amazon Web Services mostly affected the eastern U.S., but still affected everything from airline reservations and auto dealerships to payment apps and video streaming services to Amazon’s own massive e-commerce operation."

The Times notes that "Amazon has still said nothing about what, exactly, went wrong. The company limited its communications Tuesday to terse technical explanations on an Amazon Web Services dashboard and a brief statement delivered via spokesperson Richard Rocha that acknowledged the outage had affected Amazon’s own warehouse and delivery operations but said the company was 'working to resolve the issue as quickly as possible.' It didn’t immediately respond to further questions Wednesday."

•  The Boston Globe reports that e-commerce retailer Wayfair is going to take another crack at bricks-and-mortar retail, having opened and closed a series of pop-up locations and one store over the past few years.

Wayfair said this week that it "will open three storefronts in Greater Boston in the coming year, showcasing designs from two of its in-house brands. An AllModern store will open at MarketStreet Lynnfield and Legacy Place in Dedham. And a Joss & Main shop will open in the Burlington Mall. The company says it plans to open stores for all five of its brands in the next two years … the stores will feature items for the tabletop, plus bedding, bath, and seasonal products. Customers will be able to purchase things in the store or place orders for home delivery."

•  Reuters reports that "Amazon.com Inc's push to recruit big-rig contractors to haul goods across its web of warehouses is colliding with a trucker shortage as the e-commerce company moves what are expected to be record numbers of packages this holiday season.

"Its project, called Amazon Freight Partners (AFP), enlists independent trucking companies to move goods between Amazon facilities. The companies, or AFPs, all of which are exclusive Amazon contractors, also move packages to and from the company's fleet of 85 owned or leased North American airplanes."

The story notes that "Amazon's logistics unit has bought 1,395 Amazon-branded big-rig tractors to pull trailers of goods in the United States, according to Department of Transportation data seen by Reuters. Filling seats in those vehicles falls largely to independent contractors like McKinley at a time when the industry has a record shortfall of 80,000 big-rig drivers."

Published on: December 9, 2021

•  In Kentucky, the Courier-Journal reports that Publix Super Markets announced that it will open a second store in the state in the Louisville market:  "In September, it announced it plans to open its first store in Kentucky in Jefferson County, at Terra Crossing Boulevard and Old Henry Road, near Middletown, in the fourth quarter of 2023."  The second store is expected to open in Q1 2024.

Kentucky is the eighth state in which Publix will have operations;  it currently has more than 1,200 stores in Florida, Georgia, Alabama, Tennessee, South Carolina, North Carolina and Virginia.

•  USA Today reports that Barefoot Wine and Mondelēz International-owned Oreos are teaming up for a wine-and-cookie promotion, a small-batch release called Barefoot x Oreo Thins Red Blend Wine.

According to the story, "The wine will be available starting Thursday for $24.99, while supplies last, at BarefootWine.com/OREOTHINS. Each delivery order includes two bottles of the 750mL wine and a package of Oreo Thins cookies.

"The red blend includes 'flavors of chocolate and cookies and creme along with notes of oak,' the companies said, adding the wine was also crafted to be 'enjoyed together as a perfect pairing'."

•  The New York Times reports that the government of New Zealand has unveiled a plan, expected to be passed into law next year, that essentially will result in the banning of smoking from the country.

Here's how it would work.  The legislation "would leave current smokers free to continue buying cigarettes. But it would gradually raise the smoking age, year by year, until it covers the entire population.  Starting in 2023, anyone under age 15 would be barred for life from buying cigarettes. So, for instance, in 2050 people 42 and older would still be able to buy tobacco products — but anyone younger would not."

To this point, New Zealand has been trying to address the smoking issue by raising taxes so that a pack of cigarettes now costs the equivalent of $20 (US).  Leaders there say that they understand that the new age-centric regulations are likely to create a black market, but seem to believe that when combined with other initiatives - funding for addiction services, limitations on where the product can be sold, and a reduction in nicotine levels - these moves can virtually eliminate smoking in New Zealand.

Published on: December 9, 2021

…will return.