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    Published on: May 18, 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.

    Today, Tom and KC talk about two online businesses facing different kinds of troubles.  First, there's Gopuff, in which the founders appear to have gotten over their skis in making acquisitions and growing their offerings, to the point where it has created questions about the validity of their business model. And second, there's StitchFix, where the company's leadership ignored customer testing data and launched a program that veered away from its popular subscription offering.  While in both cases the companies are facing an apparent diminution of their brand equity, Tom and KC agree that neither scenario signals a flaw in their basic value propositions.  Rather, both Gopuff and StitchFix offer lessons in how to grow, how far to veer out your lane when innovating, and how to decide whether such detours are worth the thrill.

    If you'd rather download and listen to The Innovation Conversation as an audio podcast, click below.

    Published on: May 18, 2022

    Tops Friendly Markets said yesterday that it is partnering with the National Compassion Fund to create "the Buffalo 5/14 Survivors Fund," which it says will "provide direct financial assistance to the survivors of the deceased and those directly affected by this tragedy. Tops has seeded this Survivors Fund with $500,000 to get it started … One hundred percent (100%) of the contributions donated to this Survivors Fund will go directly to families of those deceased as well as those injured, and those who were present in the store and experienced psychological trauma."

    The move comes after the May 14 mass killing of 10 people, and injuring of three more, at a Tops Friendly Market on Jefferson Avenue on the East Side of Buffalo, a predominantly Black neighborhood.  The mass shooting has been described by law enforcement as rooted in a racist ideology called replacement theory, and federal authorities reportedly are considering filing hate crime charges.

    The Buffalo News this morning reports that the 18-year-old self-described "white supremacist … considered dozens of other locations – including a Buffalo barbershop, a Syracuse shopping mall and a Rochester Walmart – before deciding the Jefferson Avenue supermarket would allow him to target the largest number of Black victims."

    And CNN quotes Buffalo Police Commissioner Joseph Gramaglia as saying that the evidence suggests the shooter had plans to move on from Tops to other locations and continue his rampage.

    The Wall Street Journal writes this morning that the accused shooter's "extensive posts - a dark and paranoid monologue - present a portrait of a mass shooter that has become familiar in recent years: a lone actor, socially isolated and mentally troubled, who finds inspiration to commit mass violence in the recesses of the Internet … In the months leading up to the massacre," the story says, the accused shooter "spent hours glued to a computer in his family’s home in this quiet, predominantly white town in upstate New York. He posted dozens of hateful memes about Black people and Jews, discussed past racially motivated mass shootings and planned his own attack in painstaking detail. In March, he drove hundreds of miles to scout the Buffalo supermarket he later attacked.

    He disdained mainstream political parties and the media, writing that he believed they were controlled by Jews. He described himself as a fascist."

    KC's View:

    Distressing.  Depressing.  Disgusting.  It is hard to find the words to describe the emotions that the events in Buffalo - and other, similar acts of domestic terrorism - prompt.  And let's be clear, this is domestic terrorism that reflects the darkest impulses of the American psyche.

    Think about what we're learning, and what it means for people who venture out to the nearby Walmart, the local barbershop, a regional shopping mall … in fact, to any place where people - especially people of color - gather.  Because we know this is going to happen again.  And again.  And again.

    To me, it raises so many red flags about elements of our culture over which we seem to have lost control:  The proliferation of weapons in the hands of madmen and terrorists … the ways in which the internet and social media serve as a petri dish in which these attitudes are able to fester … the degree to which racial prejudice remain both the nation's original sin and continuing crime … and the kind of currency that terms like white supremacy, fascism, and replacement theory can gain in a society that should be better than this.

    Kudos to Tops and the National Compassion Fund tor creating this Survivors Fund.  My larger concern, in my bleaker moments, is whether the nation can survive the pestilence that threatens its core values.

    Published on: May 18, 2022

    Business Insider reports that "across the US, an unlikely store has been popping up down the street from Amazon-owned Whole Foods supermarkets: Amazon Fresh stores.

    "It's Amazon's bet to expand its grocery business beyond affluent Whole Foods shoppers, analysts said.

