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    Published on: September 7, 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.

    Is it Day Two (or later) for Amazon?  Today, as The Innovation Conversation returns after a summer break, Tom Furphy & KC consider this question within the context of Amazon's healthcare pivot (folding Amazon Care and acquiring One Medical), the paring back of its distribution and logistics infrastructure, and changing approach to physical retailing five years after its purchase of Whole Foods.  In the end, they conclude, growth is the highest priority - no matter how it is achieved.

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

    Published on: September 7, 2022

    by Kevin Coupe

    By now, most of you know that Michael Sansolo and I co-wrote a book a number of years ago, entitled "The Big Picture: Essential Business Lessons from the Movies."  (If you didn't know, you do now … and, FYI, the book is available on Amazon.)

    I mention this a) because I like to try to sell a book or two whenever I can, and b) because there was a terrific story in the New York Times the other day about how Ajla Tomljanovic actually used a movie as inspiration when she played - and defeated - Serena Williams last week in the US Open.

    The Times points out that Tomljanovic wasn't just playing Williams, who had announced that she would be retiring - actually, "evolving" out of professional tennis - after the US Open.  She also was playing the 24,000 spectators at Arthur Ashe Stadium who were rooting for Williams to earn one last championship.

    The Times writes that "Tomljanovic was nervous, and for good reason. Williams was her idol, and Tomljanovic had never played her before. She had never played in Ashe. In fact, she had never even practiced on that court. She had asked tournament organizers if they could find a time for her to hit some balls in the largest tennis stadium in the world at least once, but nothing was available.

    "Then there was the matter of her playing the role of villain, of facing down nearly 24,000 fans, virtually all of them screaming for Williams to win, and millions more watching on television. It would make anyone a tad edgy."

    Her father, Ratko Tomljanovic (who is a retired professional handball player), offered a motivational tool:

    "He mentioned one of his favorite movies, 'For Love of the Game,' in which a pitcher for the Detroit Tigers, played by Kevin Costner, reflects on his life and career in the midst of a perfect game … In the film, he told her, the pitcher focuses explicitly on the catcher’s glove and ignores everything else in the stadium. Ajla understood, and she followed the advice with her own unique resolve.

    "She blocked out all the noise, the roars for Williams, the indecorous cheers when Tomljanovic missed a serve, all the celebrities in the stands, the video tributes to Williams and her own childhood adulation for Williams, a 23-time Grand Slam champion standing across the net and playing as well as she had in years. But Tomljanovic was better."

    "Clear the mechanism" is how Costner's character puts it in the movie:

    "For Love of the Game" isn't my favorite Kevin Costner baseball movie.  It comes in third out of three - "Bull Durham" and "Field of Dreams" are much better.

    But "clear the mechanism" is a useful and Eye-Opening business metaphor and lesson.  In business, it is critical sometimes to have absolute focus on the task at hand, to be able to cut through distractions and pay attention to delivering the best possible customer experience in synch with the g=brand's value proposition.  Sometimes, everything else is just noise.

    (A short postscript.  Tomljanovic, who was seeded 48th, is now out of the US Open, having lost yesterday in straight sets (6-4, 7-6) during her quarterfinal match against F=fifth-seeded Ons Jabeur, who now becomes the first African woman to make the U.S. Open semis in the Open Era. I was there with Mrs. Content Guy, and I can report that Tomljanovic very much had the crowd on her side, largely because she was a clear underdog who was playing well, though above her weight class.)

    Published on: September 7, 2022

    FMI - The Food Industry Association’s annual comprehensive research report, The Food Retailing Industry Speaks 2022, concludes that "despite a challenging year marked by a persisting pandemic, historic inflation, supply chain bottlenecks, and labor shortages, the food industry is making significant investments to meet shoppers’ evolving tastes."

    Some excerpts:

    •  "The survey finds that food retailers are focusing on investments in new technologies (73%) like foodservice ordering and delivery, dynamic pricing, and mobile checkout systems. They are also increasing labor allocation for online purchase fulfillment (52%) and in-store/curbside pick-up (48%)."

    •  "Retailers report they are also expanding numerous fresh or perimeter departments. More than 80% are increasing the space they allocate to fresh-prepared grab-and-go products as well as offering foods with beneficial nutrition attributes for health and well-being (70%). The departments expected to grow include locally sourced (72%) and organic produce (62%), plant-based foods and animal protein alternatives (64%), allergen-free (38%) and gluten-free (35%) SKUs."

