business news in context, analysis with attitude

Published on: April 6, 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.

Last week, Tom Furphy attended ShopTalk 2022 in Las Vegas, and came away with a sense that it was an accurate reflection of the moment - there was a balance between elements of real innovation and a representation of evolving current models and how they are navigating the realities of the space.  Among the things he and KC talk about are Instacart's new and potentially game-changing platform, a new demand for profitability, and the discussion around things like the metaverse and rapid delivery models.

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

Published on: April 6, 2022

Kroger announced yesterday that its Dallas division s launching Kroger Restaurant Supply there, which it says will offer "an alternative to ordering in large quantities that have highly variable pricing and require deliveries on a set schedule. This service offers competitive wholesale pricing, opportunities to purchase items by the case or unit and seven-day-a-week delivery."

According to the announcement, "Regional restaurants, bakeries and catering companies are invited to take part in this service that offers free next-day delivery on all orders of $250 or more. Businesses can order by midnight and receive next-day deliveries seven days a week."

""Running a restaurant has always been difficult – and today it feels like it's harder than ever," said Jay Scherger, Director, Kroger Technology & Digital/E-Commerce Accelerator, in a prepared statement.  "This new service will bring our fresh assortment directly to regional businesses – all at consistent prices, product availability and delivery cadence they can count on."

Published on: April 6, 2022

The Wall Street Journal this morning has a piece about the challenges that Instacart is facing at the moment, as it faces new realities coming out of a pandemic that drove sales growth of more than 300 percent between 2019 and 2020, which then slowed to 15 percent growth between 2020 and 2021.  At the same time, Instacart's market share - which boomed both because of the pandemic and retailers' fears about the potency of the Amazon-Whole Foods combination, has dropped from 40 percent to 30 percent, as DoorDahs's market share has grown.

According to the Journal, "Over the past year, the San Francisco-based company has announced plans to cut delivery times to 30 minutes for major customers like Kroger Co., mounted a push into advertising, and sought possible deals with rivals in an effort to fend off growing competition, according to people familiar with the discussions. Instacart fell short of some internal growth targets last year, one of those people said."

Those deals included proposed mergers with either DoorDash or Uber, neither of which got traction.

Then, in recent weeks, Instacart cut its valuation by 40 percent, reflecting economic changes that have affected its sector.

Among the initiatives that Instacart has been working on in recent months has been its "recently launched Instacart Platform, which consists of warehouses, including those designed for 15-minute deliveries, advertising and in-store services such as smart carts. In recent months, Instacart bought a maker of automated shopping carts and a catering software company."  The advertising business is seen as a potentially strong revenue generator,  "charging food companies to promote products to users on Instacart. Executives have said that ad revenue helps offset Instacart’s costs of delivering orders."

There is a catch, though:  "the effort puts Instacart into competition with major grocery sellers -and Instacart customers - including Kroger and Walmart Inc., which are developing their own, similar online advertising platforms."

Published on: April 6, 2022

Forbes has a story about why many retailers are reconfiguring their stores to allow their use as fulfillment centers for online orders, citing a recent McKinsey study saying that "more than 90% of consumers see a two-to-three-day delivery time as a baseline, with 30% saying they expect same-day delivery."

In many ways, the story says, "Amazon has set this expectation with Prime. For physical retailers, it's more challenging, but for those with hundreds of stores countrywide, they can provide a similar experience and may even pose to have an advantage."

The story quotes Roger Rawlins, CEO at the DSW shoe store chain, as saying that "the company fulfilled nearly 60% of digital orders in 2021 from its stores," and plans to convert "20,000 to 25,000 square foot stores into 15,000 stores to create its 'store of the future' and likely dedicate some extra space to fulfillment."

Published on: April 6, 2022

Vice has a story about how as Howard Schultz returned to Starbucks as its CEO and held a town hall meeting with employees yesterday, he referred to the company as being "assaulted" by unionization movements.

And, on the same day that Schultz made that comment, Vice reports that "an outspoken organizer and shift supervisor at a store in Arizona was fired, the latest in a string of firings of organizers across the country … Roughly an hour after the conclusion of Schultz’s town hall, the company fired Laila Dalton, a 19-year-old shift supervisor and organizer at a store in Phoenix—one day before the store’s employees were to begin voting on a union. The National Labor Relations Board issued a formal complaint against Starbucks last month for its treatment of Dalton, finding that Starbucks retaliated against her and another employee because they supported the union."

Starbucks says that Dalton was fired "because she admitted to recording conversations involving store managers that she wasn’t part of."  Dalton has admitted to making the recordings, but said she did so in order to have proof of harassment.

Meanwhile, Reuters reports that "Starbucks Corp General Counsel Rachel Gonzalez was dismissed from her role … according to a regulatory filing on Tuesday."

Here is the Schultz town hall quote:  "We can’t ignore what is happening in the country as it relates to companies throughout the country being assaulted, in many ways, by the threat of unionization."  Schultz also said that he  was "not anti-union," but rather "pro-Starbucks."

