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    Published on: July 15, 2022

    I have some thoughts today about a session I moderated at the Organic Produce Summit (OPS) in Monterey, California, in which I spoke with Rich Gonzales, Walmart's vp of Global Produce Sourcing, and Tom Barnes, CEO of Category Partners, about the impact of inflation on consumer purchasing behavior.  One thing we talked about - how this can be an opportunity for value-oriented retailers to steal market share and sales from more high-end retailers in the organic produce category.

    Published on: July 15, 2022

    The Wall Street Journal is reporting that Amazon "has started drastically reducing the number of items it sells under its own brands, and the company has discussed the possibility of exiting the private-label business entirely to alleviate regulatory pressure, according to people familiar with the matter."

    The story notes that Amazon has some 243,000 SKUs in its private label portfolio, using 45 different house brand names.  Across the board, with a few exceptions, sales are said to be "disappointing," and not worth the grief that Amazon gets from regulators who have accused the company of giving preferential treatment to own-label items at the expense of outside brands.

    "Over the past six months," the Journal writes, "Amazon leadership instructed its private-label team to slash the list of items and not to reorder many of them, the people said. Executives discussed reducing its private-label assortment in the U.S. by well over half, one of them said."

    The Journal reports that Amazon's private label business accounts for about one percent of its sales, though a few years ago, then-CEO Jeff Bezos challenged employees to drive private label sales to 10 percent by 2022.  It didn't work.

    The story notes that "US lawmakers have proposed legislation aimed at big tech companies including Amazon that would bar dominant tech platforms from favoring their own products and services. On Thursday, Amazon proposed concessions to settle two antitrust cases against it in the European Union. Amazon promised not to use nonpublic data about sellers on its marketplace, after the EU accused Amazon of violating competition law by using nonpublic information from merchants to compete against them."

    KC's View:

    To be honest, I've long believed that Amazon's portfolio of private label brands is way too extensive and unfocused.  I think it would make a lot of sense not just to cut back on the SKUs, but on the brand names that don't really add up to much other than confusion;  I'm not sure that Amazon has effectively communicated the value of the various brands, and so what's the point.  (Actually, the poor sales numbers would suggest that Amazon hasn't been effective at all in doing this.)

    If I were Amazon, I'd boil much of it down to Amazon Basics - it is a name that makes sense, the items can be cherry-picked so that only the ones that make sense are kept.  (Ironically, Amazon Basics batteries always have been held out as an example of how private label can work well.)

    And sure, this likely would assuage some of the regulators and legislators hostile to Amazon's approach to private label.  I've never really bought into the accusation that it is wrong for Amazon to be able to give preferential treatment to own-label items - that's what every retailer is able to do - but sometimes you have to do what you have to do.

    Published on: July 15, 2022

    Brick Meets Click is out with its assessment of June and Q2 e-grocery sales, concluding that in June e-grocery sales were up six percent to $7.2 billion compared to the same month a year ago, while Q2 e-grocery sales were up one percent to $22.4 billion in sales compared to the same period a year ago.

    According to the report, "Pickup, the largest segment of eGrocery, performed well; its June and second quarter sales rose 3% respectively versus a year ago. An expanding monthly active user (MAU) base and higher average order values (AOVs) were offset by lower order frequency among its MAUs during both periods. For the second quarter of 2022, Pickup contributed 45.7% of total eGrocery sales, up 80 basis points versus 2021."

    In addition, "Delivery’s monthly sales jumped over 20%, and it finished the quarter 6% higher than year-ago results. Gains in the MAU base during both periods drove most of the sales lift, although higher AOVs also contributed to the year-over-year gains. Delivery reported mixed results relative to order frequency as frequency increased during June but declined for the quarter. Delivery captured 34.2% of the online grocery dollar share for the second quarter, up 1.7 percentage points from 2021.

