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    Published on: August 3, 2022

    I'm back in Northern California this week and had a little bit of time to visit parts of San Francisco that I wasn't able to get to a few weeks ago … parts of the city that are familiar to me from dozens of trips over the years.  What I found was simultaneously quieter than expected and disquieting in the broader scheme of things.  And I think I may have found a couple of business lessons as well, about the power of food and the importance of brand equity.

    Published on: August 3, 2022

    Walmart said this week that it is unveiling "Walmart Restored, our new program created to help customers discover refurbished products at everyday low prices. In a year when customers are looking for ways to save money, like-new refurbished products have become an increasingly popular way to cut down on costs without sacrificing quality."

    The announcement elaborates:

    "When customers buy a product in the Walmart Restored program – whether it’s a laptop or a kitchen appliance – they can be confident they are buying from top-rated performance managed sellers and suppliers. All products listed on the site have been professionally inspected, tested and cleaned, and if for any reason a customer isn’t satisfied, we offer 90-day free returns to help enable shopping with confidence.

    "The Walmart Restored program is helping build trust with our customers by offering fantastic value for shoppers. Online now and in select stores later this fall, the program also gives customers a choice and an opportunity to extend the life of a product."

    KC's View:

    The other day we had an email from a reader complaining that Walmart had lost its way, that it was trying to do too many things and be all things to all people.  I disagreed with that assessment, and think that this story illustrates that the company is testing a lot of different initiatives, which is a good thing, but has its eye on the ball of serving its core constituency.

    For me, the only problem with this idea is that Walmart is guaranteeing the refurbished products and putting its name behind the restoration process - I think it should, but just hope that the process lives up to the expectations.

    Published on: August 3, 2022

    Good piece in Fast Company about the degree to which Amazon and Walmart are doing battle over ad revenue, which is worth billions of dollars to their bottom lines.

    According to the story, "The behemoth retail rivals are not outliers in pushing this strategy. To the contrary, they appear to be the vanguard of snowballing trend: According to Marketing Brew, 9 of the 10 largest retailers in the U.S. (including Kroger, Target, Walgreens, and Home Depot) now operate their own 'media networks.' This development hasn’t, until recently, attracted as much mainstream attention as one might assume. But in addition to being yet more evidence of the inescapable reach of advertising, it raises some interesting questions about plopping advertising into the consumer/retailer relationship."

    For the record, Amazon "reported ad revenue of $31 billion in 2021, and by one estimate could hit $40 billion this year … Walmart brought in about $2.1 billion revenue from advertising last year, so it’s definitely playing catch-up. But its reported 30% uptick in ad revenue last quarter was a bit of good news in an otherwise lackluster period."

    Here are the bottom lines, as defined by Fast Company:

    "As it happens, the rise of retail media ad networks is now intersecting with a softening of the digital ad market, brought on by a combination of macro-economic factors, and more secular shifts in the online-ad business resulting from Apple tightening the ability to track user behavior across the Web. Facebook, for instance, just posted a 36% drop in profit from last year, citing ad-market woes. A recession is bound to affect ad budgets across the board. But tighter tracking rules might make the data that retailers amass even more valuable to advertisers.

    "Either way, this business is only lately coming into more public view. And one fair question is whether you want the retailers you frequent to track and monetize your shopping habits. Another is whether the increasingly commonplace practice of privileging 'sponsored' product results in e-commerce site searches might ultimately undermine consumers’ relationship with an online retailer."

    KC's View:

    Beyond the fact that the revenue pie may shrink along with the economy - a point we've made here before - I think the observation that shoppers may find a barrage of advertising less than pleasing is a valid one.

    To the degree that these ads become more about the retailers making a grab for more bucks, and less about being specific and helpful to the consumer's needs and wants, this trend could backfire.  Retailers should be vigilant, and ask themselves at every juncture, Will customers perceive this as being good for them?  

    Published on: August 3, 2022

    That's the question being raised by Axios, which looks at the "floods, heat waves and wildfires across the U.S. (that) have killed dozens and reshaped entire communities from Kentucky to northern California," all leading to an inescapable conclusion:  "This summer has demonstrated again and again that our infrastructure isn't sufficient to withstand today's changed climate — let alone what's on the horizon."

    "We have long designed our infrastructure as if the climate conditions and extremes of the past would hold true in the future," Axios writes.  "But with climate change, outlier events trend closer to the norm … In St. Louis, rainfall rates overwhelmed drainage systems and caused rivers and creeks to overflow, washing out roadways and forcing swift water rescues to be conducted.