    "Amazon has opened 30 Fresh stores since mid-2020, the company's website said. Several of those openings have put Fresh locations close to existing Whole Foods stores."

    The story suggests that the strategy is built on the notion that the two stores offer very different experiences - Amazon Fresh is seen as being more tech-oriented and offering better value;  Whole Foods is perceived as having a stronger specialty and healthy food orientation.  The feeling seems to be that rather than cannibalizing the consumer base, this combination actually offers retailers the ability to expand the base.

    KC's View:

    There is one particularly interesting passage in the Business Insider piece, noting that "management at Whole Foods has also pushed back against some of Amazon's proposed changes, such as selling ads on the grocer's mobile app, which has led to a tense relationship between Whole Foods and Amazon."

    Seems like a pretty good bet that some of these tensions may be addressed forcefully by Amazon's leadership when Whole Foods founder John Mackey steps down later this year.

    I actually think that in theory, the combo strategy makes sense.  My one caveat is that the more I visit Amazon Fresh stores, the less I am impressed by the marketing and merchandising efforts being used;  I love the technology, but the stores seem almost haphazardly put together from a consumer perspective.  And, there are a lot of people who feel that Whole Foods has lost a step or two since being acquired by Amazon.

    So while a combo strategy may make sense, the question is whether both pieces of the combo are taking a lower-common-denominator approach that could undercut their brand equity.

    Published on: May 18, 2022

    Walmart reported disappointing Q1 financial results, saying that they reflected the "unusual environment. U.S. inflation levels, particularly in food and fuel, (that) created more pressure on margin mix and operating costs than we expected."

    According to the company, "total revenue was $141.6 billion, up 2.4% …  US comp sales grew 3.0% and 9.0% on a two year stack … e-commerce growth was 1% or 38% on a two year stack …  Consolidated gross profit rate declined 87 basis points, primarily due to Sam’s Club and 38 basis points in Walmart U.S. on elevated supply chain costs and product mix … Consolidated operating income was $5.3 billion, a decrease of 23.0%, negatively affected by $0.3 billion from divestitures."

    CNBC writes that "the significant jump in fuel prices, elevated labor costs and aggressive inventory levels weighed on the company, Chief Financial Officer Brett Biggs told CNBC in an interview. He said some merchandise arrived late and other items, such as grills, plants and pool chemicals, didn’t sell due to 'unseasonably cool weather in the U.S.'

    "Plus, he said, Walmart employees returned from Covid leave quicker than expected and caused the company to become overstaffed during part of the quarter. He said those scheduling challenges have been resolved."

    The New York Times writes:  "The company’s first-quarter results also provided insight into the changing habits of the American consumer. The company’s executives said they had begun to notice inflation shaping behavior. Lower-income shoppers were buying more food and less general merchandise, like clothing and sporting goods. And instead of buying brand-name bacon and items from the deli, they were opting for more of Walmart’s own 'private label' brands, which tend to be less expensive."

    From the Washington Post:  "The results are unusual … because Walmart has been famously cost-conscious. Its frugal philosophy is a big part of why it’s able to charge low price. If Walmart is struggling even with its thriftiness and superior scale, then smaller and less efficient retailers are in for a very difficult time — not least because there was another note of caution in Walmart’s first quarter announcement."

    Published on: May 18, 2022

    Newsweek is out with a list, generated by BrandSpark International, of the "most trusted grocery stores as voted by American shoppers. BrandSpark surveyed 3200 Americans to capture their real opinions of what grocery store brands they trust the most."

    The national top four:  Walmart, Kroger, Aldi, and Meijer.

    The northeast top four:  ShopRite, Walmart, Aldi, Stop & Shop.

    The midwest top four:  Walmart, Kroger, Aldi, Meijer

    The south top four:  Walmart, Publix, Kroger, H-E-B

    The west top four:  Walmart, Safeway, Costco, Trader Joe's

    KC's View:

    Forgive me.  This is not to denigrate any of the companies that made the list, but this is just a crock, illustrating the difficulty in ranking and comparing food retailers in such a big country.

    Those 3,200 people may feel that way, but the ranking doesn't include some of the best food retailers in the country with the highest degrees of loyalty.  For example, where the hell is Wegmans … a company that, I'd be willing to best, engenders a lot more trust and loyalty in the northeast than any of the retailers mentioned.

