Published on: February 28, 2022
A pro-Ukraine demonstration on the Las Vegas strip this weekend, taking place as the National Grocers Association (NGA) show was about to begin there, stuck KC as ironic … and, at least for the moment, heartening.
Day: February 28, 2022
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Somehow, I feel a Congressional investigation coming on. And maybe a Federal Trade Commission (FTC) probe.
I would argue, however, that the Times - just like many legislators and regulators - may actually be missing the other side of the story, though it does include enough response from Amazon to count as being fair.
I would argue that, in many ways, that there is nothing necessarily wrong with dynamic pricing. Virtually every retailer on the planet lowers prices when products aren't selling, or because they need to move them out to make room for other items, or when they find out a competitor has undercut them on price. There is nothing inherently wrong with raising prices when you have a hot item for which there is considerable demand.
Now, there are caveats. Nobody should be gouging consumers - that's wrong. (Certainly ethically. Also legally, depending on ther scenario.) At the same time, if you have a price-oriented value proposition, then raising prices on hot items may violate your core brand strategy.
I'm not all that smart, nor do I have the credentials of some of the economists being quoted in stories like the Times piece. But I'd be willing to bet that if you go back to the early days of MNB, which pretty coincided with the early days of Amazon, you'd see that I've been suggesting that Amazon has never been a price play. It is a convenience play, and when it launched Amazon Prime, I suggested that Amazon was revealing its broader retail strategy - it created what was and remains the world's biggest, most effective loyalty program, finely tuned to data about the needs and wants of its best shoppers.
Sure, a great deal of this is not seen or recognized by the average shopper. But I'm not entirely sure that spelling it out is the responsibility of Amazon Prime, nor that of Walmart+, or of any retailer with the resources and imagination to create a dynamic pricing program online that is sensitive to market fluctuations and shopper behavior. At some level, don't shoppers have a responsibility to be smart consumers? (I'm not arguing for a hands-off regulatory approach. Far from it. But I'm not at all sure that what the economists are telling the Times is dastardly behavior rises to the level of the illegal or immoral.)
We needed to buy a rolling clothes rack over the weekend, and we checked out Amazon. But we also checked out The Container Store. I'm not sure where things settled because I had to leave for Las Vegas and NGA, but I'm pretty sure that Mrs. Content Guy and my daughter hadn't finished their due diligence, and would look at a couple of other places before making a buying decision, a decision that will be based on what they're willing to pay, how fast they want it, and discerned quality. isn't that what shoppers are supposed to do?
To the Times' point, if they'd just been looking for a some ingredients for a bolognese, they probably wouldn't have gone to all that trouble - they would've just gone to the store down the street, or used click-and-collect so they wouldn't have to actually go in. It is all about making informed decisions based on the priorities of the moment.
The Times and the economists use Amazon's print toy catalog, which goes out via snail mail each year as the holidays approach as an example of how prices are "absent." But I would suggest that this makes sense - from the beginning Amazon said the catalog was sent out to be a source of inspiration and maybe even a little aspiration, and as a reference for parents to use when shopping online. It simply makes sense that there are no prices in a Christmas catalog that goes out in October, probably was designed in July and printed in September.
Nobody knows what things cost? Damn right. But I'm not sure that's Amazon's fault, I'm not sure that it is a bad thing (what goes up often comes down, again, depending on market forces), and I am pretty sure that other retailers - bricks-and-mortar and digital - would be more competitive if they could approximate this behavior.
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I just want to point out that the discontented Instacart shoppers are representing all the retail clients who have signed onto Instacart as a way of outsourcing their e-commerce needs … and in doing so, are actually distancing themselves from their shoppers.
I'm not saying that the Instacart issue is going to find its way into the orders being placed by shoppers in some sort of negative way. But I am saying that in a world where retailers' connection to their customers is a precious commodity to be protected and nurtured, there's a wild car here that retailers cannot control. And that would make me nervous.
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The Times looks at a number of industries, but when it comes to food and entertainment business, there seems to be an expectation - though it may be wishful thinking - that as the pandemic wanes, people will simply be so thrilled to get out that they'll be willing to absorb those costs.
Which may be true, but I think there are some caveats that need to be stressed:
First, the relief at being in a restaurant with friends and/or family may be tangible the first time and even the second time, but after that, unless folks are at the point in their lives where they are not price sensitive, the thrill may wear off.
I'm not even completely persuaded that it will take that long for most people. A bottle of wine with dinner in a restaurant is a lot more expensive that one enjoyed at home. I just think that comparison may be on people's minds more these days because the difference - especially because the pandemic at-home experience is so recent and the current cost has been driven up by inflation. So we'll see how that play out.