    "In Kentucky, water moved so forcefully that it pulverized school buses, washed mobile homes away and destroyed roads and bridges.  Seattle set a record for its longest streak of days with highs of 90°F or greater."

    KC's View:

    I mention this article because, though it specifically refers to the nation's infrastructure, I think the same questions have to be asked of businesses' infrastructure.  Is your company - the stores, the warehouses, the supply chains - prepared to deal with a climate that seems to be changing faster than many expected?

    Published on: August 3, 2022

    National Retail Federation (NRF) Chief Economist Jack Kleinhenz said yesterday that "despite two consecutive quarters of decline, the U.S. economy still does not appear to be in a recession and remains unlikely to enter one this year."

    Here's the exact quote:

    “Back-to-back contractions have heightened fear of a recession, but while the economy has lost momentum heading into the second half of the year, economic data is not yet consistent with a typical recession.  Our view is that while the economy is functioning at a slower pace it is likely to avoid a recession this year. Despite ongoing uncertainties, we believe the underlying strength of the economy is strong enough to deal with inflation and keep a recession at bay – or short-lived even if we are wrong.”

    KC's View:

    It seems clear that if/when we go into recession, it is likely to be unlike recessions of the past.  Unemployment remains at records lows, and the pandemic has helped to create simultaneous factors that make the current situation  an outlier.

    So, we'll see.  A recession could be shallow and short.  Or…it could be something else.

    I think we all hope Kleinhenz is right.  But how does the song go?   A dream is a wish your heart makes…

    Published on: August 3, 2022

    Starbucks said yesterday that its Q3 US same-store sales were up nine percent compared to the same period a year ago;  global same store sales were up just three percent, and were hit hard by the fact that same-store sales in China were down 44 percent because of pandemic-related shutdowns.

    The company said that Q3 sales were up nine percent to $8.15 billion, though net income was down 21 percent to $912.9 million, hit by higher wages, higher costs for ingredients, and higher training costs.

    The Wall Street Journal reports that "Starbucks’s results come about four months after Howard Schultz returned to the chief executive role for the third time. Mr. Schultz said Tuesday that he has spent the previous months identifying weaknesses in the business, some of which resulted from the pandemic. Consumer demand has overwhelmed many baristas, as have anxieties about their physical, mental and financial health, Mr. Schultz said … Mr. Schultz said that about 75% of U.S. company store sales now come from cold beverages, many of which customers order with added flavors and colors. Such customization is helping Starbucks compete, as is the company’s loyalty program. Mr. Schultz said the company hasn’t noticed customers reducing their spending or buying less expensive items, as other chains have reported in recent weeks."

    The New York Times reports that "Mr. Schultz also said that the company was interviewing potential candidates for the chief executive job and that he was likely to stay on 'as long as necessary' to make sure the candidate had a seamless start. He said he would then make a transition to the board of directors to 'mentor and help' the next chief executive."

    KC's View:

    Let's be clear.  "As long as necessary" is almost certainly going to be longer than originally planned, and Schultz certainly feels that Starbucks needs him, it seems fairly obvious to me that he also needs Starbucks.  And that's okay … as I've said here before, Schultz seems to have a kind of messiah complex, but he does have a record of helping the company when he makes his returns.

    I continue to believe that the recent chapters in the Starbucks story serve as a cautionary tale for every other retailer.  For the most part, Starbucks stores do an enormous amount of pick-up business in locations built to be "third places," and do the majority of their business in cold drinks in stores engineered to make a lot more hot drinks.

    That's a disconnect that, I think probably could be seen in a lot of other businesses.  

    Published on: August 3, 2022

    •  Kroger yesterday announced "the official opening of a new spoke location in Louisville, Kentucky. The 50,000 square-foot facility will collaborate with the Customer Fulfillment Center (CFC) in Monroe, Ohio and will serve as a last-mile cross-dock location that expands Kroger Delivery's ability to serve more customers in the Greater Louisville area."

    "Kroger Delivery is part of our rapidly expanding seamless ecosystem that provides customers with fresh and quality products – anytime and anywhere," said Bill Bennett, Kroger Vice President and Head of E-commerce."

    Kroger pointed out that "local shoppers also have access to the newly launched Boost by Kroger annual membership program. For either $59 or $99 per year, Boost provides customers with benefits like unlimited free delivery on orders of $35 or more and two Fuel Points for every $1 spent on groceries and general merchandise purchases through Delivery."