    Where is Lunds & Byerlys?  Dorothy Lane Market?  Central Market?  Stew Leonard's?  How about WinCo?  Schnucks?  

    I give very little credence to any of these lists, which seem dominated by big names with big footprints, and yet seem to have very little nuance or understanding about what food trust really means.

    Published on: May 18, 2022

    Crain's Chicago Business reports that "Au Cheval founder Brendan Sodikoff is partnering with Dom’s Kitchen & Market, the grocery store from industry veteran Bob Mariano.

    "Sodikoff, who also founded Doughnut Vault and other brands under restaurant group Hogsalt Hospitality … Sodikoff plans to 'draw on the portfolio of concepts' from Hogsalt."

    The story says that he "will oversee Dom’s culinary operations as the store expands … Dom’s plans to open 15 stores by 2025. Sodikoff will oversee the food offerings, store design and menu development."

    Crain's goers on to note that Dom's is " the brainchild of grocery veterans Mariano, who founded the namesake grocery chain; Jay Owen, the great-grandson of the founder of now-defunct Dominick’s; and Don Fitzgerald, a former senior executive at Dominick's.

    "The venture has attracted funding from big-name investors, including firms launched by former McDonald’s CEO Don Thompson and former Walgreens CEO Greg Wasson. That will help fuel its growth up to 15 stores, an increase from its original goal of 10 in the next five years."

    KC's View:

    The crazy, radical bias here is for food stores that actually act like food stores.

    I'm excited for Dom's and, as a fan of Au Cheval, am looking forward to seeing what Sodikoff, in this case quite literally, brings to the table.

    Published on: May 18, 2022

    Check out this provocative video from Scott Galloway, professor of marketing at the New York University Stern School of Business, as well as a writer, entrepreneur, podcaster and public speaker.

    In it, Galloway talks about the implications of the fact that "TikTok captures more monthly hours from users than Facebook and Instagram - combined."

    One note:  Galloway refers to a "Digital K-Hole ," a term with which I was unfamiliar.   According to Urban Dictionary, a k-hole happens when you "have used too much of the drug ketamine … and lost sense of time and space, balance, verbal skills." Which means that a digital k-hole is when you've spent so much time online that the same thing occurs.

    Published on: May 18, 2022

    Axios reports that "Uber is adding 'comfort electric' vehicles to the ride-hailing options on its app in some California cities, part of an ongoing effort to get drivers and customers to go electric … Uber Comfort Electric is available in San Francisco, San Diego and Los Angeles with more cities to come.

    "Riders tap a button to request a ride in a premium EV like a Tesla, Polestar or Ford Mustang Mach-E.

    "The Comfort Electric option is offered alongside Uber Green, where riders can already request hybrid and EV rides, as well as car-free options like bikes and scooters.

    "Hailing a premium EV is more expensive, though."

    The Axios story points out that this is part of a broader expansion of services by Uber:  "At many stadiums, you can now order food from the concession stands using Uber Eats so you don't have to miss any of the game standing in line … Uber Eats at Stadiums is currently available in LA at Dodger Stadium and Angel Stadium; in New York at Yankee Stadium; in Washington, D.C., at Capital One Arena; in Houston at Minute Maid Park; and in San Jose at PayPal Park … Inside the venue, customers can open the Uber Eats app and click on their general seat location (Main level, section 215 or gate 21B, for example) to be shown nearby ordering options.

    "When the order is ready, they’ll be notified and can head to the pickup location, skipping the line."

    KC's View:

    Think of this as eliminating friction.  In the case of the stadium business, it is the friction of lines.  And in the case of Comfort Electric, it is ethical friction.

    Published on: May 18, 2022

    •  The Oregonian reports that "employees at four Starbucks coffee shops in Portland voted to unionize Tuesday, delivering a handful of wins to the store-by-store campaign to organize the Fortune 500 coffee chain.  The locations are the first in Portland to vote to form unions … The union wins bring the number of organized company-owned stores to 75 nationwide, according to Starbucks Workers United, a labor union affiliated with the Service Employees International Union."

