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    Published on: May 9, 2022

    This year, the DVD celebrates 25 years since the format was first introduced at the Consumer Electronics Show (CES).  Its success, and then diminishment as a consumer entertainment vehicle, offers lessons to retailers … especially about the most critical question that needs to be asked by business leaders.

    Published on: May 9, 2022

    Brick Meets Click and Mercatus are out with their monthly analysis of the e-grocery business this morning, concluding that "April online grocery sales pulled back 3.8% versus last year, finishing at $8.1 billion, as total order volume dropped 5.8% driven by lower order frequency and a slightly smaller monthly active user (MAU) base."

    The analysis goes on:

    "Delivery-related sales, which accounted for almost one-third of total online grocery sales during April, dropped nearly 6% versus a year ago and contributed nearly half of the decline in total sales year-over-year.  The segment’s average order value (AOV) jumped 6% to $84 versus April 2021, helping to mitigate an 11% decline in order volume that was mainly driven by an MAU base that contracted nearly 9% over the past year.

    Ship-to-Home, the smallest segment with just over one-fifth of the sales in April, fell over 3% versus last year. Order volume drove the decline, dropping nearly 6% versus April 2021, while the AOV increased by almost 3% to $47. The decline in order volume was the result of a contraction in the MAU base of more than 2% as well as MAUs receiving 4% fewer Ship-to-Home orders during the month.

    "Pickup, the largest eGrocery segment with almost half of total sales, declined by less than 3% versus the prior year. Unlike the other two segments, Pickup reported a nominal drop in AOV of approximately 70 basis points to $81; this, combined with a 2% drop in order volume, contributed to the year-over-year decline in sales. Versus April 2021, Pickup’s MAU base shrank by less than 3% and order frequency among its MAUs was essentially unchanged."

    The report also concludes that "the likelihood for an online grocery shopper to use the same service again within the next month increased during April, coming in at almost 63%, up almost 8 percentage points on a year-over-year basis."

    KC's View:

    No surprise here.  The combination of a post-pandemic mentality and the pressures of inflation almost certainly will create some backing off from Covid-era behavior.

    That's not to suggest that e-grocery somehow is going to go away.  In many ways, this is just a temporary correction … and there still are a bunch of companies out there pushing faster and faster delivery windows, which will create heightened expectations.

    Published on: May 9, 2022

    The New York Times reports that "in a sign that federal labor officials are closely scrutinizing management behavior during union campaigns, the National Labor Relations Board said Friday that it had found merit in accusations that Amazon and Starbucks had violated labor law.

    "At Amazon, the labor board found merit to charges that the company had required workers to attend anti-union meetings at a vast Staten Island warehouse where the Amazon Labor Union won a stunning election victory last month … In the same filing of charges, the Amazon Labor Union accused the company of threatening to withhold benefits from employees if they voted to unionize, and of inaccurately indicating to employees that they could be fired if the warehouse were to unionize and they failed to pay union dues. The labor board also found merit to these accusations."

    At Starbucks, the Times writes, "where the union has won initial votes at more than 50 stores since December, the labor board issued a complaint Friday over a series of charges the union filed, most of them in February, accusing the company of illegal behavior.

    "Those accusations include firing employees in retaliation for supporting the union; threatening employees’ ability to receive new benefits if they choose to unionize; requiring workers to be available for a minimum number of hours to remain employed at a unionized store without bargaining over the change, as a way to force out at least one union supporter; and effectively promising benefits to workers if they decide not to unionize.

    "In addition to those allegations, the labor board found merit to accusations that the company intimidated workers by closing Buffalo-area stores and engaging in surveillance of workers while they were on the job. All of those actions would be illegal."

    Amazon responded to the NLRB move by saying that the charges are false and that it would prove it during the process.  Starbucks said much the same thing, pointing out that "the complaint doesn’t constitute a judgment by the labor board."

    This isn't the only labor story involving these two companies.

    •  The New York Times writes that Amazon has informed "more than a half-dozen senior managers involved with the Staten Island warehouse that they were being fired, according to four current and former employees with knowledge of the situation who spoke on the condition of anonymity out of fear of retaliation.

    "The firings, which occurred outside the company’s typical employee review cycle, were seen by the managers and other people who work at the facility as a response to the victory by the Amazon Labor Union, three of the people said. Workers at the warehouse voted by a wide margin to form the first union at the company in the United States, in one of the biggest victories for organized labor in at least a generation … Many of the managers had been responsible for implementing the company’s response to the unionization effort. Several were veterans of the company, with more than six years of experience, according to their LinkedIn profiles."