Second, there will be retailers who will see stories like these as a call to action - they're going to undercut the companies raising their prices at every turn, and use this trend to drive market share.
I continue to believe that retailers have to pay attention to value more than prices. Not to suggest that prices are unimportant, but I think that savvy retailers can build on the aspirational nature of value - as well as the narrative benefits of a compelling and consistent narrative - to find ways to get closer to their customers, not more distanced.
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Which is exactly what I would say to the media if I'd cut the legs out from under a competitor.
Sounds to me like in a scenario where Plum Market brought a knife, Dom's brought a gun. If I remember my lessons from Jimmy Malone correctly, "That's the Chicago way."
Plum may have bigger problems. Dom's is described as offering "grocery shopping, restaurant dining and food delivery, selling both prepared and packaged food, plus wine, flowers and coffee." That sounds a lot like a smaller version of what Mariano's offered, and it is something that Bob Mariano knows how to do. (Friends in Chicago say that the Mariano's stores have not been the same - not even close - since his departure.). The question that the folks at Plum need to ask themselves is whether they are being outflanked in terms of the offering, not just the real estate.
Which is not to say that this was a cool thing to do. I know a number of independent retailers, and my guess is that most of them, if not all of them, would not have treated a fellow independent the same way.
Jonna said in his letter to customers that Dom's behavior was “unconscionable, dishonorable and disgusting … It is true that landlords and leases come and go, but independent grocers usually pride themselves on operating with integrity and supporting local vendors and artisans. Plum Market certainly walks that walk, as does most of its competition, but Dom’s actions certainly cast a dark shadow on independent grocers.”
I know that the folks at Plum are hurting. But here's the deal: Revenge is a dish best served cold.
I'd get a food truck into that neighborhood ASAP … I'd get aggressive in terms of serving the existing and potential shoppers there (you have actionable data, right?) with an e-grocery offering that does not depend on a location … I'd look for available real estate where I could open a dark store that could also serve as a delivery hub and click-and-collect location … and I'd do everything possible and legal to make sure that Dom's rued the day it ever decided to come to Old Town.
Take the lesson from Sean Connery's Jimmy Malone in The Untouchables:
"You want to get Capone? Here's how you get him. He pulls a knife? You pull a gun. He sends one of yours to the hospital? You send one of his to the morgue! That's the Chicago way."
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So Shipt is delivering for Walgreens, but it also made a deal with CVS to run all the drug/HBC departments in its stores. And it also makes deliveries for Rite Aid (which is owned by Walgreens).
Apparently nobody at any of these three brands worries about differentiation.
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My daughter sent me a story about banning Russian vodka in the US, simultaneously approving the sentiment while noting that "it is a good thing we drink Tito's," which, of course, is from Texas.
Published on: February 28, 2022
The New York Times had a really interesting piece over the weekend entitled "The Case of the Missing Price Tags," which explored the notion that online shopping, rather than giving shoppers more power over what they spend via e-commerce, actually has given retailers the ability to change prices virtually at will.
Prices, experts tell the Times, have been obfuscated by other priorities - convenience, ease of use, speed of shipping, and consumers' growing expectation that they should be able to have whatever they want whenever they want.
The Times writes:
"Retailers and brands are bombarding shoppers with discounts, one-time offers and different gimmicks that overwhelm them with numbers while giving the impression that they are getting a good deal. And even when price comparison is easier and more prevalent, such as for airline tickets or hotel reservations, consumers get an incomplete picture of the actual cost because of add-on fees … The prices of some goods, like gasoline, a cup of coffee or a gallon of milk, are easier to remember because people buy them regularly and in person. When shopping happens online, the picture can become hazy — although the experience may not be universal, especially for people living on limited means."
The story goes on:
"When Amazon raises and lowers product prices millions of times a day using a complex algorithm based on competitors’ prices, supply and demand, and shopping habits, its rivals often follow suit … In a statement about its pricing practices and price fluctuation, Patrick Graham, an Amazon spokesman, said the company’s systems benchmark prices in other stores to ensure customers get the best price from Amazon.
"'If we find a better price at another retailer, like Walmart, Target, Home Depot and others — we systematically match or offer a more competitive price if we are selling the product ourselves,' he said." And, while "Amazon said it did not practice discriminatory pricing - charging different people different prices based on demographics - it is all in on dynamic pricing. Profitero, an e-commerce analytics firm, estimated in 2013 that Amazon tweaked prices 2.5 million times a day. (It is safe to assume that the number has grown.)"
