business news in context, analysis with attitude

Published on: February 23, 2022

The continuing 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 look at Peloton's missteps and travails, drawing specific lessons that retailers should take to heart as they prepare for a post-pandemic world.  From how to calculate a total addressable market (TAM) to the opportunities that Peloton has to develop a more software-driven business model that depends o constant value innovation, Tom and KC see metaphors and lessons that can be applied by traditional retailers.

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

Published on: February 23, 2022

CultureMap Houston reports that Kroger has opened a new ghost kitchen with partner Kitchen United MIX - this one in one of its Houston stores.

According to the story, "Available for both pickup, to-go, and delivery via third party apps, Kitchen United MIX offers food from more than 10 restaurant brands such as Fuddruckers, The Rustic, Buca di Beppo, Dog Haus, and local favorite Burns Original BBQ. Other restaurants will prepare cuisines that include sushi, Tex-Mex, vegan-vegetarian, and breakfast burritos … Diners can order their meals using Kitchen United's website, mobile app, or on-site kiosks that would allow customers to order and shop while their meals are being prepared. Restaurant employees cook the meals and pack them for to-go. Looking at the ordering website, prices appear to be similar to what a person would pay at the brick-and-mortar location."

“We are thrilled and proud to be the first Kroger location in Texas to launch this exciting and innovative partnership,” Kroger Houston president Laura Gump said in a prepared statement. “'What’s for dinner' is a question that’s always on the minds of our customers and being able to offer a fresh and tasty selection, paired with friendly service, is the experience we strive to provide each day. This partnership is one way we continue to advance our 'Fresh for Everyone' strategy.”

Published on: February 23, 2022

From Reuters this morning, a story about how the Retail, Wholesale and Department Store Union (RWDSU) is once again accusing Amazon "of unlawfully interfering with a union election at an Alabama warehouse where the company had already been found to have engaged in unlawful conduct to deter labor organizing."

According to the story, the RWDSU "filed charges with the National Labor Relations Board (NLRB) claiming Amazon removed union literature from employee break rooms, limited workers' access to the warehouse before and after shifts and forced workers to attend anti-union meetings."

Amazon's position is that it has "fully complied" with the law.

Published on: February 23, 2022

Axios this morning has a story about how the demand for what is called "green talent" - people with the skills to create business models that are more environmentally friendly and that can achieve climate change-oriented goals - "is expanding across all industries."

Here's how Axios frames the shift:

"Hiring for green skills grew globally by almost 40% between 2016-2021, but demand will soon outpace supply," economist Karin Kimbrough writes in a new blog post.

"While job postings requiring green skills grew at 8% annually over the past five years, the share of green talent has grown at roughly 6% annually in the same period.

"Green jobs include more than just solar panel installers and sustainability consultants.

Some fast-growing green jobs involve broader roles like compliance manager, facilities manager or technical sales rep.

"U.S. job listings in the 'Renewables & Environment' sector grew 237% over the last five years — vs. 19% growth in oil and gas. By 2023, the sector will outnumber oil and gas jobs, LinkedIn predicts.

"Meanwhile, more job seekers are listing green skills like ecosystem management, environmental policy and pollution prevention on their resumes."

Published on: February 23, 2022

CNBC reports that Warby Parker, which as been a leader in the direct-to-consumer movement, selling eyeglasses online and then in stores by positioning them as fashion-for-less, has its eye on a second act: selling services.

“We’re at this kind of interesting transition where historically we’ve been a glasses company and eyeglasses brand and now, we’re transitioning to becoming a holistic vision care company,” co-founder and CEO Dave Gilboa tells CNBC. “Where, in addition to buying glasses from us ... Now, an increasing number of our customers are also getting their eye exam and prescriptions from us."

The services business would be linked to the company's physical expansion:  "Currently, Warby Parker has 160 locations in the U.S. and Canada, and Gilboa said it has the potential to increase that number to 900, though he said it will take a while to get there."

The move, the story suggests, will position Warby Parker as increasingly competing against French-Italian company EssilorLuxottica, which has a multi-brand model: "it manufacturers its own labels such as Ray-Ban and operates under license for some of the world’s largest luxury players including Chanel, Versace and Ralph Lauren. It produces around 80 million to 90 million pairs a year according to a company spokesperson in an email to CNBC, and it made 5.5 billion euros in revenue in the third quarter of 2021, selling in North America, EMEA and Asia.

"The French-Italian company also runs Sunglass Hut and other stores that sell its eyewear, and owns vision insurance companies too, including EyeMed, leading to criticism by some that it is a monopoly."

"We don’t spend a lot of time thinking about others in the space and, as a direct-to-consumer company, we get a lot of feedback [on] what’s working well,” Gilboa tells CNBC. “We do expect to grow significantly faster than the overall industry over the years and decades to come … We don’t really think in terms of market share or kind of getting bigger than the others in the category,” he added.

Published on: February 23, 2022

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…

•  The United States now has had 80,270,563 total cases of the Covid-19 coronavirus, resulting in 963,371 deaths and 52,199,829 reported recoveries.