    •  CNBC reports that "Starbucks is asking the White House for a meeting after President Joe Biden met with an organizer who is helping its coffee shops unionize.

    "The president met with 39 national labor leaders on Thursday, including Christian Smalls, who heads the Amazon Labor Union, and Laura Garza, a union leader at Starbucks’ New York City Roastery. Biden has been a vocal supporter of unions, from the campaign trail to his time in the Oval Office, during a time when high-profile labor drives at companies such as Amazon, Apple and Conde Nast are making headlines.

    "A.J. Jones, Starbucks’ head of global communications and public affairs, wrote in a letter Thursday that the decision to not invite any representatives from the company was deeply concerning."

    KC's View:

    It is hard for me to believe that in the long term, companies like Starbucks and Amazon are going to run the table when it comes to labor victories.

    That said, it is important to keep labor's so-called progress in some sort of context.  After all, employees - whether unionized or not - that are getting raises may find them to be illusory, since they are not keeping up with current inflation rates.  They may be getting more money, but at the same time they may have diminished spending power.

    Which may only heighten management-labor tensions.

    Published on: May 9, 2022

    The Hill has a story about US Senators last week "scrutinized Visa and Mastercard for raising swipe fees on merchants, costs that they say will be passed down to consumers amid surging inflation."

    According to the story, "On April 22, Visa and Mastercard changed their interchange fees, which are tacked onto every credit card transaction to compensate issuing banks and pay for consumer rewards and anti-fraud measures.

    "Visa reported cutting fees for most small businesses while Mastercard said it lowered fees on transactions below $5, but the changes still amount to a $475 million annual fee hike for merchants, according to an estimate from payments consultancy CMSPI. That’s a relatively small bump for retailers, which already paid $138 billion to accept card payments last year, according to the Retail Industry Leaders Association. 

    "The changes prompted a lobbying blitz from big box retailers and their trade groups urging lawmakers to crack down on what they say are anti-competitive practices by Visa and Mastercard, which together control roughly 80 percent of the credit and debit market."

    Which is why last week FMI–The Food Industry Association, the National Grocers Association (NGA) and the National retail Federation (NRF) all weighed in on swipe fees, which they said became more onerous as more people shopped online and used credit cards for virtually all those transactions.

    From FMI:

    "While the grocery industry is committed to serving all their customers, regardless of how they pay, the increase in card usage has several unintended consequences. Retailers pay processing fees to accept credit and debit cards as payments from their customers for goods and services. These processing fees are very expensive and include various fees, such as swipe and routing fees. In 2021, merchants’ card processing fees totaled $137.8 billion, up over 112% from the previous decade. Swipe fees are most retailers’ highest operating cost after labor and rent.

    "The hidden processing fees negatively impact U.S. consumers – at an average of $700 a year for an American family. The $137.8 billion in hidden processing fees artificially drives up the price consumers pay for goods and services. Retailers are forced to incorporate these fees in their pricing decisions and sell items at the “credit card” price to cover costs. The impact disproportionally hurts lower income Americans, those who rely on cash, and those who do not have access to high credit card rewards. The current credit card market leaves lower income Americans paying for bloated credit card rewards they will never enjoy."

    From NGA:

    "For more than a decade, Visa and Mastercard have set not only their network fees – the costs associated with a credit or debit card payment being routed through their network – but the interchange fees that merchants pay to the issuers of the credit and debit cards with which Americans transact. Nearly twice a year, every year, these two card networks have instituted fee changes that, on net, almost always lead to increases in merchants’ costs. Case in point, this hearing comes on the heels of a net $1.2 billion increase in interchange fees and other merchant costs implemented by Visa and Mastercard in April 2022.

    "Visa and Mastercard use their dominance over the U.S. card payment marketplace to set not only the fees associated with accepting card payments, but the rules and 'standards' that govern the rest of the participants in the marketplace as well. Unfortunately, the benefit of this duopoly has been one-sided. Visa and Mastercard profit margins continue to lead the S&P 500, and credit and debit card issuers continue to gain from central interchange price fixing. Merchants and American consumers, meanwhile, are left with increased costs and higher rates of fraud.