"Dynamic pricing — when prices move in accordance with market conditions — is just one reason people lose touch with what things cost," the Times writes. "Discounts tied to loyalty programs or annual subscriptions like Amazon Prime and Walmart+ also complicate the math. At the same time, features meant to save time and enhance convenience, such as automated monthly deliveries of household goods, have made shoppers less price aware."
Published on: February 28, 2022
CNN has a story about how Instacart shoppers around the country are "grappling with the sudden drop in orders surfaced to them and struggling to understand the reasons behind it without more information from the company."
According to the story, "in recent weeks, some shoppers in markets across the country said they have gone hours or even days at a time without seeing many — or any — 'batches,' which can consist of one or a few orders from different customers, according to social media posts and conversations with five shoppers, each of whom joined the platform during the pandemic."
CNN writes that the affected Instacart shoppers believe that "the timing of the slowdown corresponded with a recent company app update. Instacart notified workers late last month that it was rolling out a change over 'the next few weeks' so that 'batches you see will be closer to your location' and warned that this 'will result in you seeing less batches in the list view,' according to an email viewed by CNN Business.
"The company said in the email that the goal of the change is to help shoppers 'choose batches that are more relevant to you without having to travel too far for a batch.'
"But the underlying cause appears to be more fundamental: a shift in demand. An Instacart spokesperson told CNN Business there isn't a technical issue but rather the marketplace is stabilizing following what the company said was the busiest holiday season in its history atop a surge in Covid cases from the Omicron variant, which is now easing in the United States."
Published on: February 28, 2022
The New York Times writes about how, with all the tsuris about inflation and supply chain and labor shortages, one fact seems baked in: Americans "are willing to pay more for the goods and services they want to buy."
Which means, the Times writes, "Companies are taking advantage of a moment of hot and seemingly unshakable demand — one in which consumers are spending 'with a vengeance,' to borrow the words of one executive — to cover rising costs and to expand their profit margins to prepandemic or even record levels. Corporate executives have spent recent earnings calls bragging about their newfound power to raise prices, often predicting that it will last.
"If it pans out, that trend that could have big economic implications.
Planned corporate price adjustments could continue to boost inflation, which is running at its fastest pace in 40 years. The Federal Reserve is trying to assess whether businesses and households are changing their expectations in a way that might make rapid price gains a more permanent feature of the economic landscape."
Published on: February 28, 2022
From Crain's Chicago Business:
"The CEO of Old Town grocery store Plum Market condemned industry veteran Bob Mariano, saying his newest venture, Dom’s Kitchen & Market, is driving Plum out of business.
"Matthew Jonna sent a letter to customers Friday, saying that its Old Town location will close in June. The closure was not in the company’s plan, Jonna said.
"'The truth is, there was a quiet back-door agreement that took place between our landlord . . . and Dom’s,' the letter said. 'Those clandestine dealings resulted in the termination of our lease, without Plum Market ever having an option to negotiate or keep our store open'."
To be clear, Dom's - which only has one store at present, opened last summer - "plans to open 15 locations by 2025 and is backed by big-name investors, including firms founded by former CEOs of McDonald’s and Walgreens. It has raised $25 million to date." Dom's was founded by Mariano, who once was CEO of Dominick's and later founded the Mariano's chain, which he sold to Kroger; Jay Owen, the great-grandson of the founder of Dominick’s; and Don Fitzgerald, a former senior executive at Dominick’s.
Crain's writes, "While the new Dom's will have a different address than Plum Market, it will occupy the same space. The real estate company has not commented on the contretemps, and the folks at Dom's are saying that they were approached about the space by the landlord, there were no 'back-door' conspiracies at work, and that they are "surprised and disappointed to learn of this ill-founded interpretation of the move that we are making to the new Old Town location … As an independent grocer ourselves, we know all too well the challenges of operating in this competitive environment. Our intentions have always been to grow into neighborhoods where we can continue to expand the rich and meaningful food experience we provide."
Published on: February 28, 2022
Target-owned Shipt announced late last week that it has struck a deal with both 7-Eleven and Walgreens to provide delivery services to the two retailers.
The deal adds mor than 12,000 total locations to the number that Shipt services, increasing its footprint by more than 40 percent.
“Located on corners of nearly every major market in America, these two powerhouse brands are incredible complements to our marketplace, bringing customers even more variety and product categories while driving added convenience for each brands’ shoppers,” Rina Hurst, Shipt’s chief business officer, said in a statement.
Shipt has delivery contracts with close to 150 different retailers around the country, and has been focused on ramping up the business to compete with the likes of Instacart.
