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    Published on: December 20, 2022

    Today, I talk about an essay by Salon's Michael La Corte, in which he writes about his late father's food enthusiasms, which touched my heart but also revealed the degree to which food - any kind of food - can connect people.  It is, and always will be, a wonderful lesson for every food retailer.

    Published on: December 20, 2022

    by Kevin Coupe

    I frequently use Stew Leonard's - which happens to be my primary store, in Norwalk, Connecticut - as an example of effective communication with customers, and I'm going to do so again today.  This email, which I got yesterday, strikes me as the very model of talking to shoppers in a way that is relatable and accessible - it positions Stew's as being an advocate for the shopper, and presents meal and product options in a way that is less about selling and more about guiding.  In that way, it is very much an Eye-Opener.

    Published on: December 20, 2022

    From Bloomberg, a story suggesting that Jeff Bezos' prediction may be coming true - that eventually Amazon would be disrupted in the same way that is caused so much disruption.

    "The idea seemed absurd in the middle of the pandemic. Amazon’s online sales had exploded as people avoided stores. Restless consumers, buoyed by stimulus payments, were on a shopping spree. Between 2019 and 2021, Amazon’s online store sales grew 57% to more than $222 billion; subscription sales, which include its prized members’ service Prime, surged 65%; and its share of  consumer retail spending surged to overtake it biggest rival, Walmart Inc. It became more of a utility in consumers’ minds than an online store. What would we have done without online delivery? Without Amazon?

    "At the same time, retailers that had been lagging behind in e-commerce were forced to catch up — and fast. Nearly everyone from luxury names to department stores ramped up online. Walmart, for one, expanded its online assortment, opened its marketplace to international sellers, rolled out curbside and in-store pick up, and ramped up online order fulfillment out of its stores. In the first nine months of the pandemic, its online sales grew at twice the rate of Amazon’s, albeit off a far smaller base, according to data from retail technology research firm YipitData."

    Now, Bloomberg writes, "Amazon no longer seems unassailable. This year saw the world’s largest e-commerce company at one point lose a trillion dollars in market value as growth in online shopping slowed sharply and its forecast for the all-important holiday quarter disappointed. Prime memberships have flat-lined following the pandemic surge. And the firm is in the midst of its biggest-ever employee cull, targeting about 10,000 jobs across the devices and retail businesses.

    "Inflation-squeezed shoppers are more cautious about what they do with their wallets, and less willing to spend on novelties like $20 for an avocado chopper or $25 for a few wands that remove histamines from a glass of wine. Instead of impulse buys, people are spending more on groceries and other necessities — Walmart’s sweet spot. Amazon’s prices are still generally cheaper than Walmart, but Walmart does price matching all year around and its annual Walmart+ membership of $99 compares with $139 for Prime. With some back of the napkin math, a pack of toilet paper may end up cheaper to buy from Walmart than Amazon.

    "The dramatic shift in sentiment coupled with more aggressive online competition have seen Amazon fall back in the battle for consumers’ wallets as Walmart leverages its advantage as the country’s largest grocery store. So long as we’re in an inflationary environment, Walmart’s lead in groceries and Prime’s increased cost put Amazon on the back foot, according to Tom Forte, a senior research analyst with D.A. Davidson.   Research firm Insider Intelligence estimates that the brick-and-mortar giant will generate roughly $39 billion in online grocery sales this year, and widen its lead over Amazon through 2024."

    KC's View:

    First of all, let's stipulate that, as we've long said here on MNB, there is no such thing as an unassailable business model.  (Bezos always has known this.)

    I take issue with some of the Amazon Prime vs. Walmart+ comparisons.  Sure, Amazon costs more, but the Prime value proposition also is far greater, with discounts extending to Whole Foods and all sorts of benefits including access to Prime Video and live sports events.  If all you are worried about is the cost of toilet paper - and granted, that is the bottom line for a lot of folks - then maybe Walmart+ makes more sense.  And cents.  But this underlines the key difference between Walmart and Amazon that I've always emphasized, that Walmart just wants to sell you more stuff, while Amazon wants to be inextricably intertwined in every aspect of your life.  (Nothing wrong with either approach, but they are very different.)

    This is something that Tom Furphy and I have discussed in recent Innovation Conversations.  Amazon has some decisions to make - there is a lot of upside, as well as some risk, for Amazon to continue  investing in grocery.  But that's one of the retail categories where Amazon has not dominated, and so it makes sense to keep pushing.