    "U.S. merchants paid $137.83 billion in credit and debit card processing fees in 2021, a 24.3% increase from 2020 and more than double the amount paid a decade ago.1 U.S. merchants pay the highest swipe fees in the industrialized world, an average of 2.2%, but these fees can vary from 1-4% depending on the type of credit card a customer uses. Merchants have no ability to affect these costs. Even some of the world’s largest retailers do not have leverage to negotiate significantly lower swipe fees."

    And, from NRF:

    "Swipe fees are most merchants’ highest operating cost after labor, averaging 2.22 percent of the transaction amount for Visa and Mastercard credit cards. The fees drive up consumer prices, amounting to more than $700 a year for the average American family. As a percentage of the transaction, they go up as prices go up, creating a multiplier effect for already-soaring inflation.

    "Swipe fees can be even higher for small retailers because they are based, in part, on transaction volume. Small retailers with a few dozen transactions per day pay a higher percentage than national retailers with millions of transactions. Fees are also higher for e- commerce transactions, which have become increasingly important for small retailers because of the shift to more online shopping since the beginning of the pandemic.

    "Ongoing and unwarranted increases in swipe fees are especially damaging to small retailers. We have heard many stories from small retailers about the extreme challenges posed by the current payments system and Visa and Mastercard’s continuing monopoly. It is small retailers who are calling for swipe fee reform more than any other segment of our industry. They pay the highest swipe fee rates and have the fewest resources to fight back against global credit card networks and Wall Street banks. They want the card industry to compete the same as they do."

    The retail organizations seem to have a sympathetic ear.

    The Hill writes that "Senate Judiciary Committee Chairman Dick Durbin (D-Ill.), a longtime critic of the credit card giants, called for new rules to inject competition into the credit card industry and prevent 'unreasonable' fees during a hearing in which Visa and Mastercard executives answered questions about the swipe fees.

    "'The credit and debit card systems are not competitive marketplaces,' Durbin said. 'It’s a sweetheart deal for the dominant networks, for the biggest banks and for certain cardholders who have ritzy rewards programs, but the average small business and the consumer, they pay the price'."

    KC's View:

    This is an argument that seems to be without end, with very little possibility of a resolution.  It is like the old African proverb about how, when elephants fight, the real loser is the grass.

    In this case, shoppers are the grass.

    Published on: May 9, 2022

    From the Buffalo News:

    "Four years after emerging from bankruptcy, Tops Markets is staging a comeback.

    "Tops is spending $120 million over four years to update many of its stores in the Buffalo market, where the Amherst-based grocer originated 60 years ago.

    "It's a sign of better times for the once debt-strapped company that for the most part put remodeling its stores on hold in 2017 and declared bankruptcy a year later.

    "Now, Tops is in a better position. It merged with Price Chopper/Market 32, owned by the Golub family, giving it a more solid financial base. Its latest upgrades are not only improving its look and product offerings, but also updating its technology and reducing electricity costs by using solar farms to provide renewable energy to many of its stores.

    The project, which began in 2019, includes renovating 32 of its stores, most of them in Western New York. Twenty-two of them have already been completed, with two more in Buffalo slated to be done this year … These days, the grocer is committing between 5% to 7% of its sales revenue on capital expenditures – one of the highest amounts of any food retailer in the industry, according to Burt Flickinger, the managing director at Strategic Resource Group and an expert in grocery retail … Flickinger said he’s encouraged by the investment, part of what he describes as Tops' 'transformational turnaround out of bankruptcy.' Typically, grocery retailers spend 1% to 2% of sales profits on capital expenditures, he added."

    KC's View:

    In totally buy into the idea that Tops now can be more competitive than ever.

    But I'm struck by the list of competitors included in the News story - " local powerhouse Wegmans, as well as Walmart, Aldi, Dash's, Save a Lot, BJ’s Wholesale Club, Trader Joe’s, Super Target and Market in the Square, just to name some, and now Costco is coming to the Western New York marketplace."

    Not mentioned is Kroger, which has said it plans to enter the northeast with an online-only offering similar to one it is using in Florida and Texas.  While Kroger has not been specific about where in the northeast, I keep thinking that it could make a move on western and upstate New York, and then try to bolster its digital-only offer with an attempted acquisition of the Price Chopper-Tops chains.

    This is just idle speculation, of course.

    Published on: May 9, 2022

    Robomart, which has been testing a number of self-service shopping vehicles that bring specific product categories - such as HBC or convenience snacks - to neighborhoods, where they can be hailed by consumers using a proprietary mobile app, said last week it is working with Unilever  to roll out a new-age ice cream truck.