Published on: February 28, 2022
USA Today reports that "the governors of Texas, Ohio and New Hampshire on Saturday ordered state retailers to remove Russian spirits from their shelves, joining a trend of Americans targeting vodka, a quintessentially Russian liquor, to protest Russia's war in Ukraine.
"But data shows these protests should only affect a tiny fraction of all U.S. vodka imports. Only 1.2% of U.S. vodka imports which come from Russia, according to data from the Distilled Spirits Council of the United States for the first half of 2021. Vodka is the only spirit listed as a Russian import in the report."
And the New York Times adds, "France - whose vodkas include Grey Goose, Cîroc, Gallant and MontBlanc - accounted for about 39 percent of total vodka import value, the most of any country … Sweden, with vodkas like Absolut and DQ, accounted for about 18 percent. The other top importers were the Netherlands (17 percent), Latvia (10 percent), Britain (5 percent) and Poland (5 percent)."
Published on: February 28, 2022
The Wall Street Journal has a long piece in which it details Walmart's various strategies and tactics for navigating a post-pandemic world, incorporating lessons learned during the past two years as well as figuring out where to go beyond conventional thinking.
The steps being taken include "building more automated fulfillment centers attached to existing stores, experimenting with autonomous trucks, using its own workers to make deliveries and expand a service where staffers leave packages inside homes." And much more.
Published on: February 28, 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…
• Here are the US Covid-19 coronavirus numbers: 80,567,757 total cases … 973,119 deaths … and 53,192,990 reported recoveries.
Ther global numbers: 435,996,996 total cases … 5,968,059 fatalities … and 366,546,585 reported recoveries. (Source.)
• The Centers for Disease Control and Prevention (CDC) says that 76.3 percent of the total US population has received at least one dose of vaccine … 64.9 percent are fully vaccinated … and 43.6 percent have received a vaccine booster dose.
• From the Wall Street Journal:
"Federal officials eased their guidelines on Covid-19 masking, including at schools, in a shift that reflects decreased risks from the Omicron variant, a steep drop in cases and mitigation efforts nationwide.
"The Centers for Disease Control and Prevention on Friday changed the metrics it uses to assess Covid-19 risk by county across the U.S. Risk will now be assessed based on three factors, the CDC said: new Covid-19 cases per 100,000 residents in the past seven days; new Covid-19-related hospital admissions; and the percentage of hospital beds occupied by Covid-19 patients.
"Before Friday, the CDC used these metrics to sort counties into one of four risk categories based on Covid-19 case numbers and test positivity rates.
"Now, the agency is breaking counties down into three different groups: high, medium or low local Covid-19 risk. The CDC’s assessment of Covid-19 levels by county will be available on the agency’s website.
"The new guidelines reflect a heightened focus on minimizing severe disease and limiting pressures on the healthcare system, the CDC said.
Masks aren’t necessary indoors where Covid-19 is circulating at low levels, according to the new guidelines. For areas with medium levels of Covid-19, the CDC recommends that people with conditions that put them at higher risk of severe disease talk to their healthcare providers about whether to wear a mask. In areas with high levels of Covid-19, people should continue wearing masks in public indoor settings including schools, the CDC said."
• The New York Times reports that "Scientists released a pair of extensive studies on Saturday that point to a market in Wuhan, China, as the origin of the coronavirus pandemic. Analyzing data from a variety of sources, they concluded that the coronavirus was very likely present in live mammals sold in the Huanan Seafood Wholesale Market in late 2019 and suggested that the virus twice spilled over into people working or shopping there. They said they found no support for an alternate theory that the coronavirus escaped from a laboratory in Wuhan."
Yeah, but what they're not telling us is that Fauci has a financial interest in those markets, and has able to line his pockets with billions by facilitating the spread of the disease starting with those markets. At least, that's what I read in some corners of social media. Must be true, right?
Published on: February 28, 2022
• From Axios:
"Amazon Music is poised to surpass Pandora as the second most popular music app by total listeners, according to new data released by Insider Intelligence.
"Nearly 53 million people will listen to Amazon Music at least once a month in 2022, compared with 49 million to Pandora.
"But, but, but: Spotify maintained its lead by a long shot."
Published on: February 28, 2022
With brief, occasional, italicized and sometimes gratuitous commentary…
• The National Grocers Association (NGA) has presented the Thomas K. Zaucha Entrepreneurial Excellence Award to Michael Needler Jr., president and CEO of Fresh Encounter Inc. The award, sponsored by Mondelēz International Inc., is presented annually to an independent retailer that demonstrates tangible examples of persistence, vision and creative entrepreneurship throughout the year.