    Published on: May 18, 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 current US Covid-19 coronavirus numbers:  84,473,447 total cases … 1,027,285 deaths … and 81,380,775 reported recoveries.

    The global numbers:  524,263,182 total cases … 6,293,039 fatalities … and 494,202,326 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 … 66.5 percent are fully vaccinated … and 46.4 percent of fully vaccinated people have received a vaccine booster dose.



    •  Axios reports that the US Food and Drug Administration (FDA) yesterday "authorized booster doses of the Pfizer-BioNTech coronavirus vaccine for children between the ages of 5 and 11 … Children aged 5-11 can get their first booster shot five months 'at least five months after completion of a primary series with the Pfizer-BioNTech COVID-19 Vaccine,' the FDA said."

    "While it has largely been the case that COVID-19 tends to be less severe in children than adults, the omicron wave has seen more kids getting sick with the disease and being hospitalized, and children may also experience longer term effects, even following initially mild disease," FDA commissioner Robert Califf said in a statement.

    Published on: May 18, 2022

    •  The US Department of Commerce said yesterday that April retail sales rose 0.9 percent, which the Associated Press coverage characterized as "a solid increase that underscores Americans’ ability to keep ramping up spending even as inflation persists at nearly a 40-year high … Even adjusting for inflation, which was 0.3% on a monthly basis in April, sales increased. Gas prices fell slightly last month, restraining inflation, after soaring in March in the aftermath of Russia’s invasion of Ukraine.

    "Consumers are providing critical support to the economy even after a year of seeing prices spiral higher for gas, food, rent, and other necessities. The economy contracted in the first three months of the year, but consumer and business spending still increased at a healthy pace."

    The AP writes that "the Tuesday report also showed that sales in March were revised much higher, to a gain of 1.4%, from 0.7%. As a result, spending even rose that month after adjusting for inflation, which surged to 1.2% as gas prices rose. The revision suggests the economy likely shrank by less than the 1.4% contraction that was reported last month."

    At least some economists believe that the continued strength in the consumer spending numbers suggests that a recession is "much less likely, at least anytime soon,"  the story says.



    •  From the Wall Street Journal:

    "Coca-Cola Co. ’s British business said it would introduce packaging that keeps plastic lids tethered to bottles when opened to make it easier for consumers to recycle drinks packaging in its entirety.

    "Plastic bottle caps can be recycled but are often lost, discarded or end up as litter, Coca-Cola said in a statement. The new design aims to reduce that, the company said.

    "The hinged lids started rolling out Tuesday on 1.5-liter bottles of Fanta, Coca-Cola Zero Sugar and Diet Coke in Scotland, and all plastic bottles across Coca-Cola’s brands will adopt the new design in the U.K. by 2024, the company said.

    "Coca-Cola will work with bottling partners to eventually phase the design into production lines across Europe, a company spokesman said."

    Published on: May 18, 2022

    •  CNBC reports that "Mastercard is piloting new technology that lets shoppers make payments with just their face or hand at the checkout point.

    "The company on Tuesday launched a program for retailers to offer biometric payment methods, like facial recognition and fingerprint scanning. At checkout, users will be able to authenticate their payment by showing their face or the palm of their hand instead of swiping their card.

    "The program has already gone live in five St Marche grocery stores in Sao Paulo, Brazil. Mastercard says it plans to roll it out globally later this year."

    The story says that "about 1.4 billion people are expected to use facial recognition technology to authenticate a payment by 2025, more than doubling from 671 million in 2020, according to a forecast from Juniper Research.

    Published on: May 18, 2022

    •  United Natural Foods, Inc. (UNFI) announced that COO Eric Dorne will retire from the Company effective October 29, 2022. after 46 years in the grocery industry and the past 11 years in senior leadership roles at UNFI.

    Published on: May 18, 2022

    Got the following email from MNB reader Dick Spezzano about a new Amazon Fresh store in La Verne, California:

    The store has been open three weeks and I was there on Thursday at 1:30 in the afternoon,  the cantaloupe was the lead item in produce at $2.29 each, and there was none. They had a barbecue chicken, every day low price, at $4.97 and there was none.  I tried the pizza by the slice it was terrible. It’s a very flat look,  in those items that were in stock was very thin, 2 to 3 packages deep in the center store. There were 11 customers shopping, I check stand open, 2 customers at self checkout, and 6 Amazon shoppers for pick up or delivery. 