    •  "Despite the macroeconomic challenges, a majority of retailers (61%) pointed to a positive impact on business sales and profits in 2021 from local and national economies."

    •  "On the other hand, food suppliers – surveyed for the first time in the 74-year history of the Speaks report – were less upbeat (50% positive, 36% negative). Both retailers and suppliers agree that the current economic climate will not be as favorable, with both retailers and suppliers anticipating that inflation will cause operating costs to increase (78% retailers, 90% suppliers)."

    KC's View:

    The argument here always has been that when things get challenging, the worst thing a retailer can do is stop innovating and focus on "getting back to fundamentals."  Let your competition do that … this is a perfect time to define and enlarge differential advantages, to innovate and promote.  If you're not already doing the fundamentals, it is too late.

    Published on: September 7, 2022

    From the Wall Street Journal:

    "Nutrition advocates and food-industry groups are revving up for a fight over whether an additional label should go on the front of many packaged-food items to more clearly indicate whether they pose a health risk.

    "A long-running debate over what those new labels should look like—and whether they should be required—is intensifying ahead of a White House conference on hunger, nutrition and health later this month.

    "The Food and Drug Administration already requires most packaged foods to display a detailed nutritional label, but they are typically placed on the back or side of the item. Advocates want another, more condensed label on the front of the package that would visually flag certain health risks, such as high sugar or saturated-fat content, at a time of rising national rates of obesity among adults and children, as well as other diseases."

    The Journal goes on to point out that "industry groups say there is insufficient real-world evidence to show such labels would influence consumer behavior. They also contend the FDA doesn’t have the authority to mandate front-of-package labels, which they said could pose a First Amendment threat, because companies could view them as a form of forced speech."

    But Peter Lurie, president of the Center for Science in the Public Interest (CSPIO), which is advocating for front labels, argues, "We already have information on the side of the pack, but it’s clear that it’s not having the desired impact to advance the public health.  This is a chance to make that information more prominent, more readable and more useful.”

    KC's View:

    While I understand why some folks want nutrition information to be more prominent, I'm not sure that this will make the difference, other than to make labels sort of boring and look-alike.  I think that a large part of the reason people don't read back-of-the-package labels is that they don't want to read back-of-the-package labels.

    We all know they're there.  We just make other choices.  It is a shame, but so it goes.

    Published on: September 7, 2022

    The Verge reports that Amazon's healthcare ambitions may reach as far as Asia - the company "is considering partnering with pharmacies in Japan to deliver medications starting in 2023."

    According to the story, "The plan is for Amazon to build a platform where patients can get information about the drugs they’ve been prescribed and also sign up to get those drugs delivered … Amazon would not operate pharmacies itself — just provide the online system."

    Such a move by Amazon would be part of a broader shift in Japan's healthcare industry.  "People in Japan will be able to order prescriptions online after online doctor visits for the first time next year," The Verge writes.  "Major pharmacies and other Japanese companies are also working on similar programs that would give patients digital access to information on their medications."

    KC's View:

    I tend to think that Amazon will be more successful in healthcare when it can buy into and support existing systems, as opposed to trying to reinvent the industry from scratch.  Which seems to be the direction it is taking.

    Published on: September 7, 2022

    Newsweek is out with its annual list of retailers offering the best and most consistent customer service.  "Whether it's an easy-to-use website, a generous returns policy or just a friendly voice, these companies put the customer first," Newsweek  writes, and it partnered with global data research firm Statista to compile the list … which, in the supermarket category, in order, features Publix, Wegmans, Sprouts, The Fresh Market and Whole Foods.

    There are only three retailers that make the list in the "superstores and warehouse club stores" category - and, in order, they are Costco, Target, and BJ's.

    There also are just three online grocery retailers listed - in order, Local Harvest. FreshDirect, and Shipt.

    And, three "discount supermarkets" - Treader Joe's, Grocery Outlet, and Aldi.

    Five c-store chains make the list in that category - Wawa, Sheetz, QuikTrip, Casey's General Stores, and Cumberland Farms.