</br></br>• From Bloomberg:
"US inflation-adjusted consumer spending advanced by more than expected in January, highlighting the resilience of American demand despite a surge in Covid-19 cases and prices rising by triple the Federal Reserve’s target.
"Purchases of goods and services, adjusted for changes in prices, increased 1.5 percent from December, the most in 10 months, according to Commerce Department figures Friday.
"The personal consumption expenditures price index, which the Fed uses for its inflation target, increased 0.6 percent from a month earlier and 6.1 percent from January 2021, the most since 1982. Unadjusted for inflation, spending rose 2.1 percent from December, while incomes were little changed.
"The report underscores the robustness of consumer demand and reflects the temporary, but relatively subdued, impact from the omicron wave on outlays. Declining Covid-19 cases and an improving labor market should support spending in the months ahead, especially for services, but inflation -- which is expected to increase further in the near term -- remains a headwind."
• From the New York Times:
"First they won in Buffalo. Now they’ve scored a victory on the other side of the country.
On Friday, the National Labor Relations Board announced that workers at a Starbucks in Mesa, Ariz., had voted 25 to 3 to unionize, with three challenged votes. The result brought the number of company-owned stores with a union to three, out of roughly 9,000 nationwide.
"The victory was the first for the union since two stores voted to unionize in Buffalo in December, but it could mark the beginning of a larger trend. More than 100 Starbucks stores across more than 25 states have filed petitions for union elections, most of them since that first victory. The next tally will probably come from three more stores in the Buffalo area, where votes have already been cast. Starbucks workers in cities including Boston, Chicago and Seattle are scheduled to vote or are likely to vote in the coming months."
That sound you hear is Howard Schultz clearing his throat, getting ready to say that this never would've happened under his watch, and that he is tanned, rested and ready to take back control of the company and return it to the halcyon days of yore.
Published on: February 28, 2022
• Ingles Markets announced that the company's Controller, Patricia E. Jackson, has been promoted to the role of CFO succeeding the retiring Ronald B. Freeman.
Published on: February 28, 2022
On the subject of e-grocery, MNB reader Charles Bartell wrote:
Which chain will be the first to give a discount to the customer who goes into the store and does their own shopping? When the chain layers on a service such as selecting the order for the customer, the value should be demonstrated to the consumer in a fee for the service. The DIY customer is subsidizing the Click and Collect customer.
This is a distortion of value. Instacart has it right by up charging for the basket. Customers should be educates to find the value in excellent fulfillment of orders by paying a premium for the service.
Reacting to our story about Walmart+, one MNB reader wrote:
I think they are struggling to expand this program as quickly as they wanted or need to. I’ve known a few people that were not impressed and dropped the membership. Something they should consider is to expand it to their associates through a payroll deduction, much like they do Sam’s Club memberships. That would open them up to about 1.5 million possibilities. I’m surprised they haven’t done this yet. Breaking down the cost to folks on a tight budget might help.
But, from another reader, a different perspective:
My POV is that this is an excellent program. Our family has a subscription to Walmart +, and it has changed the way my wife shops. She now orders nearly all of the staple groceries from Walmart 1-2X/week where prior to Walmart + is more along the lines of 1X/month. A greater share of our grocery spend is at Walmart now with Publix accounting for fill-in trips and some very specific items our family can’t get elsewhere. Costco serves as our bulk, meat, and fruit destination as we have a large family.
I didn’t know that there was a gas benefit, so I’ll look into that as the price of gas skyrockets.
The only thing I see missing is some form of partnership with a streaming service that would truly be game-changing.
We also had a story last week about how "Walmart's GoLocal delivery service, which was announced last summer as designed to service other retailers around the country using traditional vehicles as well as autonomous cars and drones, said that it is teaming up with Cognetry Labs to 'provide an integrated white label, turnkey ecommerce plus delivery solution to mid-sized and independent grocery retailers'."
MNB reader Steven Ritchey wrote:
Maybe I'm reading this wrong, but, if I were a small retailer, I'd be leery about using my competition for delivery services. Maybe I'm being myopic about it, but I just don't feel the need in enriching them any more than I have to.
A case in point, years ago, Fiesta Supermarkets held an ownership stake in a local import Mexican Food wholesaler. That wholesaler did a lot of business in the Dallas area. However, when Fiesta started to build and open stores in the Dallas area, many of those independent supermarkets stopped buying from that wholesaler. The reasoning was that they didn't want to support their competition even indirectly.
I'm quoting The Untouchables a lot today, but once again….
"Never stop fighting till the fight is done."
You have to play the game to win, and you have to always be playing the game.
"Here endeth the lesson."
Wouldn't it be nice if someone had written a book about business lessons from the movies?