    "Ship-to-Home continues a long-term decline that started at the onset of the pandemic in March 2020 when online grocery shopping began to evolve rapidly to meet new needs. Year over year, Ship-to-Home sales fell over 14% in June and by more than 10% for the second quarter. While the segment’s MAU base grew over both periods, consistently lower AOVs drove the sales decline along with a slight contraction in the number of orders placed each month. Ship-to- Home dollar share for the quarter was 20.0%, down 2.6 percentage points versus last year."

    “Inflation and COVID are creating cross-currents in the market as higher prices motivate customers to look for ways to avoid paying more than necessary, and ongoing concerns about contracting the virus motivate shoppers to use online grocery as a way to stay healthy,” said David Bishop, partner at Brick Meets Click, in a prepared statement.  “This is especially true as new variants of the virus triggered surges in infection and rising illness rates during May and June.”

    KC's View:

    I think David Bishop's comments are on-point.  There are a lot of cross currents at the moment, as inflation works to make people leery of practices that will cost them more money, but a new and contagious variant makes people concerned about going to the store.

    E-grocery won't grow at the same rate as it did during the pandemic, but in the long run, IMNSHO, it is a mistake to think that this segment won't continue to expand.

    Published on: July 15, 2022

    The Wall Street Journal has a story in which it notes that "on Monday, Gap Inc. replaced Chief Executive Sonia Syngal after more than two years on the job. On Tuesday, Dollar General Corp. said its longtime CEO would step down. Those announcements follow recent exits of the CEOs at companies such as Bed Bath & Beyond Inc., athletic-equipment merchant Under Armour Inc. and luxury-consignment seller The RealReal Inc.

    So what's up with this?

    The story suggests that some of it is timing - the pandemic delayed a number of companies' succession plans, and boards of directors are just now catching up with changes they planned to make earlier.  But in addition, the Journal writes, there are changes in the marketplace that require different kinds of skills and approaches, which is forcing some companies to change the players in their c-suites.

    And, there are some companies that "have struggled for years to reinvent themselves, including Gap and Bed Bath & Beyond. Shares of both companies have tumbled in recent years. Both of them replaced their CEOs with board members while they are looking for new leadership."

    The Journal writes that "in the past, retail executives typically reached the top job through two paths: They were either great merchants, with a canny ability to anticipate popular styles and new trends, or skilled operators, with a mastery of the systems necessary to keep stores running smoothly. The shift to online shopping further complicated the job, requiring an understanding of technology and data. And other factors have come into play, including a push for making products in a more sustainable way … The retail sector is under pressure to innovate and operate faster, and executives are also managing greater demands from customers and shareholders for attention to environmental, social and governance issues, said Susan Hart, who leads recruiter Spencer Stuart’s retail, apparel and luxury goods practice."

    KC's View:

    I don't think there is any question that the world in which retail exists today is significantly different than just a few years ago - new contexts and new challenges that will in many cases require new leadership.  We'll probably see a lot more of these changes going forward.

    Published on: July 15, 2022

    Chris Rupp said yesterday that she will depart Albertsons, where she has served as Chief Customer and Digital Officer since 2019, and join Victoria’s Secret & Co., where she will take on the role of Chief Customer Officer.

    Victoria' Secret said in a press release that "she will be responsible for creating a seamless store and digital commerce business globally and will be accountable for sales and profitability across both channels."

    Prior to joining Albertsons, Rupp spent time at both Microsoft and Amazon, where she led Fulfillment by Amazon and launched Amazon Prime Day.

    KC's View:

    This certainly is a loss for Albertsons, where Rupp has been highly thought of.  But the good news for Rupp and the bad news for Albertsons is that people who do well get recognized and the opportunity to do more … often elsewhere.

    Published on: July 15, 2022

    Amazon yesterday said that "Prime members purchased more than 300 million items worldwide during Prime Day 2022, making this year’s event the biggest Prime Day event in Amazon’s history. And, more shopping means more savings - Prime members saved over $1.7 billion, more than any previous Prime Day event."  Amazon also said that "Prime members worldwide purchased more than 100,000 items per minute during this year's Prime Day event."

