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    Published on: October 5, 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 the trends that were spotlighted at the recent Groceryshop show - how Instacart seems to be dominating the conversation and the technological evolution taking place in the food retail business … the continuing  emphasis on retail media networks … and also take a look at what doesn't seem to be on everybody's mind anymore, and why.  Together, Tom and KC put these developments into a larger context about what retailers need to be thinking about going forward if they want to be relevant and competitive.

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

    Published on: October 5, 2022

    The latest dunnhumby Consumer Trends Tracker (CTT) is out, and underlines the fact that "Americans believe that food-at-home inflation has hit 22.8%, 9.7 points higher than the 13.1% annual rate reported by the U.S. Bureau of Labor Statistics."

    Other key findings:

    •  "Sixty-four percent of U.S. consumers report they would have difficulty covering an unexpected expense of $400 or more compared to 60% in April-May 2022. The study found a wide range of financial insecurity with a low of 42% in Wisconsin, followed by 48% in Maryland and 52% in Washington, to a high of 77% in Louisiana and Oklahoma."

    •  "Fifty-five percent of consumers surveyed report they are not getting enough of the food they want to eat, and 18% are not getting enough to eat. In addition, 31% of households have skipped or reduced the size of their meals in the last 12 month because there wasn’t enough food, a 5% increase since the last CTT survey May-June 2022."

    •  "Seventy-five percent of consumers want retailers to provide consistent prices. Low base prices are also important across all incomes, even among affluent shoppers. Seventy-three percent of households with incomes above $100,000 reported that low base prices are important, an increase of 7%. Shopping at stores with low base prices is the most common shopper behavior with 59% of those surveyed reporting they do this most of the time."

    •  "Checking prices online before and while shopping is the second most popular customer behavior with 37% of consumers reporting they do this. This behavior is up 6% since the first CTT. Rounding out the top three most common customer behaviors are buying in bulk (35%) tied with shopping at different stores to find the best value (35%)."

    •  "Consumers are shifting a significant share of their spending to dollar stores, at the expense of specialty / premium stores. Since April-May 2022, dollar stores’ share of wallet has increased 2.1% (17.8% to 19.9%) while specialty / premium stores has decreased 1.1% (18.7 to 17.6%)."

    •  "eCommerce channel penetration has also decreased since peak Covid and appears to be linked to customers’ increasing sensitivity to cost. Between October 2021 and July 2022, there’s been approximately a 20% increase in people citing additional fees (e.g. delivery and picking fees) as a barrier to buying groceries online."

    •  "Eighty-three percent of respondents are looking for cheaper alternatives to the products they usually buy in at least one category. The top three categories consumers are trading down in are packaged food (53%), common household products (52%), and frozen food (42%)."

    •  The purchase of premium or luxury items are on the rise, particularly in the 35-44 age range. This aligns with the 'lipstick effect' that has been observed in previous recessions, whereby consumers will invest in small luxuries that increase their confidence and perceived attractiveness during periods of uncertainty. Customers are likely to be forgoing more expensive luxuries, in place of small luxuries available at the grocery store."

    KC's View:

    The fact that Americans' perceptions of food inflation are dramatically inflated - sorry - compared to reality is interesting but, in some ways, irrelevant - marketers can't get into an argument about this, and have to address perceptions when talking to shoppers.

    Many of these numbers simply confirm what we all know about consumer behavior - at moments like these, almost everyone is cutting back where they can, and allowing themselves small luxuries when possible.  Essentially, it is that simple.

    Which means that retailers need to figure out ways to give consumers wins wherever they can, so they don't lose market share to lower priced competitors, while at the same time finding ways to continue to cater to people's aspirations when possible.

    It is like I've said here before - great retailing is about aspiration, inspiration, and perspiration.  Not necessarily in that order, nor in equal parts.

    Published on: October 5, 2022

    From the Wall Street Journal this morning:

    "U.S. employers pulled back sharply on job openings, while layoffs rose in August, adding to signs the labor market and overall economy are cooling.

    "Employers’ total job openings fell 10% in August to a seasonally adjusted 10.1 million from 11.2 million the month before, the Labor Department said Tuesday. The 1.1-million drop in openings is the largest decline since the early months of the Covid-19 pandemic in 2020, leaving job openings at their lowest level in a year.

    "Openings dropped the most in healthcare, retail and other services industries. The decline in openings coincided with an August easing of job growth. Employers added 315,000 jobs that month, compared with 526,000 jobs in July. The figures reflect a labor market that is still strong overall, but lost some steam in August after recovering rapidly from the effects of the pandemic … The high number of job openings and the low unemployment rate - at 3.7% in August - means that it remained relatively easy for people to find work."

    KC's View:

    This is a good thing, especially in the broad economic sense.  But if the pendulum shifts back in employers' direction, they need to remember who the essential people were when things got tough.  Everybody's goal should to stop the pendulum from swinging wildly, but rather come to a resting place in the middle, where everybody is valued and feels invested in the business's success.

