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    Published on: July 29, 2022

    In June, streaming platforms captured 33.7% of total television consumption - the highest percentage ever, and a measure of how traditional viewing habits have been disrupted by a technology that seems to be more in touch with viewers' tastes, habits and preferences.  You think that kind of disruption can't happen to your business?  You think some new technology, some new format, some new innovation or approach to selling the goods you sell can't come in and steal market share and shoppers?  Well, think again!

    Published on: July 29, 2022

    Amazon yesterday said that its Q2 net sales increased 7 percent to $121.2 billion, compared with $113.1 billion in second quarter 2021 - the slowest rate of growth that Amazon has seen in more than two decades.  Amazon also saw a Q2 net loss of $2.0 billion, compared with with net income of $7.8 billion during the same period a year ago;  it attributed the loss to "a pre-tax valuation loss of $3.9 billion" connected to its investment in EV manufacturer Rivian Automotive, which has seen its stock price drop precipitously since an IPO late last year.

    The New York Times writes that "Amazon’s growth looked particularly meager versus a strong second quarter last year, when growth surged 27 percent. At the time, vaccines were still in the early stages of distribution and federal stimulus checks buoyed consumer spending. The company’s annual Prime Day deal event, which Morgan Stanley estimated generated $4.6 billion in revenue this year, was held in the second quarter last year but moved to the third quarter this year.

    "But the results were better than Amazon had predicted, and its shares rose more than 12 percent in after-hours trading."

    Reuters notes that "sales at physical stores, which are made up in large part by Whole Foods, were up 12% in the quarter. But part of that appears to be a bounce back from lockdown-related days. In the last 12 months, those sales brought in $18 billion, just 6% higher than where they were in 2018.

    "With the deal to buy the grocery retailer going on five years, Amazon’s ability to be transformative looks less herculean … Though it’s hard to know if its Prime subscription business is encouraging people to shop in its physical stores - or conversely if stores are encouraging people to shop online - its failure to produce profit isn’t exactly an endorsement.

    "And it raises questions about other ventures that Amazon has taken on. A partnership with food-delivery service GrubHub may enable it to layer on offerings for Prime members, but that doesn’t matter much if those extra services never help Amazon’s e-commerce business deliver profit. Ditto a push into healthcare. Meantime Amazon Web Services’ operating margins of near-30% are strong, and the division brings in just 16% of overall sales but all the operating income. Investors waiting for the e-commerce vision to check out will be stuck in line for a while."

    In a prepared statement, CEO Andy Jassy said, "Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network.  We’re also seeing revenue accelerate as we continue to make Prime even better for members, both investing in faster shipping speeds, and adding unique benefits such as free delivery from Grubhub for a year, exclusive access to NFL Thursday Night Football games starting September 15, and releasing the highly anticipated series The Lord of the Rings: The Rings of Power on September 2."

    KC's View:

    Amazon's numbers are mixed, but then again, most companies have mixed numbers these days.  The events of the past few years have created some enormous challenges for companies, and it is the rare business that doesn't have to realign tom some degree because of decisions made during the pandemic that are playing out differently now.

    That said, I would argue that in general, Amazon’s ability to be transformative over the course of its existence has been pretty consistent.  I'd be wary about betting against it, no matter what the stock market thinks and says;  after all, Amazon generally hasn't paid a lot of attention to what the investor class demands.

    Published on: July 29, 2022

    Axios reports that "Walmart is embarking on a 'mini-retail' journey with health and wellness hospitality company Getaway to add small general stores at select travel outposts across the country."  The stores, according to the retailer, will be just 75 square feet and are its "first micro-retail shopping experience."

    Getaway is described as "a network of modern cabin retreats.  It says that "it has averaged 'above 84% occupancy over the year across Outposts' and recently announced nine new Outposts will open because of continued demand."

    According to the story, "The General Store by Walmart will include seasonal products, sourced from the retailer featuring products from local small businesses and curated by Getaway outdoor experts.  Available items included everyday items as well as hiking gear, leisure activities and campfire equipment … Items on sale at The General Store by Walmart will also be available through a Getaway shopping page on Walmart's website."

    Axios writes that "the companies say the partnership's goal is to help consumers 'live better by aiming to make traveling to nature even easier and convenient'."