    KC's View:

    The list is worth noting if only because it illustrates the bias that the national media has toward such things.  These are all fine companies, but I don't know that I'm buying rankings that ignore some of the great independent food retailers out there - I could come up with two or three independent food retailers who offer exceptional customer service for every one of the names that Newsweek and Statista came up with.

    Published on: September 7, 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 96,716,573 total cases of the Covid-19 coronavirus, resulting in 1,073,295 deaths and 92,706,128 reported recoveries.

    Globally, there have been 611,565,277 total cases, with 6,507,774 resultant fatalities and 589,265,613 reported recoveries.  (Source.)

    •  The Centers for Disease Control and Prevention (CDC) says that 79.2 percent of the total US population now has received at least one dose of vaccine, with 67.5 percent. being fully vaccinated.  The CDC also says that 48.5 percent of the total US population has received a first vaccine booster dose, with 34 percent of the 50+  population and 41.2 percent of the 65+ population having received a second vaccine booster shot.

    •  The Wall Street Journal reports that "U.S. health authorities plan to recommend that people get Covid-19 boosters once a year, starting with the new shots now rolling out, a shift from their current practice of issuing new advice every several months.

    "The annual cadence would be similar to that of flu shots, White House officials said Tuesday, though elderly people and those with weakened immune systems may need more frequent inoculations.

    "A shift to annual Covid-19 boosters would be a departure from current practice and comes after many people in the U.S. have ignored calls to get a first or second booster, partly due to fatigue with repeat inoculations."

    Never have understood the whole "fatigue with repeat inoculations" thing, if only because I think it would be a lot more exhausting to get seriously ill.  I'd rather do whatever I can to a) prevent myself from getting Covid, b) reduce the impact of Covid in the event that I do get it, and c) be responsible for trying to keep the people with whom I come into contact safe and healthy.

    Published on: September 7, 2022

    •  KTVH-TV reports that "unsecured package theft has become such an increasing problem that Washington, D.C., has become the first city in the nation to allow customers to pick up their Amazon packages at lockers at a police station.

    "The D.C. Metropolitan Police Department announced it worked with Amazon to implement the strategy of installing Amazon-secured lockers at one of its substations in the city … The first station is part of a pilot program between the online retail giant and D.C. police before possibly expanding to other police stations throughout the city."

    •  The Teamsters Union on Tuesday formally launched what it is calling its Amazon Division, described as "a new arm of North America’s strongest union dedicated to uniting Amazon employees, securing more workplace protections in the warehouse and logistics industry, and defending workers from the unchecked exploitation of one of the world’s most dangerous employers."

    •  From The Information:

    "Instagram is planning to drastically scale back its shopping features, the company told Instagram staffers on Tuesday, as it shifts the focus of its e-commerce efforts to those that directly drive advertising. The retreat shows how Meta Platforms is moving away from some long-term projects as it focuses on building its short-form video business.

    "In an internal memo on Tuesday, staff were notified that Instagram’s existing Shopping page will eventually disappear, 'given shifts in company priorities.'  Instagram isn’t abandoning shopping altogether: over the next few months the company will test a simpler and less personalized version of the shopping page known internally as 'Tab Lite,' according to the memo."

    What this all means, The Information writes, is that the company’s is aligning its "commerce goals with supporting ad revenue."

    •  CNN reports that the Irish government has assessed the equivalent of a $402 million (US) fine against Meta-owned Instagram after "an investigation into its handling of children's data … The investigation, which started in 2020, focused on child users between the ages of 13 and 17 who were allowed to operate business accounts, which facilitated the publication of the user's phone number and/or email address."

    Instagram said it plans to appeal the fine, which was levied by Ireland's data privacy regulator.

    Published on: September 7, 2022

    •  From the Los Angeles Times:

    "Gov. Gavin Newsom on Monday signed a nation-leading measure giving more than half a million fast-food workers in California more power and protections, despite the objections of restaurant owners who warned it would drive up consumers’ costs.

    "The landmark law creates a 10-member Fast Food Council with equal numbers of workers’ delegates and employers’ representatives, along with two state officials, empowered to set minimum standards for wages, hours and working conditions in California … The law sets a cap on minimum wages for fast-food workers at chains with more than 100 restaurants at $22 an hour next year, compared with the statewide minimum of $15.50 an hour, with cost of living increases thereafter."