    Published on: October 5, 2022

    The New York Times this morning reports that "Amazon is freezing corporate hiring in its retail business for the rest of the year … The announcement, in an email to recruiters, said the company was halting global hiring for all corporate roles, including technology positions, in its stores business, which covers Amazon’s physical and online retail business and its logistics operations. More than 10,000 openings were posted in that division, which accounts for the bulk of Amazon’s sales, as of Monday evening."

    The Times notes that this makes Amazon just "the latest company to pull back amid the economic uncertainty … The freeze at the nation’s second-largest private employer is part of a wider cooling in the job market, or at least another sign that it is no longer at a raging boil."

    Brad Glasser, a company spokesman, said that “Amazon continues to have a significant number of open roles available across the company,” and said that Amazon expects "to keep adjusting our hiring strategies in each of these businesses at various junctures."

    The company will continue to hire for Amazon Web Services (AWS), its cloud computing business, and for its warehouses.

    CEO Andy Jassy has told investors and analysts that the company is focused "on controlling costs and efficiency in its warehouse and logistics operations."

    KC's View:

    In some ways, this is a game of three-card-monte.  People are still being hired, but won't go on the payroll until January.

    Jassy seems to be very much about right-sizing the business, which means being able to trim the sails at the right moment while still making necessary progress.  I don't think this is a bad thing - Amazon will still make big bets, but making sure that everybody in the organization understands that the gravy train doesn't run forever also has to be important.

    Published on: October 5, 2022

    Schnucks announced that a select number of its St. Louis-area stores now are offering what it is calling a "flex assignment option."

    “Schnucks Flexforce” teammates, the company says, "will be able to optimize their work schedules by selecting shifts and store locations that best fit their personal schedules while creating opportunities for growth and learning at a pace determined by the teammate … Teammates will be able to log into a Schnucks scheduling app to view and claim open shifts and, if they choose, can also opt-in to receive notifications of open shifts.

    "Flexforce starting pay is $12.85 per hour and is currently reserved for those at least 18 years old. Flexforce teammates will receive the same benefits and perks as traditional Schnucks teammates."

    “At Schnucks, a primary goal is to position our teammates for success, and we are excited to offer this new opportunity to both our current and prospective teammates,” said Schnucks Chief People Officer Laura Freeman in a prepared statement.  “Much like rideshare and food delivery service employees, Flexforce teammates will be able to seek and claim shifts at the time and location of their choosing.”

    KC's View:

    This is part of what employees want - some control of their destinies.  Schnucks is smart to adopt this approach.

    Published on: October 5, 2022

    The Chicago Tribune reports that Dom's Kitchen & Market - supermarket industry icon Bob Mariano's latest entrepreneurial/gastronomical effort - will open its second store in the Windy City on November 1.

    The store will open in the Old Town neighborhood, in a former Plum Market location.  The original store opened in June 2021 in Lincoln Park.

    According to the story, "Dom’s said the Old Town store will feature 'globally inspired, seasonally driven, and locally sourced' products, including bakery items from Eli’s Cheesecake and Stan’s Donuts and produce from Gotham Greens, a New York-based hydroponic grower that’s expanding its existing Pullman greenhouse facilities.

    "Other offerings include a high-end wine library, an assortment of hundreds of cheeses and a wide range of premade meals, including Roman-style pizza, sushi, poke bowls, salads and made-to-order burgers and sandwiches. A coffee bar will serve brews from Hexe, Metropolis and La Colombe; a separated wine bar will host happy hour on weekdays from 4 to 7 p.m.  New to the Old Town location will be chef-made hot foods like mac and cheese and Rhode Island-style shrimp and a custom store-made cake program."

    “Dom’s continues to evolve based on our collective team efforts. We all work diligently to excite the hearts, minds, and palates of our loyal and new customers alike,” said Mariano, Dom’s co-CEO, in a statement. “Our work here is never done and we strive for excellence on a daily basis.”

    The Tribune writes that Dom's plans to have 15 stores open by 2025, with "several" on track to open  next year.

    Mariano is the former president-CEO of Dominick's in Chicago.  He left the company after it was acquired by Safeway in 1996, and became CEO of Roundy's in 2002.  While there, he developed the upscale Mariano's Fresh Market format;  he retired from Roundy's about six months after Kroger acquired the company.

    Also involved in the new Dom's business are Jay Owen, a grandson of Dominick’s founder Dominick DiMatteo, and Don Fitzgerald, former senior executive with Dominick’s, Roundy’s and Mariano’s.

    Published on: October 5, 2022

    •  The Washington Post reports that "Amazon suspended at least 50 workers on Tuesday who were involved in a work stoppage the previous evening at the company’s only unionized warehouse in the United States, union leaders said.

    "Roughly 100 warehouse associates on the night shift at the Staten Island facility refused to work for several hours on Monday evening, shortly after a fire broke out in a trash compactor machine used on cardboard, according to Amazon Labor Union officials. Labor leaders said the warehouse smelled of smoke and that they couldn’t breathe. One worker went to the hospital, they said.