    KC's View:

    This is an intriguing development … though I have to say that 75 square feet is pretty small.  It is about the size of the office out of which I work … and it is pretty cozy to do what I do;  I can't imagine running a store out of it.

    In addition to giving Walmart a chance to play in an entirely new sandbox, but I also think it'll be interesting to see if Walmart is able to somehow integrate these small stores with its e-commerce operations, using them as delivery depots for those last-minute items not kept in stock but easily obtained from a warehouse.

    I suspect there are options that we're not seeing but that Walmart plans to test.

    Published on: July 29, 2022

    Kroger yesterday announced "the official opening of its newest Customer Fulfillment Center (CFC) in Dallas, Texas. Powered by the Ocado Group (LSE: OCDO), the CFC will leverage advanced robotics technology and creative solutions to redefine the customer experience for customers in the Dallas-Fort Worth area."

    The 350,000 square-foot customer fulfillment center "will work in collaboration with spoke facilities located in Austin, San Antonio and Oklahoma City," the company said.  Each spoke facility will serve as a last-mile cross-dock that will enable Kroger Delivery to expand its services to more customers" - including customers without access to physical Kroger-owned stores.

    "Kroger's fast-growing seamless ecosystem takes the promise of zero compromise to the next level, with Kroger Delivery bringing the freshest food and quality ingredients to your own doorstep—when you want it, how you want it," said Bill Bennett, Kroger Vice President and Head of E-commerce, in a prepared statement.  "Customers can use or the Kroger app to check the weekly circular, select personalized digital coupons, search products by dietary preference and ultimately place their delivery order, saving time and money."

    The Dallas Morning News reports that "Kroger has the second largest market share in D-FW behind Walmart and believes it can increase its local business with the new facility that customers can access through Kroger’s website or app."

    Published on: July 29, 2022

    The Boston Globe this morning reports that employees at a Hadley, Massachusetts, Trader Joe's have voted 45-31 to unionize, the first store in the chain to do so.

    According to the story, "Trader Joe’s United, the name of the union at the Hadley location, will be an independent bargaining unit not affiliated with a larger labor union … 

    Representatives from the National Labor Relations Board conducted the vote over two days. A simple majority was needed for the vote to pass. Objections can be filed over the next seven days before the results are officially certified."

    The next step is for union representatives to meet with company management to negotiate a contract.  The New York Times reports that "the company said in a statement that it was prepared to begin discussions immediately. Implying that its pay, benefits and working conditions were already better than those unionized grocery workers typically receive, it added, “We are willing to use any current union contract for a multistate grocery company with stores in the area, selected by the union representatives, as a template to negotiate a new structure for the employees in this store.”

    The Times also points out that "it is unclear whether the union campaign will spread rapidly to other Trader Joe’s stores, as has the campaign at Starbucks, where more than 200 company-owned locations have voted to unionize since December. But the supermarket chain will face at least one more union vote soon - at a Minneapolis store next month - and workers at a store in Colorado filed an election petition this week."

    KC's View:

    Pendulums, by their very nature, swing.  But it seems to me that it remains within the power of every non-union retailer to take advantage of the moment and find out what the reasons are that people in their businesses might want to organize.  At Trader Joe's, there seems to be some sentiment that management has stepped away from its traditional employee-focuses values. It may be true, and may not be … but perception is a powerful thing, and it is a mistake to discount the opinions and feelings of front line employees.

    Published on: July 29, 2022

    JD Power is out with its 2022 U.S. Pharmacy Study, concluding that "health and wellness services - in addition to medication management - may be the key to the future of the retail pharmacy industry as it contends with growing threats from online retailers."

    The study says that "customers are beginning to embrace their retail pharmacy as a hub for a broad range of routine health and wellness services … among pharmacy customers who are interested in receiving routine healthcare services, 33% are interested in vision and hearing services and 27% are interested in physical exams and routine lab tests at their local retail pharmacies."

    While a majority of survey respondents say they have no plans to change pharmacies anytime soon, JD Power also says that pharmacies need to look out for Amazon:  "Nearly two-thirds (66%) of brick-and-mortar pharmacy customers currently have an Amazon Prime account and nearly half (48%) of pharmacy customers are aware of pharmacy services offered by Amazon. To date, 14% of those who are aware of Amazon’s Pharmacy Services have used Pill Pack filled through Amazon Pharmacy. Of that group, 38% say they 'definitely will' switch pharmacies in the next 12 months."