    •  The Washington Post reports that "e-cigarette company Juul, which at the height of its success dominated the market with its sweet flavors, has agreed to pay $438.5 million in a settlement with 33 states and one territory over marketing its product to teens.

    "Connecticut Attorney General William Tong (D), who led the plaintiff effort, said in a statement Tuesday that the settlement will send millions of dollars to programs aimed at reducing tobacco use.

    According to the Post, "Juul use among teens and young adults spiked from 2018 to 2019, with use among 18-to-20-year-olds doubling … Juul and other vape companies contributed to an e-cigarette epidemic among youths, the surgeon general at the time said in 2018.

    "Tuesday’s settlement doesn’t eradicate the problem of e-cigarette use among youth, but it is a significant move to hold Juul accountable for its actions, Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, said in an interview."

    Published on: September 7, 2022

    Yesterday, we featured an Eye-Opener about how, in a message to customers, Stew Leonard, Jr. recommended that his customers go visit a newly opened Amazon Fresh store with checkout-free technology.

    I commented:

    When was the last time you saw a retailer recommend that customers go visit a competitor?'

    I've been doing this a long time, and I can't recall it ever happening before.

    Now, let's be clear - Stew Jr. is using the recommendation to draw some clear lines of differentiation between his stores and the Amazon Fresh.  He's arguing that his price of apples ($2.99/lb. vs. 99 cents apiece) is lower.  And, he's pointing out that there may be some flaws with the technology.

    But, implicit in Stew Jr.'s email is enormous confidence that Stew Leonard's value proposition - strong on fresh, terrific theater, sharp pricing, and a limited assortment of some 1,200 items - can compete effectively with Amazon Fresh - in fact, he's confident that if you compare the two, you'll prefer Stew Leonard's.

    One MNB reader responded:

    Yes, it is a bold message.  The best part of the message is that Stew recognized a customer in an Amazon Fresh Store, spoke with this customer and then purchased the rotisserie chicken.  I hear you, I see you, and I am actually listening.  I can’t think of a better way to engender loyalty.  On the other hand, he points out that the Amazon store is sort of dystopian with cameras watching your every move, but failing to get it right. 

    From another reader:

    Harken back to the film, "Miracle on 34th Street" where Santa begins to recommend to parents of children that cannot find the item they are looking for at Macy's, that they can find that item at another store nearby.  We do the same thing and why not?  Isn't the point of operating a retail business to help the customer find what they are looking for?  If we don't stock it, or we're out of stock, let's help that customer find what they are looking for wherever that item may be found.  Even if it is carried by a competitor.  

    In a column yesterday about the low unemployment rate in Minnesota, Michael Sansolo made a passing reference to the snow the state often gets.  Prompting MNB reader Henry Stein to write:

    Common to any story about Minnesota, Michael Sansolo references “snow” in his concluding sentence about over and under employment rates in our state.

    It’s always a good reminder that in Minnesota, we have no wildfires like California, no hurricanes like Florida and Texas, no flooding like Kentucky and Tennessee, few tornados like Oklahoma and Kansas, and earthquakes? Nope. Occasional snow. Not a bad trade-off.

    Commenting yesterday on CVS Health's deal to acquire Signify Health, which runs a network of doctors making house calls, for roughly $8 billion, I made a point that I've made before - that I find it hard to imagine placing my healthcare needs in the hands of a retailer that runs such mediocre stores.

    One MNB reader responded:

    I agree with you about CVS.  I often find my local CVS to look like your picture.  Will it get worse because they will be focusing on non-retailing?  And you are right to question- can we trust them with healthcare if their retail is like this?

    And, from another reader:

    Long story short. Went to my primary care doctor of 30+ years, had my annual physical, did a stress test, that afternoon my primary care doctor saw the results of the stress test, I got a text from her with the message, go to the ER immediately. I did so, and found out I had 3 blocked arteries, and left the hospital with a triple by pass surgery 5 days later. 3 weeks to date, I am on the road to a complete recovery. The moral of the story for me is that I do not want my healthcare provided by Walmart or any other retailer who wants to enter the healthcare industry. I will leave it to the doctors who know my health history.

    Agreed.  Hard to imagine CVS - or Amazon, or Walmart - being part of such a narrative.