    The company also highlighted in its press release that "this year was the biggest Prime Day event for Amazon's selling partners, most of whom are small and medium-sized businesses, whose sales growth in Amazon’s store outpaced Amazon's retail business. Customers spent over $3 billion on more than 100 million small business items included in the Support Small Businesses to Win Big sweepstakes."

    KC's View:

    To be fair, Amazon could've sold exactly one dollar more worth of merchandise that it did in its previously biggest year and it would be able to make the "biggest in its history" claim.

    I'm not saying that's the case here … just that there has been a lot of speculation that owning to a) some degree of Prime Day exhaustion and b) economic pressures that have reduced people's willingness to spend money on things they don't need, this Prime Day might not see the kinds of sales increases that Amazon has seen in the past.

    I am saying that this story has additional chapters yet to be told.

    Published on: July 15, 2022

    •  From the Washington Post:

    "A Tops Friendly Markets location in Buffalo where 10 people died in a racially-motivated massacre two months ago is set to reopen to the public on Friday, generating mixed feelings from the predominantly Black community the grocery store used to serve.

    Tops executives held a moment of silence at the site on Thursday afternoon with local officials and others in attendance … The Tops store has undergone a hasty renovation since FBI agents and local law enforcement cleared up a sprawling crime scene there. The neighborhood is still reeling from the May 14 mass shooting, one of a trio this spring and summer that have stunned a gun violence-battered country.

    "Tops was a desperately-needed market in what was considered a food desert on the city’s East Side. The grocery chain and local officials pledged to reopen the store as soon as possible, saying they recognized the need the area had for residents to have healthy food options.

    "Opponents of the reopening say they would prefer to preserve the site as a memorial to those who were shot. A petition pushing to keep the Tops store closed had 77 signatures as of Thursday afternoon."

    •  From the Associated Press:

    "The number of Americans applying for unemployment benefits last week hit its highest level in nearly eight months, but the total number of those collecting benefits fell.

    "Applications for jobless aid for the week ending July 9 rose by 9,000 to 244,000, up from the previous week’s 235,000, the Labor Department reported Thursday. First-time applications generally reflect layoffs. Analysts had expected the number to remain flat from the previous week.

    "The four-week average for claims, which evens out some of the week-to-week volatility, rose by 3,250 from the previous week, to 235,750.  The total number of Americans collecting jobless benefits for the week ending July 2 fell by 41,000 from the previous week, to 1,331,000. That figure has hovered near 50-year lows for months."

    •  CNBC reports that Fresh Market has ended its planned initial public offering (IPO) in a filing with the Securities and Exchange Commission (SEC).  No reason was given.

    However, the story suggests that few explanations are needed:  "After banner years in 2020 and 2021, including a record-setting level of activity last year, investors have shown no appetite for new issues amid this year’s market plunge. The tech-heavy Nasdaq Composite has dropped 28% so far in 2022, underperforming the S&P 500, which is off by 20%."

    Published on: July 15, 2022

    •  TechCrunch reports that Instacart "announced a slew of promotions inside of its senior leadership …  the U.S. grocery-delivery giant promoted Daniel Danker and Laura Jones, vice presidents of product and marketing, to chief product officer and chief marketing officer, respectively. Given that Instacart is prepping for a public debut, getting its C-suite in order makes sense. In that vein, the multi-unicorn is also promoting its vice president of engineering, Varouj Chitilian, to the CTO role. Prior CTO Mark Schaaf is leaving the company for what Instacart described in a phone call as a break of sorts."

    The story says that "the company also shook up its business division. Recall that Instacart has a few revenue lines, including delivery, a software platform that it offers to grocery chains, and advertising business. Instacart also announced today that it is unifying its grocery business and ads business under its newly promoted chief business officer Chris Rogers, its prior vice president of retail."

    Published on: July 15, 2022

    …also will return.

    In the meantime, have a great weekend, and I'll see you Monday.