    Published on: July 29, 2022

    Yesterday, MNB reported on a bipartisan effort by two senators - Democrat Dick Durbin of Illinois and Republican Roger Marshall of Kansas - to introduce legislation that would "give merchants power to process many Visa Inc. and Mastercard Inc. credit cards over different networks," creating greater competition that would, ideally, be beneficial for consumers.

    The National Grocers Association (NGA) issues a statement yesterday saying that it "welcomed the introduction of the Credit Card Competition Act of 2022, a bipartisan credit card reform bill aimed at bringing competition to the credit card marketplace and lowering acceptance costs for merchants and consumers."

    “The fees associated with accepting credit card payments is one of the highest costs of doing business for many U.S. merchants, including independent community grocers. These ‘swipe fees’ have a direct impact on our members’ operations and the viability of their businesses,” said Greg Ferrara, NGA president-CEO. “Competitive grocers make a 1 percent net profit margin in a good year. Unfortunately, we do not see the same level of competitiveness in the credit card marketplace, which is why credit card fees increase annually without any free-market forces to drive down costs.”

    Jennifer Hatcher, Chief Public Policy Officer and Senior Vice President, Government Relations at FMI-The Food Industry Association, released the following statement:

    "Americans are rightfully concerned about the impact of higher prices on their budgets for the items they need for their families. Despite this inflationary environment, credit card companies continue to dramatically increase the hidden processing fees that grocers and ultimately consumers are forced to pay for accepting/using credit cards for payments. These fees and increases contribute to higher prices for consumers, costing the typical American family an average of $900 per year, according to Nilson Report.

    "We appreciate Sens. Durbin and Marshall for introducing this important bill as a critical first step in bringing greater competition to the credit card market and much needed financial relief to grocers and American families during these extremely challenging economic times."

    And then, naturally, came this press release from nine trade associations representing the financial services industry including the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, Electronic Payments Coalition, Independent Community Bankers of America, Mid-Sized Bank Coalition of America, National Association of Federally-Insured Credit Unions, and National Bankers Association:

    “At a time when fraud prevention, cybersecurity, and digital innovation are more critical than ever, this deeply flawed legislation from Senators Marshall and Durbin will undermine the significant safeguards and security that exist today to protect credit card payments. Retail groups want Washington to mandate that banks route credit transactions to the cheapest networks— many of which have underinvested in their platforms with little concern for security innovations— leaving the burden on consumers, small businesses, and financial institutions to clean up when things go wrong.

    “Consumers exercise their choice to pick their credit card in a free market based, in large part, on the trust, security, benefits, and protections that the card offers. The consumer expects that their choice will be honored. Having the government take the choice away from consumers, and give it to big-box retailers, is fundamentally wrong.  This is the ultimate bait and switch, placing the risk of fraud and associated costs on consumers, their families, and their financial institutions.

    “The proposed legislation is a clear attempt to secure yet another windfall for the largest multinational retailers and e-commerce giants at the expense of the security of the payments ecosystem and the financial health of everyday Americans. Consumers will pay the price, while many small issuers will be forced to exit the credit card business altogether. Senators Marshall and Durbin should not reengineer the entire payments system just to benefit a small group of the largest retailers while causing smaller financial institutions and their customers to suffer.”

    KC's View:

    Why don't the banking trade associations just get Henry F. Potter to be their spokesperson?

    It strikes me as being ludicrous for the financial services industry to be accusing retailers of looking for a windfall.  I mean, really?

    Also, last time I checked, FMI and NGA didn't just represent the biggest retailers.   They also represent a lot of smaller businesses that are being caught up in the spider webs created by major banks.

    Published on: July 29, 2022

    The National Grocers Association (NGA) is out with its Independent Grocers Financial Survey, conducted jointly with FMS Solutions, concluding that "while down from the incredible spikes in 2020, independent grocers’ knowledge of the marketplace, grit and nimbleness resulted in the second-best year on record in terms of net profits before taxes."