    The truck will feature a number of Unilever ice cream brands, including Ben & Jerry’s, Breyers, Good Humor, Magnum and Talenti.

    The offering will hit the roads of Los Angeles this summer, the companies said.

    KC's View:

    Everything old is new again.

    Published on: May 9, 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 a total of 83,581,715 total cases of the Covid-19 coronavirus, resulting in 1,024,546 deaths and 80,944,857 reported recoveries.

    Globally, there have been 517,376,989 total cases, with 6,276,719 resultant fatalities and 472,157,948 reported recoveries.   (Source.)



    •  The Centers for Disease Control and Prevention (CDC) says that 77.7 percent of the total US population has received at least one dose of vaccine … 66.3 percent are fully vaccinated … and 46 percent of fully vaccinated people have received a vaccine booster dose.

    Published on: May 9, 2022

    •  TechCrunch reports that Starbucks has announced that "its plans to enter the web3 space with the launch of its own NFT collection later this year, where the individual digital collectibles also provide their owners with access to exclusive content experiences and other benefits, it said.

    "The company touted its plans to investors on its fiscal Q2 2022 earnings call by explaining how NFTs can help Starbucks extend its brand’s concept of the 'third place' — meaning a place between home and work where people can feel a sense of belonging over coffee."

    Starbucks Chief Marketing Officer Brady Brewer told investors last week that "we are creating the digital third place. To achieve this, we will broaden our framework of what it means for people to be a member of the Starbucks community, adding new concepts such as ownership and community-based membership models that we see developing in the web3 space."

    Starbucks said "it would build out its NFT community on an 'environmentally sustainable' web3 platform - a decision it said would be more in line with its existing sustainability commitments. The company didn’t indicate what sort of blockchain technology would be involved with its NFT collections, however, but said it was likely to be 'multi-chain' or 'chain agnostic'."

    Published on: May 9, 2022

    •  CNBC reports that "Best Buy is adding merchandise that might surprise shoppers who typically think of its stores and website as a place to buy smartphones, laptops and TVs.

    The company said Friday it has begun to carry about 100 skin-care devices, including a facial steamer and at-home tool for microdermabrasion, at nearly 300 stores and on its website.

    "Best Buy is making a broader push into categories such as fitness and furniture as it looks to propel growth beyond the Covid pandemic. The company benefited from early pandemic trends, as people sought computer monitors for home offices, kitchen appliances for more at-home cooking and theater systems or giant TVs to pass the time."

    The story notes that "there are already signs of softening electronics sales, as consumers direct dollars toward vacations and social events. Major appliance maker Whirlpool missed on estimates and saw sales drop 8.3% in North America in the most recent quarter versus the year-ago period, the sharpest decline since the pandemic began. Microsoft, which produces Xbox video game consoles, gave a negative outlook for the coming quarter with projected declines in the gaming category.

    "The NPD Group, a market researcher, projected that revenue from consumer electronics in the U.S. will fall by 5% in 2022, 4% in 2023 and 1% in 2024 — but said total sales will remain higher than pre-pandemic levels. The declines follow a record-setting year for the industry in the U.S. with consumer tech sales hitting almost $127 billion, a 9% jump over the elevated sales in 2020, NPD Group said."

    Published on: May 9, 2022

    I got the following email from MNB reader Tony Stanton, which he said was "an open letter to Jeff Bezos":

    Dear Jeff,

    I had an opportunity to visit your much anticipated and newest store in Murietta, California yesterday afternoon. Here is what I encountered.

    At the front door there was only a rent-a-cop security person to answer questions on how to proceed into your store. He was overwhelmed. Clients were confused on what turnstile to pass through. None of us understood what we were to swipe to gain access. An AF employee showed up as the line grew out the door. He asked people if they had the AF app on their mobile phones. I think most did not. I did not. So I decided to pass through the single turnstile for the technologically challenged. The woman in front of me tried to access through the same turnstile. But it would not open. Your AF employee asked her to step back and try again. She did and still nothing. Your AF employee asked her step aside, then asked me to attempt to pass through with my cart in front of me. EUREKA! Success. The woman then scooted in behind me (sans cart) before the gate closed behind her. May I suggest that you hire a few more greeters for OUTSIDE the front door where they can welcome newbies like me and answer their questions. Inside the entrance lobby is way too small to do that. Were I an impatient man, I might have turned around and gone home. But curiosity got the best of me. Moving on.