Globally, there have been 428,760,419 total cases, with 5,928,528 resultant fatalities and 356,939,854 reported recoveries.  (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 76.2 percent of the total US population has received at least one dose of vaccine … 64.8 percent are fully vaccinated … and 43.4 percent have received a vaccine booster shot.

•  Axios reports this morning that "the federal government plans to test new vaccines that combine multiple strains of COVID to find what offers the best potential new booster.

Axios notes that "fourth doses are already authorized for immunocompromised people. But for most people, a single booster shot appears to offer strong protection against severe disease, including from Omicron."

•  From the Washington Post:

"As coronavirus cases continue to decline across the country, all states but one — Hawaii — have dropped their mask mandates or have made plans to do so in the coming weeks. This week, Target and Apple stores joined other retailers in pulling back their own mandates.

"In recent days, some cruise lines — including Norwegian and Royal Caribbean International — said they are relaxing mask requirements for vaccinated passengers after putting stricter rules in place during the omicron surge. The industry was hit hard early in the pandemic as horror stories of onboard outbreaks made international headlines."

The CDC still says that vaccinated people should wear masks in areas of "substantial or high transmission,” but reportedly is reviewing its recommendations in view of current science and transmission numbers.

Published on: February 23, 2022

•  Amazon said yesterday that it "has filed lawsuits against fake review brokers who orchestrate the posting of incentivized and misleading product reviews, in exchange for money or free products.

"The lawsuits aim to shut down two major fake review brokers, AppSally and Rebatest, who helped mislead shoppers by having their members try to post fake reviews in stores such as Amazon, eBay, Walmart, and Etsy."

The company described the suits as "one part of Amazon’s comprehensive and proactive efforts to ensure a safe and trustworthy shopping experience for its customers and extensive opportunities to create thriving businesses."

Some context from Amazon:

"Amazon strictly prohibits incentivized or fake reviews and uses a combination of machine learning technology and skilled investigators to detect, prevent, and remove them. In 2020, Amazon stopped more than 200 million suspected fake reviews before they were ever seen by a customer. A nefarious industry has emerged in recent years, in which fraudsters facilitate fake or inflated reviews in exchange for money or free products.

"Amazon’s legal action comes after an in-depth investigation into these review brokers, which taken together claim to have more than 900,000 members willing to write fake reviews. Fake review brokers attempt to hide their activity and evade detection. For example, the fake review site AppSally sells fake reviews for as low as at $20 and instructs bad actors to ship empty boxes to people willing to write fake reviews, and to provide AppSally with photos to be uploaded alongside their reviews. The fraudulent scheme run by Rebatest will only pay people writing 5-star reviews after their fake reviews are approved by the bad actors attempting to sell those items."

•  The Wall Street Journal reports that "Macy’s Inc. has opted against separating its e-commerce business from its bricks-and-mortar stores amid calls from an activist investor to increase shareholder returns.

"The department-store chain, which posted strong sales and earnings for the holiday quarter, said it is entering 2022 a much stronger company than it was before the pandemic. Chief Executive Jeff Gennette also said Tuesday he expects consumer demand to remain healthy this year as the job market improves and people return to the office and social events."

However, the story notes that Macy's "is facing headwinds, including inflation and a tight labor market that is pushing up costs. It is also still missing about half the international tourists who have historically shopped its Macy’s and Bloomingdale’s brands, a problem Mr. Gennette doesn’t expect to be rectified until 2023."

Published on: February 23, 2022

•  From the Wall Street Journal:

"Demand for the humble drive-through lane is booming, as coffee makers, chicken joints and other fast-food operators vie for limited supply.

"Interest in drive-through real estate was growing even before Covid-19, but it exploded last year when total sales volume for restaurants, pharmacy and bank properties hit a record $12 billion, according to data firm CoStar Group Inc. That represents a 43% increase from 2019 and a doubling in sales from 2012.

"Coffee and fast-food customers gravitated to drive-throughs in the early months of the pandemic, when dining rooms were closed and fear of infection kept people in their cars.

"As time went on, many realized they enjoyed the convenience of drive-throughs, especially now that mobile ordering reduces wait time and the need to yell into a speaker to place your order, said R.J. Hottovy, head of analytical research at data-analytics company Placer.ai.

"The migration from cities to the suburbs has also boosted drive-through business, Mr. Hottovy said. And these properties offer companies the opportunity to cut costs in terms of square footage and staffing, he said."

Published on: February 23, 2022

•  Publix Super Markets announced the promotion of Bridgid O’Connor, the company's director of real estate strategy, to the role of vice president of real estate strategy.  O'Connor succeeds Bob Balcerak, who is retiring from he company after 29 years.

Published on: February 23, 2022

Yesterday we linked to a CNBC story speculating that Amazon's grocery business has turned into an "expensive hobby," as it has tried a number of different strategies and tactics without achieving the dominance that it has reached in other segments.