    Some highlights:

    •  "Despite the inflationary environment, 58% of independent grocers were unable to match their 2020 sales records, though many came close. Same-store sales declined 1.7%, yet dollar sales dollars remained far ahead of the 2019 pre-pandemic levels. Center store represented nearly 61% of the business, as consumers remained focused on staples for home cooking while they looked for value. Different levels of inflation also influenced departmental contributions to sales as did the rampant out-of-stocks."

    •  "Managing inventory, inflation and demand resulted in independent retailers compressing their margins in key departments in 2021, including meat and produce. The total store margin dropped to 27.4% — down 1 percentage point versus 2020. Expenses rose to 28.7% of sales, back to 2019 levels, with labor and benefits averaging 15% of sales. Many retailers also experienced increases in utilities."

    In summary, the report says, "2021 was a strong year despite the year-on-year declines. Inflation, higher costs of doing business, volume and unit declines, and prolonged marketplace volatility are expected. While 2022 is unlikely to bring the same results as 2020 and 2021, NGA president/CEO Greg Ferrara said independents are prepared for the challenge. “For many years, independent grocers have proven to be resilient, creative and nimble,” he said. “Strongly rooted in their communities, independents are well positioned to weather the perfect storm of supply chain, inflation and labor challenges.”

    Published on: July 29, 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 US now has had 92,917,658 total cases of the Covid-19 coronavirus, resulting in 1,054,422 deaths and 87,908,049 reported recoveries.

    Globally, there have been 579,908,225 total cases, with 6,415,101 resultant fatalities and 549,846,909 reported recoveries.  (Source.)

    •  The Centers for Disease Control and Prevention (CDC) says that 78.8 percent of the total US population now has received at least one dose of vaccine, with 67.2 percent. being fully vaccinated.  The CDC also says that 48.3 percent of the total US population has received a first vaccine booster dose, with 30.9 percent of the 50+  population and 37.8 percent of the 65+ population having received a second vaccine booster shot.

    •  From the New York Times this morning:

    "The Biden administration now expects to begin a Covid-19 booster campaign with retooled vaccines in September because Pfizer and Moderna have promised that they can deliver doses by then, according to people familiar with the deliberations.

    "With updated formulations apparently close at hand, federal officials have decided against expanding eligibility for second boosters of the existing vaccines this summer. The new versions are expected to perform better against the now-dominant Omicron subvariant BA.5, although the data available so far is still preliminary.

    "At this point, only Americans over 50 and those over 12 with certain immune deficiencies have been eligible for second booster doses. Although some federal officials pressed to bolster the protection of younger Americans now, officials agreed on the goal of strengthening everyone’s immunity in the fall with what is hoped to be a more effective booster, ahead of a possible winter surge of the virus.

    "In internal deliberations, some senior health officials argued that eligibility for a second booster should be broadened before the reformulated version is ready because coronavirus infections are on the rise again. Dr. Anthony S. Fauci, the president’s chief medical adviser, and Dr. Ashish K. Jha, the White House pandemic response coordinator, both advocated that position … But officials at the Food and Drug Administration and the Centers for Disease Control and Prevention argued that the government should concentrate instead on the fall campaign with updated doses — if the campaign could begin soon enough. After both Pfizer and Moderna assured the F.D.A. recently that they could deliver millions of doses by mid-September, regulators decided it was better to wait for those shots.

    "All adults are expected to be eligible for the updated booster shots. Children could be eligible as well, according to people familiar with the deliberations."

    Published on: July 29, 2022

    •  The New York Times reports that Instacart "expects to go public before year’s end, according to people familiar with the matter, earlier than many on Wall Street had expected amid a frozen market for new listings.

    "An initial public offering this year would be a bold move in one of the slowest years for IPOs in more than a decade. Many bankers advising companies on going public have said they don’t expect large, unprofitable firms to launch IPOs until volatility subsides and other recent IPO stocks recover.

    "Instacart confidentially filed for an initial public offering with the Securities and Exchange Commission earlier this year during a broad stock-market selloff, and markets have remained volatile since. Instacart is in the process of responding to comments from the SEC on its IPO documents, some of the people said."

    The Times writes that Instacart’s bankers have "started to approach investors for so-called testing-the-waters meetings, some of the people said. Such meetings allow investors to get to know the company’s management team better and allow the company to gauge the appetite for its stock.