At the same time, Vice reports, "Schultz echoed rhetoric that’s common among anti-union executives and managers, calling unions 'outside organizations' and referring to Starbucks as 'a company that does not need someone in between us and our people.'

"Schultz also pointed to how the company has grown since he bought it in 1987 - when it had just 11 stores - as proof it doesn’t need a union.  'I took us all the way today,' Schultz said. 'We didn’t get here by having a union'."

Published on: April 6, 2022

IRI is out with new research suggesting that as the nation emerges from the pandemic, people's desire to get together as the weather improves will outweigh concerns about increased prices created by inflation.

According to the study, "Consumers will host or attend larger gatherings this spring holiday season, especially households with children, but know they will spend more due to inflation and will be looking for deals, according to new Spring Holidays 2022 research from Information Resources, Inc."

The study says that "90% of surveyed consumers feel the cost of food is higher than last year … 30% of consumers will prepare a special meal just for themselves or their families, down from 38% in 2021 … More consumers report they’ll host or attend a meal with extended family who do not live in their household or will travel out of state to attend a celebration in 2022 compared to 2021 … (and) 26% of shoppers expect to pay much or some more for their spring holiday gatherings than they did last year."

Published on: April 6, 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:  81,900,012 total cases … 1,009,390 deaths … and 65,968,467 reported recoveries.

The global numbers:  494,287,348 total cases … 6,184,360 fatalities … and 429,922,747 reported recoveries.   (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 77.1 percent of the total US population has received at least one dose of vaccine … 65.6 percent are fully vaccinated … and 45 percent of fully vaccinated people have received a vaccine booster dose.

Published on: April 6, 2022

•  The New York Post reports that "Amazon pays summer interns more than three times as much as some warehouse and delivery workers, according to data published Tuesday. 

The median corporate intern at Amazon — which offers internships throughout the year — rakes in $8,000 a month, according to a new report from corporate review site Glassdoor. That’s the equivalent of $96,000 per year or $46.15 per hour based on a 40-hour work week. 

"By comparison, Amazon’s warehouse and delivery workers make a minimum of $15 an hour and the company says its median starting wage for warehouse workers stands at $18 an hour.

"The data on intern pay comes on the heels of Amazon warehouse workers in New York becoming the company’s first-ever US employees to unionize."

•  CNBC reports that "Amazon’s Alexa voice assistant will soon tell users when items they’ve had an eye on are about to be on sale.

"The company announced … that Alexa will notify Prime customers up to 24 hours in advance of upcoming sales on items in their Amazon wish list and shopping cart, or items that were marked 'saved for later' on the platform. The feature will work with fourth-generation Echo smart speakers and newer.

"For example, if a customer is looking at a new TV and it’s been sitting in a wish list, Alexa will give the consumer a heads-up that it will be on sale soon. The Amazon Echo ring will turn yellow when an item goes on sale, so a user knows to ask Alexa to read out their notifications. Consumers can then ask Alexa to remind them about deals when they’re live or ask the smart device to order items on their behalf.

"The feature is meant to help customers save time and prepare for big sales, like Prime Day. It also benefits Amazon, which uses Echo devices to get people to buy more products on the site."

•  The Information reports that "one-click checkout startup Fast is shutting down entirely and will discontinue its products and brand, according to several people familiar with the matter … Fast has been aiming to transform online shopping by making it easier to check out across a wide range of stores.

"But after failing to generate more than a sliver of revenue - and spending wildly on hiring hundreds of employees - the company was in desperate need of a new investor or a buyer. The company had hired Morgan Stanley to run an auction and explore options. Meanwhile, it had just weeks’ worth of cash left to spend."

The story characterizes it as "a stunning collapse for a fintech company that had raised $120 million in funding from backers including payments giant Stripe, Index Ventures and Lee Fixel’s Addition."

•  The Associated Press reports that "Amazon has deals with three rocket companies to help launch communications satellites that the online retail giant says will help provide fast, affordable broadband to millions of underserved people around the world.

"Seattle-based Amazon said Tuesday that Arianespace, United Launch Alliance and Blue Origin will combine for up to 83 launches during the next five years, deploying the majority of Amazon’s 3,236 low-earth satellites to be used for what Amazon is calling 'Project Kuiper.'

"No financial details were given.

"Amazon and Blue Origin were both founded by Jeff Bezos, who blasted into space on a Blue Origin rocket last summer. Blue Origin signed on for 12 launches, with options for up to 15 more."

Affordable, easily accessible broadband, of course, makes it easier for Amazon to sell to more people … and creates competition for local retailers who now will have to deal with tougher environments.

Published on: April 6, 2022

•  From the Los Angeles Times:

"As panicked shoppers stocked up on grocery essentials during the early days of the COVID-19 pandemic, Smart & Final made them pay.

"The grocery chain engaged in price gouging on four premium egg products between March 4 and June 22, 2020, state Atty. Gen. Rob Bonta said Tuesday as his office announced a settlement with the Commerce-based supermarket company.