    In my FaceTime video yesterday, I noted that recently, outgoing Whole Foods CEO John Mackey said that younger people "don't seem like they want to work" partly because they want meaningful jobs.  "You can't expect to start with meaningful work. You're going to have to earn it," he said.

    I disagreed.  Profoundly.  And to lead a company with an attitude like Mackey's, I think, is tantamount of managerial malpractice.  (I actually was tougher than that on Mackey, who has he's gotten older seems more and more misanthropic.)

    One MNB reader disagreed:

    Mackey is 100% correct. Must be easy making calls from the bleachers!  Talk to the hundreds of service oriented small businesses across the country and the majority would agree.

    Do you read MNB?  What I do is make calls from the bleachers … but it doesn't make me wrong.

    Another MNB reader wrote:

    Regarding the beat down of the Whole Food exec :-)………Wow, think you were being a little tough on him , he gave an answer that boils with frustration and I would have to give him a break as I personally know how he got to where he is.  Don’t actually agree but remember he is probably dealing with youth that are the children of the millennials who suffered thru 3 recessions including 9/11, covid and dotcom.  They are also tagged as being the first generation in recent history to be less well off than their parents so their kids are a product of that.

    I think the toughest job in an organization now might be human resources because the market now is in such disarray especially for youth. They are victims or the current strategic failure between education and the business community. First hand, I have seen students from secondary schools reading and writing at the elementary level, some not even being able to read at all.  And there are a significant number out there like that, and many of them have high expectations in a cruel world. The lack of cohesiveness between education and job market, or lack there of, seriously needs to be addressed.  Candidly,  many execs will tell you the same thing that the Whole Foods guys expressed, many for the same reason, frustration.  That doesn’t mean however business can’t start the process, flipping burgers or frying chicken can be an entry way, if it is used to teach understanding and knowledge of business enterprise.  Chick Fil A is one of the best at doing that. 

    This problem is way bigger than Whole Foods and it starts with family and education, then nurturing by the professional community in a way that guides youth to a work future.  Show me a kid that can’t read or write today or has no job skills/training and I’ll show you one thats going to be a labor causality tomorrow.  That just points out the need to have meaningful instruction that leads to meaningful jobs, we all have a part and we shouldn’t allow frustration and a setback determine who we are or who we are not.

    From another MNB reader:

    Thank you for your thoughtful video.  You are spot on in your comments.  Perhaps, John Mackey has forgotten in his C suite that stocking the shelves, sweeping the floors, and bringing the carts in from the parking lot, not only have meaning, but on a fundamental level may have much more meaning than his role both to the customer and the employee.

    And another:

    Wow. Where do I start? Great stuff as always, Kevin. Here’s my take:

    Generational differences. One of our senior leaders published an article in our company newsletter about this. We have so many employees of high school and college age, we can see it daily. They wrote about the different perceptions of younger people and different work ethic. They went further, though, explaining how it was incumbent on leaders to understand and respond to what this younger generation was looking for. The article was written in 1978. They were basically talking about me. Of course the differences are different now. They will be for the next generation, too. What hasn’t changed is that true leadership requires…

    Meaningful work. Our former VP of Operations had a few favorite books he would share. One was Gung-Ho, which spoke about this very topic, the importance of helping people find meaning in the work they did, whatever it was, along with empowering and encouraging them along the way.

    MNB reader Patrick Smith wrote:

    I am retired from the food industry. I started in the 60’s working for Albertsons in the Pacific Northwest. I recall that my first store manager, at the division’s top store in 1964, made $42,000, much of it from bonuses. Not all stores produced these incomes, but it was a brass ring many reached for. The store department heads all bonused too. Young and aggressive store employees all worked hard to get one of the plum jobs in that organization.

    Now, store managers may have multiple stores for which they are responsible and department heads get little beyond their salaries. I have numerous friends, at the time like me who were not college graduates, who had good careers with both Albertsons, plus their various northwest competitors. Now many of the jobs these people held either do not exist, or the financial rewards are far lower than in the past. I am aware that things do change, but some things do remain constant. If you read financial publications that rate successful companies, in all types of industries, a common thread they share is they hire and retain effective employees. They do this through valuing their work in both work environment and result driven compensation. It seems to me that retail grocery industry, by and large, has gotten away from this once proven policy. Just do the math and figure a 1964 salary of $42,000 per year in today’s dollars.