    "Instacart is now considering a traditional IPO, which would raise cash that could be used for future acquisitions, people familiar with the matter said. It had previously leaned toward going public via a direct listing, which is when a company simply begins trading on an exchange without raising money. The company had also previously floated the idea of forming partnerships with rivals that would benefit both parties, some of the people said."

    Published on: July 29, 2022

    •  From the Associated Press:

    "Fewer Americans applied for jobless benefits last week, but the previous week’s number was revised upward significantly, with claims breaching the 250,000 level in back-to-back weeks for the first time in more than eight months.

    "Applications for jobless aid for the week ending July 23 declined by 5,000 to 256,000 from the previous week’s 261,000, the Labor Department reported Thursday. The number of claims for the week of July 16 was revised upward by 10,000 from the previous estimate of 251,000."

    •  The Washington Post reports on a Hendersonville, North Carolina, Chick-fil-A franchise where management decided to ask for volunteers to work in its new Drive Thru Express, saying it would pay them in food rather than in actual cash money.

    The Post writes that "the store has been met with backlash for appearing to ignore the Fair Labor Standards Act (FLSA), the long-standing federal law that states how employers must pay their employees for all of the hours they work. The Hendersonville location, which is run by a franchisee, responded to the online blowback by saying the 'volunteer-based opportunity' was intended for people who 'think it’s a good fit for them,' and argued it was different from full- or part-time employment."

    Chick-fil-A said yesterday that program was not endorsed by the company, that "it was a program at an individually owned restaurant," and now has been ended.

    I know we had a story earlier this week about chicken nuggets are the new hot thing … but this is ridiculous.

    •  We've reported this week about how fast food chain Raising Cane's bought Mega Millions lottery tickets for all of its 50,000 employees - a $100,000 expense - when the lottery went to more than $800 million.  Nobody won … and now company co-CEO AJ Kumaran has done it again, buying another ticket for each of the company's employees.

    The next drawing is later today.  The prize is $1.1 billion.

    “Look, I hear from our crew members all the time, and things are really tough out there,” Kumaran tells the Washington Post. “Whether they’re pumping gas or buying groceries, they’re feeling it and it’s hard. So this was an opportunity to have fun but at the same time, hopefully make a little bit of extra money for our people.”

    Published on: July 29, 2022

    I am, to be honest, conflicted about the Netflix adaptation of "The Gray Man," the highly regarded Mark Greaney novel that has spawned a dozen sequels.  (The latest, "Burner," will be out in February.  (I've had the pleasure of interviewing Greaney a couple of times here on MNB, and you can watch those conversations here and here.

    The film version of "The Gray Man" features Ryan Gosling in the title role, and I think he's very good - despite that he is very much the movie star, Gosling manages to capture the fade-into-the-woodwork essence of the character who goes through a kind of ethical awakening in the movie.  I bought him, completely.

    But … for me, the casting of Chris Evans (an actor I like) in the role of the film's villain, a CIA contract worker hired to kill Gosling's assassin, doesn't work.  Not. At. All.  It isn't really Evans' fault, though;  he's been given a character written by Joe Russo, Christopher Markus and Stephen McFeely, and directed by Anthony Russo and Joe Russo, that is so over the top that he defies belief.  I suppose they felt that for the film, they needed an extravagant villain, but to me, it diminished the movie's plot - if Evans' character had been more understated, he actually might've been more scary and formidable.

    That said, the film is lots of fun - several action sequences are extraordinarily good, there are some terrific supporting performances by Ana de Armas, Regé-Jean Page, Alfre Woodard, and Billy Bob Thornton, and "The Gray Man" holds together very well.

    And, to be sure, it has been successful - Netflix already has commissioned a sequel, and the Russo brothers reportedly plan to expand the "Gray Man" universe in a variety of ways.

    Maybe it is me.  As I say, I am conflicted.  For me, "The Gray Man" is very good, but could've been much, much better.

    I'm really looking forward to a couple of on-the-horizon projects, like the third and final season of "Star Trek: Picard"…

    And the coming-on-August 12 series version of "A League Of Their Own"…

    More reasons that streaming is so disruptive to traditional television.

    That's it for this week.

    Have a great weekend, and I'll see you Monday.