    "Seth Goldstein, a labor attorney for Amazon Labor Union, called the suspensions of the Staten Island workers 'a violation of workers’ rights to join in a collective action about the terms and conditions of their employment.'

    The Post writes that "Amazon confirmed that company managers had suspended workers with pay who engaged in the work stoppage on Monday, as they investigate the events that took place. Company spokesman Paul Flaningan said that while Amazon respects its workers’ rights to protest, it is not appropriate for employees to occupy active work spaces, break rooms or thoroughfares in its warehouses."

    The story also notes that "the mass suspension took place less than 10 days before warehouse workers at a separate Amazon warehouse near Albany, New York, are slated to vote to become the second Amazon workforce to join Amazon Labor Union."

    •  From Bloomberg:

    "A Starbucks Corp. barista says he was fired for wearing a mental-health awareness pin -- a move the company’s union claims is part of a purge of labor activists.

    "The fired barista, Will Westlake, is also a prominent union organizer at one of the first three cafes around Buffalo, New York, that petitioned to form a union last year.

    "Westlake said he and others at his store began wearing the pins after a co-worker died by suicide earlier this year. After management told them the pins violated the dress code, most removed them to avoid getting in trouble, he said.

    "Westlake continued wearing his, and he said management sent him home dozens of times and issued him a 'final written warning' for refusing to remove it. In a termination notice issued Tuesday, Starbucks said it fired Westlake due to 'refusal to abide by the dress-code policy,' as well as attendance issues."

    •  Tasting Table reports that Starbucks has come to an agreement with the union representing some of its employees, SBWorkers United, which will have it purging from employee records union activities that previously have been noted.  In addition, the story says, Starbucks agreed to "post a notice of the settlement in the employee break room at the location, for no less than 60 days," though there is no admission of "wrongdoing, liability, or violation of law."

    "We're pleased" with the settlement terms, a Starbucks spokesperson said.

    Published on: October 5, 2022

    •  Loretta Lynn, the "Coal Miner's Daughter" who, as a singer-songwriter illuminated the challenges and victories of a generation of women, has passed away.  She was 90.

    In its obituary, the New York Times writes that "her voice was unmistakable, with its Kentucky drawl, its tensely coiled vibrato and its deep reserves of power … Her songwriting made her a model for generations of country songwriters. Her music was rooted in the verities of honky-tonk country and the Appalachian songs she had grown up singing, and her lyrics were lean and direct, with nuggets of wordplay: 'She’s got everything it takes/To take everything you’ve got,' she sang in 'Everything It Takes,' one of her many songs about cheating, released in 2016."

    Her memoir, "Coal Miner's Daughter," was turned into a hit movie of the same name in 1980, starring Sissy Spacek - who won an Oscar for portraying Lynn, who handpicked her for the role.

    Published on: October 5, 2022

    We had a story the other day about Rite Aid grappling with severe shoplifting issues in its New York City stores, prompting MNB reader Rich Heiland to write:

    Interesting note about Rite-Aid. There is a Rite-Aid a block or so from our apartment in downtown West Chester, PA we use. Last summer they posted signs on the doors reading "No more than three minors in the store at one time. All backpacks and bags must be left at the front counter." I asked one employee what was up and he said groups of teens had been coming in, distracting employees and their shoplifting losses were soaring dramatically.

    I don't know if this makes me feel better, that West Chester - population 20,033 - has the same issues as New York City, population 8.38 million.

    We also had a story about how there apparently are fewer discounts being offered by supermarkets at the moment, and MNB reader Howard Schneider observed:

    I think many discounts are less visible to the broad market because the major supermarket chains use their loyalty card programs to target discounts to members. Good deal for the member, the store gets permissioned, SKU-level data, and enjoys tighter control compared with broad-market discounts, mass coupons, BOGOs, etc.

    Howard knows a lot. more about this stuff than I do, so I bow to his guidance.

    We had a story yesterday noting that the National Retail Federation (NRF) is out with its assessment of August spending, concluding that while "consumers remain worried about high inflation and Federal Reserve interest rate hikes intended to bring inflation under control," they are not so worried that they've stopped spending.

    But a number of people made an observation like this one:

    Is the increase due to inflationary price increases vs.spending increases? 

    Excellent point.

    As I said yesterday, we have to be careful about false optimism.  We've been drinking the kool-aid for so long, thinking that the good times will go on forever and that the bill would never come due.  I'm old enough to know/remember that the bill always has to get paid at some point.

    Published on: October 5, 2022

    New York Yankee outfielder Aaron Judge yesterday hit his 62nd home run of the season, passing Roger Maris's single-season American League record in the second game of a doubleheader against the Texas Rangers in Arlington, Texas.

    The home run leaves Judge short of the Major League record of 73 home runs, set by Barry Bonds in 2001.  In addition, Mark McGwire hit hit 70 in 1998 and 65 in 1999, and Sammy Sosa hit more than 61 home runs three times from 1998 to 2001.  All three players, however, are inextricably associated with baseball's steroids era.