    •  Amazon announced that it is "partnering with education organizations Beyond 12 and Kaplan to bring even more features to the Career Choice program - one of Amazon’s nine skills training programs. Career Choice already offers pre-paid college tuition to its more than 750,000 hourly employees. With these new partnerships, employees will have access to career coaching, college advising, and specialized career services free of cost. Through the expanded benefits program, employees will receive virtual one-on-one coaching to help them identify the academic programs that best fit their skills and long-term goals, as well as continuous support throughout their higher education experience."

    Published on: August 3, 2022

    •  The Washington Post reports that "the hot labor market could be starting to soften, as U.S. employers posted 10.7 million job openings in June, tapering off a bit from previous months.  The number of people who quit their jobs was still elevated at 2.8 percent, according to data released Tuesday by the Bureau of Labor Statistics."

    The story notes that "the June data follows several months of record-high job openings and quit rates, which marked the high point of the hot labor market, as employers scrambled to find workers amid shortages across many sectors. June’s figures continue to reflect a strong labor market."



    •  The Houston Chronicle reports that Dollar General has opened new Popshelf stores - a format with a merchandise mix that "includes seasonal and home décor, health and beauty products, cleaning supplies, household items, arts and crafts, party goods, toys, candy, games and electronics" - in the Houston market, with stores in Cypress, Webster and north Houston.

    "Since introducing Popshelf in the Nashville market in 2020," he story says, the format "has grown to 60 locations and 25 store-within-a-store locations inside Dollar General in eight states. The shop, which competes with retailers such as Five Below, Dollar Tree and T.J. Maxx, aims to deliver a fun, affordable shopping experience with a revolving selection of products, seasonal specials and limited-time items … Popshelf plans to open an additional 100 additional stores in fiscal 2022 and operate up to 1,000 stores by 2025."



    •  CNBC reports that "federal regulators have fined Family Dollar more than $1.2 million in penalties related to safety violations at two Ohio stores, the Department of Labor’s Occupational Safety and Health Administration said Monday.

    "In January and February of this year, OSHA inspected Family Dollar stores in Columbus and Maple Heights and found blocked exits, unstable stacks of goods, cluttered working areas and inaccessible electrical equipment and fire extinguishers.

    "At the Columbus location, the agency found 'water-soaked ceiling tiles' had fallen to the floor on at least two occasions in 'close proximity' to employees, according to the citation.  The agency found 11 violations between the two stores, adding to more than 300 total violations by Family Dollar and its parent company, Dollar Tree, over the last five years, OSHA said in a release."

    The story notes that "the fines come just months after a Food and Drug Administration investigation found rodents, dead and alive, in more than 400 Family Dollar stores, leading to mass voluntary recalls of products this past February."

    Published on: August 3, 2022

    •  Raley's announced that Craig Benson, the company's Senior Vice President of Technology, has been promoted to Chief Information Technology Officer.

    The company also said that Helen Singmaster, VP-General Counsel and Corporate Secretary, has been promoted to Senior Vice President, General Counsel.

    And, Matt Hilbrink, Senior Director of Enterprise Risk and Asset Protection, was promoted to Vice President of Enterprise Risk & Asset Protection.

    Published on: August 3, 2022

    Vin Scully, who was the voice of the Los Angeles Dodgers from 1950 to 2016, engaging in what he called "a running commentary with an imaginary friend" about the sport that he started listening to on the radio during the Great Depression, has passed away.  He was 94.

    For Southern Californians, Scully provided the soundtrack for countless summers, his sonorous voice becoming inextricably linked to the game of baseball and the City of Angels.

    From the Los Angeles Times appreciation:

    "Fans learned to trust him when the team struggled and he wasn’t afraid to say so. After television took over, his broadcasts retained a familiar tenor; belonging to a generation before instant replay, he still used words to paint a picture. Every game included shots of children in the stands. Every at-bat, it seemed, prompted a quip.

    "Talking about an opposing player, Scully once said: 'Andre Dawson has a bruised knee and is listed as day-to-day. ... Aren’t we all?'

    "Describing the great Bob Gibson, who worked fast on the mound, Scully noted: 'He pitches as though he’s double-parked.'

    "During a mediocre season in 1990, he said: 'The Dodgers are such a .500 team that if there was a way to split a three-game series, they’d find it'."