    All of which continues to create at least the impression that a) many Amazon Fresh stores are being operated as if they are dark stores that happen to allow customers in, and b) if they really want to make the format work, they need a food retail heavyweight with creativity and discipline who can really make them sing.

    If they're interested, I have some names.



    Responding to yesterday's FaceTime piece, and accompanying pictures, about a supposedly redesigned Walmart Supercenter in Forney, Texas, MNB reader Gregory Gheen wrote:

    I don't know if your pictures were intentional but there sure was a lot of out of stocks in your pictures.

    Think of it as being the equivalent of a thousand words.

    From another reader:

    This may be a high volume store, but the produce department looks like an afterthought, almost like a larger Aldi's the way the produce is displayed. Nothing like what I'm sure HEB will deliver…

    Agreed.  if Walmart thinks this is the format that will defend its turf from H-E-B, they may want to rethink the strategy.

    That said, another MNB reader offered some words of caution:

    I know it’s not your cup of tea, but, in these times, price, price, price! Thanks for sharing your trip. My daughter’s family lives in Houston, and the WalMart stores consistently beat HEB on almost anything in regards to price. When you have 3 teenage kids, it’s price, price, price.

    Which is why I was careful to make the point that the Walmart clearly is doing a lot of business.  I just think that if this redesigned store is any indication, they still have not figured out the fresh foods business.  I'd give it a C+ at best … but to be fair, Walmart may have decided that a C+ is all it needs in fresh foods to be successful.

    But you make a good point.  Thanks for challenging my biases.



    On another subject, from another MNB reader:

    In response to your article about retailer competition for ad dollars, the chains and wholesalers who are my customers offer robust menus of digital and shopper marketing programs to entice brand marketing dollars.  This spend is expected to be incremental to trade spend.  The programs look great, in theory, and show off nice bells and whistles.  In my opinion, though, the commitment to these programs from brand marketers is more about leveraging the partnership with desirable retailers, and less about seeing directly attributed results from specific programs. 

    MNB reader Matt Nitzberg also weighed in with a somewhat different perspective:

    Important and timely topic, and it parallels data commercialization and other efforts motivated by blended (and often blurred) objectives of collaboration, growth, margin enhancement, and improving customers’ experiences. 

    From 30+ years at the intersection of brands and retailers, I can confirm that nearly all retailer commercialization programs are initially greeted by CPG‘s as unwanted and uncomfortable “have to’s.“ Basic questions include “how are we going to find the money,” and “are we going to get anything in return?“

    A few, marked by retailer transparency, accountability, measurable results, and improving ROI, make it to the “want to“ level. At the moment, many retailers are more focused on margin enhancement than these other attributes, particularly when that’s the mandate from the C-suite. 

    Many CPGs aren’t in strong bargaining positions at the moment, partly due to unaligned cross-retailer measurement (which you mention in your assessment), and partly from being on their back feet around supply and price increases. 

    I expect that, within 3-6 months, leading CPGs will determine how to calibrate program measurement across multiple retailers. This will strengthen arguments for reducing participation in underperforming programs that aren’t making meaningful progress. 

    Beyond that, as supply and inflationary concerns begin to recede, there will be more challenging (and important) executive-level discussions regarding cost-to-serve, mutual growth, ROI, transparency, and what it means to collaborate. 

    Both CPG‘s and retailers should be getting ready for those strategic conversations now.

    Winners among both groups will (1) keep the customer (shopper) at the center, (2) be driven by the right data and strategic analyses, (3) collaborate in new areas and new ways, (4) relentlessly achieve continual improvement, and (5) drive out non-value added costs. 



    And finally…

    I said yesterday that I'm not going to be posting political diatribes that blame one side or the other for the conditions that lead to things like the mass shooting at the Tops store in Buffalo.  I'm going to make this exception, though, for a pointed comment from an MNB reader that, in my view, blames the whole damned lot of them:

    My view is that if 20 children and 6 educators can get mowed down in Newtown with no changes taking place we will never see change.

    American exceptionalism, I think not.