    My next impression was that I had just walked into the darkest store I had ever been into. Black on black on steroids. Black walls, black ceiling, black fixtures, black employee uniforms. I'm 69 years old and my vision has been compromised over time. I need light and a lot of it to see most anything these days. Black doesn't help me or others my age with vision issues. And black isn't exactly uplifting or encouraging. Matter of fact it's pretty depressing. Moving on.

    Now I'm on the hunt for a couple of your advertised Grand Opening specials. Hold onto your seat Jeff, it's going to be bumpy ride. I know this is only Day Two of your first week and I shouldn't expect everything to be running smoothly. However, this is not your first store or your first store Grand Opening and yes everything and everyone should be at the top of their game. Let's pick up some bananas. You price them individually, ala Trader Joe's. And each banana was individually displayed. Perfectly spaced apart. My first impression was "They've run out of bananas. So they are spreading them out to appear as they have not run out of bananas." (I'm talking to myself, as I sometimes do. Did I mention that I'm 69 years old). Moving on.

    Next, on to the bakery. I'm looking for the advertised cakes. Mom wants a cake for Mother's Day. Sorry, but you've run out of the cakes on special. I ask an employee, who is sampling mashed potatoes next to the bakery, if he knows if there is a display of the cakes elsewhere in the store. Nope. Moving on.

    Off to frozen foods, ice cream specifically. I'm looking for your house brand at $1.99 per pint. Pretty good deal. I found one pint of chocolate left on the shelf. All other flavors, sold out. I asked an AF employee who was restocking ice cream if there were any more of the blueberry flavor in stock. She did a quick scan of the barcode and indeed there were eight left in back stock. Great. I'm really impressed at the speed she was able to check inventory in real time. She said she would grab them just as soon as she finished restocking the ice cream novelties she had on her cart. "Wouldn't want them to melt.", she said. No of course not. Melted ice cream, not good. Jeff, are you still holding onto your seat? While she went to the backroom I went around the corner in search of other stuff. And I found bagged ice cubes. Ummm? Maybe I should buy a bag. Our ice maker is on the fritz and Mom likes her evening martinis ice cold. With bag in hand I returned to the ice cream section only to find your AF employee had restocked the ice cream I wanted and the vultures had swept in and took all but one pint. I quickly grabbed the lone pint. Squish. Soft ice cream. Partially melted. Oh Jeff, say it isn't so. An AF employee couldn't feel the difference between a frozen solid pint and a pint partially melted. I took it anyway. My niece loves everything blueberry. Maybe the bag of ice will keep the ice cream from melting any more on the way home. Moving on.

    Off to the checkout line. I had not installed the Amazon Fresh app onto my mobile phone. Not a problem. Only one guy in front of me. Happy to wait. But here is what occurred right in front of me. Three middle school aged girls, hands full of chips, sodas and candy bars, came up behind me and leaned over the counter and asked the cashier "Do you take cash? Do we have to sign up to buy this?" As I was turning towards the exit I overheard the cashier begin to explain how the checkout process went. Now I saw everything come full circle. Poor engagement at the front door on how things worked lead to the cashier having to take time out from processing paying customers. Kinda defeats the whole concept of contactless checkout doesn't it? This revolution in grocery store technology just went over the heads of a young (and I assume tech savvy) generation.

    Good luck, Jeff.

    Sincerely,

    Anthony Stanton, Amazon Prime Member

    This is a brand new store.  A common phrase comes to mind, though it is one that may not have been absorbed by the folks at the new Amazon Fresh store:

    "You only get one chance to make a first impression."

    Published on: May 9, 2022

    In this weekend's 148th running of the Kentucky Derby, a last-minute entry named Rich Strike - an 80-1 shot - came up the rail for one of the greatest upsets in Churchill Downs history.

    KC's View:

    It is, of course, possible to overuse sports as a metaphor for business and life.

    But the "it ain't over 'til it's over" performance of Rich Strike certainly offers underdogs everywhere some level of hope about succeeding even in the face of daunting odds.

    The New York Mets aren't exactly underdogs;  when you've been bought by one of the richest men in sports, you give up the right to use that sobriquet.  But they proved much the same thing last Thursday night when, in the ninth inning, they stormed back from a 7-1 deficit to beat the Philadelphia Phillies 8-7.