    And, regarding one of Scully's most memorable broadcasts - of Sandy Koufax's 1965 perfect game, the Times writes:

    "As Koufax worked his way through the inning, pitch by pitch, Scully provided a spellbinding account. No detail escaped the announcer’s eye: Koufax hitching up his belt and mopping his brow, the other Dodgers pitchers pressing against the bullpen fence to watch, fans hollering for a strike every time.

    "'There’s 29,000 people in the ballpark and a million butterflies,' Scully said, adding later:  'A lot of people in the ballpark now are starting to see the pitches with their hearts'."

    KC's View:

    I grew up in the New York metropolitan area, and while I was alive during the final years that the Dodgers and Giants played in New York before moving to the west coast, I don't remember them.  For me, the voices of summer during my youth were Mel Allen, Red Barber, Phil Rizzuto and Jerry Coleman, and later, when the Mets were born, Ralph Kiner, Lindsey Nelson and Bob Murphy.  These days, I'm lucky enough to be able to listen to Howie Rose call Mets games on the radio, and Gary Cohen Ron Darling and Keith Hernandez on television.

    And yet, as I write this I feel like I've lost a friend, a reassuring voice that painted word pictures about the game I love, the greatest game, a game that lends itself more than any other to on-the-air wordsmithing.  I listened to Scully when I went to college in Los Angeles, and loved tuning in to his broadcasts on many trips to LA.  Calling him the "poet laureate" of baseball may seem too grand, so let's just stick with "baseball preeminent storyteller," blessed with a distinctive voice and a sensibility perfect for baseball.

    Published on: August 3, 2022

    Yesterday, we took note of a CNBC report that organized labor representatives are asking Starbucks to extend pay hikes and improved benefits being offered to non-union employees to those workers working in stores that have voted for unionization.

    Starbucks said no, and that it can't - that once a store has been unionized, those employees have to go through collective bargaining before contract changes are made.

    The union, naturally, disagrees.

    I commented:

    While I've not been a fan of how Schultz has dealt with the union threat - it's been all arrogance, no humility - I think they're right on this one.  Once employees in a store have said that they want different rules to apply to them, that is the reality with which they have to live.  Now it is up to those employees to send their union reps to the table, charged with getting an equal or better deal.

    I got differing reactions to this.

    One MNB reader wrote:

    I have to disagree with your point on this one. You state that it’s up to union reps to try to get an “equal or better deal”. They already did that, by requesting that Starbucks extend the already-offered benefits to the union – and Starbucks refused, after misrepresenting that they aren’t able to do so. It’s just union-busting tactics, and petty and mean-spirited ones at that.

    But another MNB reader chimed in:

    Unionizing has consequences.   It would be foolish of Starbucks to give union members the same as non union members and then start bargaining from there.  Unionized supermarket operators have the unfortunate history in most cases to start bargaining from the existing contract and how to give more.  The only bargaining is how to reduce the new demands. Kroger is probably an exception, does their homework and seeks more flexibility to run their business in exchange for higher wages. 

    Right now Starbucks has an advantage with only a low percentage organized and geographically disbursed.  The law only requires them to bargain in good faith. If I am them, I would rather take a strike in 3 units than agree to terms that are better than the non union people have and that includes work rules. 

    That said, my experience is most unionization is successful when local management is poor or mistreats the associates.  They need to institute an upward management process that anonymously lets front line associates evaluate their managers and company policies.  They will find that 10% or so of their managers are “despicable “and need retraining, new understandings and if they don’t improve, terminations.  



    We referenced a story in The Information yesterday about Netflix's plans to offer an ad supported platform, and I commented:

    To me, this story is worth reading because there are so many retailers developing their own media platforms, hoping that advertising will bring a new and lucrative revenue source.  But Matt Spiegel, executive vice president of digital marketing at TransUnion, which partners with ad-buying firms to better target their ads, makes an important point:

     “This pie does not grow endlessly.”

    Spiegel says that "Netflix, if it can scale, will pull from the same ad market as network and cable television."  And from retail media platforms.

    Not only doesn't the pie not grow endlessly, but there also are a limited number of existing slices.

    MNB reader Andy Casey observed:

    No, the promotional pie doesn’t grow endlessly but if the advance of marketing technology teaches anything it is that the pieces keep getting redistributed. If you don’t keep improving and changing pretty soon you will find yourself with little or no pie or even a Choco Taco.



    And, one MNB reader chimed in on the Red Vines vs. Twizzlers debate:

    I loved Twizzlers until I looked at the sugar content.  Take a look. 

    I don't have to.  I know how bad they are, which is why I eat them so rarely, and hate myself after I plow through a bag.