I commented, in part:

I do think that it is important for investors, analysts and retailer competitors to remember that Amazon's greatest superpower may be its market capitalization, which is so far beyond that of most companies that it can afford to try a lot of different approaches as it seeks the right balance.  The story makes the point that Amazon Go stores are being de-emphasized in favor of the Amazon Fresh brand, but learnings from the Go concept almost certainly are informing many of the decisions being made with the Fresh stores.  (Keep in mind that Amazon's smartphone venture was a failure, but it learned things from the experience that found their way into its Alexa business, which has been an enormous success by any measure.)

I'm not wildly impressed by the Fresh store format, but I also think that it is entirely possible that Amazon is viewing the concept as being a distribution center/dark store that happens to allow customers in … a perception that seems to be reinforced by the numb er of people I know who, going into a Fresh store, find that they are vastly outnumbered by employees who are assembling orders for pick-up or delivery.

This prompted MNB reader  Thomas Parkinson to write:

I think we should be cautious about that article declaring grocery is an expensive hobby for Amazon.  This all comes down to the definition of "grocery".  Is HBA grocery? Diapers? Baby formula? Is everything sold in a grocery store "grocery"?  From my own personal experience, I purchase many non-food items on Amazon that I can get at a grocery store.  I think their national shipping business is probably not included in the estimate.  I have no proof, just a hunch.

Excellent point.  I share your hunch.

We also had a story yesterday about a new Whole Foods flagship store in San Francisco, about which I commented:

It is all well and good to open a flagship store ands beat your chest about it.  But I think it is fair to say that there is a strong perception in the industry and around the country that many Whole Foods stores have lost a step or two over the years.

Now, there are a lot of potential reasons for this, and you can choose one or more:

Time takes an inevitable toll.  Amazon's ownership has diluted the chain's commitment to core values.  Covid-related stresses.  Labor shortages.  Supply chain issues.  And I'm probably missing a few.

The thing is, most Whole Foods customers have no idea that this San Francisco flagship even exists.  They only know their store, and whether it is meeting their needs or somehow lacking in how it delivers on the brand's value proposition.

I do know this.  in a lot of places, for a long time, Whole Foods was a respected and even feared competitor, but that doesn't seem to be the case anymore.  I think this is a situation that ownership has to address.

MNB reader Kathleen Ottaviano responded:

Couldn't agree more with your statement that Whole Foods has lost a step or two.  I used to love shopping there.  Not anymore.   Granted, the store I shop at is on the small side, but along with less variety in the selection, the notion of good customer service has ceased to exist.   Once when searching for shallots, I was told there was a 'crop failure'.   Funny - the Safeway down the street had plenty in stock.  The wait to check-out is always long, no matter the time of day.   (No self-checkout at my location).  

But the most annoying thing is the clerk asking me if I'm a prime member.   When did Bezos buy Whole Foods?  Was it in 2017?   Can't they figure out a way to automate the whole Prime membership question in 5 years?  Maybe if they knew someone in tech.....

I never get asked that at Whole Foods, but that's probably because I am always quick to offer the Prime app on my smartphone for scanning.  Doesn't really bother me when I hear them ask other folks, but apparently it does become bothersome.

Another MNB reader wrote:

On the WFM new flagship in San Francisco, I can’t agree more that they have lost a few steps over the past years.  I know this from the inside since I worked for WFM from 1998 until 2016 in the NE region, growing it from 4 Fresh Fields stores to over 45 Whole Foods.  I had overseen the Prepared Foods program for most of the time and was very proud of what we created. Now when I walk into WFM stores their fresh selections in prep foods, bakery and other perishables has fallen down … I don’t want to be associated with how they operate now. 

Yikes.

Yesterday we took note of a New York Times report that Family Dollar had to temporarily close "more than 400 stores after the discovery of a rodent infestation and other unsanitary conditions at a distribution center in Arkansas touched off a far-reaching recall of food, dietary supplements, cosmetics and other products.

"A recent Food and Drug Administration inspection of the facility, in West Memphis, Arkansas, found live and dead rodents 'in various states of decay,' rodent droppings, evidence of gnawing and nesting, and products stored in conditions that did not protect against these unsanitary conditions, the agency said in a statement Friday.

"A fumigation of the facility last month revealed more than 1,100 dead rodents, and a review of company records indicated the collection of more than 2,300 rodents from late March to September, 'demonstrating a history of infestation,' the agency said. Rodent contamination can cause salmonella and infectious diseases, the FDA said."

Lots of email on this one.

One MNB reader wrote:

Not surprised at all given store conditions generally in the ones I visit. Wouldn't be surprised if it happened at Dollar General as well at some point.

From another reader:

No one has been fired or taken to the woodshed??????

Not yet.  Not to my knowledge.

From yet another reader:

Ya gotta hope they are checking out other DollarTree facilities since this appears to be a management/cultural issue!  Cutting costs, to operate at the level they do, potentially risks "unintended consequences" and "collateral damages".

Yup.  Gotta hope.

And then, the funniest email of the day from MNB reader Bob Thomas:

See the havoc that cheese addicts can cause?

Who knew?