"Following Gov. Gavin Newsom’s state of emergency declaration on March 4, 2020, companies were prohibited from selling food and other necessities for more than 10% higher than pre-emergency prices, unless it was a direct result of increased supply or labor and production costs.

"According to Bonta, Smart & Final sold more than 100,000 cartons of illegally priced eggs, having raised the price on some items by approximately 25%.

"The grocery chain will pay $175,000 in penalties."

In a statement, Smart & Final attributed the price hikes to "fluctuations in egg prices charged by its suppliers."

“Since the beginning of the pandemic, we have experienced numerous supplier price increases in multiple product categories,” the company said. “In response to the rapid pace of these price increases, we briefly and unintentionally raised the price of premium eggs to align with supplier price increases on standard eggs. We want our valued customers to know that price gouging has no place in our stores. We will continue to review our pricing to ensure it remains compliant.”

•  Southeastern Grocers Inc. (SEG), parent company and home of Fresco y Más, Harveys Supermarket and Winn-Dixie grocery stores, said yesterday that it is "committing to increase sustainability for its Own Brand packaging by the end of 2028."  The announcement, the company said, :is in response to feedback provided by SEG’s customers, associates and community members who expressed their desire to see more sustainable packaging as their top sustainability concern.  As part of its pledge, SEG will overhaul its Own Brand packaging by eliminating the use of polystyrene, make all packaging reusable, recyclable or industrially compostable, and include an average of 30% post-consumer recycled material in all packaging."

Anthony Hucker, president-CEO of Southeastern Grocers, said, that the company has heard clearly from customers “that sustainable packaging is among their top concerns, and we listened! In response, we are working with our supplier partners to establish sustainable packaging goals and meet our commitments in 2028."

•  Publix has announced that "its board of directors approved a 5‑for-1 stock split and an increase in the number of authorized shares of its common stock from 1 billion to 4 billion shares. In addition, Publix announced the board declared a quarterly dividend on its common stock.

"Under the revised Florida Business Corporation Act, which became effective Jan. 1, 2020, no shareholder approval is required in connection with a stock split and the related increase in authorized shares.

"The stock split and authorized shares increase will be effective as of the close of business April 14, 2022. For each share of stock a shareholder owns, they will receive four additional shares issued from the stock split in book entry form as an electronic certificate(s)."

•  Bloomberg reports that "French supermarkets are joining a national effort to curb the country’s electricity consumption, as cold weather and nuclear reactor outages pushed domestic power prices to a 13-year high.

"Carrefour SA said it’s cutting its power consumption Monday morning, using methods like 'reducing heating in offices, and dimming lighting in the group’s 400 stores across the country,' a spokeswoman told Bloomberg News."

Published on: April 6, 2022

•  Kroger announced yesterday that Erin Rolfes, the company's Head of Kroger Technology & Digital Communications, has been promoted to the role of Director, Corporate Communications & Media Relations.

She succeeds Kristal Howard who is leaving Kroger after 12 years to pursue other interests.

Published on: April 6, 2022

Responding to Michael Sansolo's column yesterday about how falsely claiming to be "local" can hurt a brand, one MNB reader wrote:

There's a better word to use which is "community".   Part of our mission statement is "contributing to the community we serve".  I agree the word local has lost its roots.  (Pun intended)  It's much more about being community minded now in any case.  Wegman's in the example provided in the column was clearly focused on helping and supporting their community.  Community doesn't need a GPS. 

Yesterday we noted that In the wake of the pro-unionization vote that took place at one of its New York city warehouses, the New York Post reported that Amazon is updating an "internal social media-style app used by Amazon employees" so that certain words are blocked and flagged.

Words like "union,” “living wage” and “plantation."  Plus, “pay raise,” “prison,” “slave labor” and “restrooms."  The Post writes that "additional banned words reportedly include 'freedom,' 'bullying,' 'harassment,' 'petition,' 'diversity,' 'concerned' and 'robots,' as well as slurs and swear words.  Amazon managers would also be able to flag or suppress posts even if they don’t include banned words." 

I commented:

Amazon has signaled that it is likely to challenge the Staten Island vote, and I can understand that it is concerned about precedent.  But I think Amazon's leadership has to be careful about the optics.  It's anti-union rhetoric and actions will not be taking place in a vacuum … all of its customers are watching, and it is not beyond the realm of possibility that Amazon could do something that would damage its image.

One MNB reader responded:

Most people who work anywhere these days work on either a company-supplied computer or in a company owned, on-site system.  When we log in to these systems or otherwise access our companies’ systems remotely, we quickly bypass the terms of use that basically state that this is the company’s computer, system, etc.  As such, they have the right to look at whatever we write in it and govern how we can and cannot use their system.  Like it or not, Amazon has a right to block out words from their systems.  They own it.  On the same note, who’s taking bets on how long Amazon’s Staten Island NY warehouse stays open?

I wasn't arguing Amazon's right to ban those words from its platform.  I'm just asking whether it will be smart to do so … it isn't like the ban will make the words go away.  There are, after all, other ways for people to communicate.

Amazon, as much as any company, ought to realize that.