    (By the way, Amazon's lack of dominance in grocery is one of the reasons that Kroger and Albertsons probably shouldn't be using it as a reason for them to merge.  Just sayin'…)

    Retrenchment and rightsizing makes sense at this moment for Amazon, but it has to continue innovating in customer-centric ways at a faster pace than the competition.  That's always been the secret sauce for the company, even when it flies in the face of conventional economic wisdom.

    I keep coming back to something that an MNB reader wrote in some time ago.  It used to be that Amazon obsessed about customer satisfaction at any cost, but lately it seems that it obsesses about customer satisfaction "at an appropriate cost."  That's a lot more than a semantic difference … if accurate, it would represent a cultural shift of significant magnitude.

    I'm also going to come back to my previous prediction - this story simply reinforces for me that it is better than 50-50 that Jeff Bezos returns in 2023 as the Amazon's CEO.

    Published on: December 20, 2022

    The Wall Street Journal reports that "retail chief information officers are weighing technology developments that would streamline the in-store payment process, refocusing on an area they say has lagged behind."

    The reason:  While the pandemic prompted retailers to put more of the energies - and money - into e-commerce, the end of the pandemic, combined with headwinds created by inflation and a recessionary mindset among many consumers, has resulted in e-commerce being "16.4% of all retail shopping, down from 18.8% at the height of the pandemic.  CIOs say they could risk losing their customer base to antiquated in-store technology, although cost could be a barrier to making some of these investments."

    According to the Journal, "Tech leaders at companies like Kroger Co., Nordstrom Inc. and Halfords are considering what new technologies could improve the payment process for customers, offering the type of seamless experience in stores that customers are used to when shopping online … Kroger is testing a shopping cart equipped with cameras and sensors that track what a customer is buying so that individual items no longer have to be scanned at checkout, said senior vice president and CIO Yael Cosset.

    "Mr. Cosset also said he is looking at the possibility of installing checkouts in individual aisles so that if customers want to quickly grab an item they can check out right there."

    At Nordstrom, Dennis Bauer, the company's president of credit, loyalty and payment services, "said he has his eye on a nascent technology that would allow payment to be received via a mobile phone rather than a traditional payment terminal."

    KC's View:

    One of the most important things that retail leaders can focus on these days is eliminating friction for the customer - and for internal operations - wherever it exists.

    That means both in-store and online.  Retailers can focus on both areas at once.  And, quite frankly, should … because while there may be some backsliding in terms of e-commerce sales, that's probably situational and temporary, reflecting both a post-pandemic mindset and inflationary realities.  Neither of which are permanent.

    Published on: December 20, 2022

    The Wall Street Journal this morning reports that "dollar stores, boosted by demand for less expensive groceries and goods in underserved rural areas, are far outpacing other retailers in opening new stores.

    "Bricks-and-mortar shopping has rebounded strongly since the height of the pandemic, with many companies now adding new locations. Leading the pack are the two largest U.S. dollar-store chains, Dollar General Corp. and Dollar Tree Inc., which combined expect to have opened more than 1,300 net new stores by the end of the fiscal year that ends in late January, according to the companies … Dollar stores’ expansion shows their ability to thrive in far-flung areas that are too sparsely populated to attract other major retail chains, according to retail and real-estate analysts. Dollar stores are able to bring national buying power to places where the cost of labor and operations is lower than more urban and suburban areas."

    And, some context from the Journal piece:

    "The growth of dollar stores has been significant over the past two decades. Dollar General now has roughly 18,800 stores across the U.S., compared with 5,000 in 2001, according to Coresight Research. Dollar Tree acquired Family Dollar Stores Inc. in 2015, and has since added more than 2,400 locations for a current total of more than 16,000.

    High inflation has increased the appeal of dollar stores’ relatively low prices. But the expansion of the sector is rooted in structural changes in U.S. shopping habits that predate the current economic cycle, according to John Mercer, head of global research at Coresight. Surveys have shown that members of the millennial and Gen Z generations are more price-sensitive and tend to look for savings on retail and household goods in favor of spending more on services and experience-based purchases, he said."

    KC's View:

    The growth of the dollar store format, and its perfect positioning at a moment of inflation and recession concerns, means that it may be the biggest threat to many conventional stores - especially those without a definitive and differentiated value proposition and brand image.

    I do find myself wondering, though … would it have made more sense for Kroger to acquire a dollar store chain rather than Albertsons?  Would such a move been more additive in terms of depth, and not just breadth?  

    Published on: December 20, 2022

    Amazon and Google-owned YouTube reportedly are the last players standing in the negotiations to gain the rights to NFL Sunday Ticket.

    According to The Verge, "Both companies have reportedly placed bids on Sunday Ticket and have already made forays into live sports, with Amazon Prime Video streaming Thursday Night Football and YouTube TV carrying a number of sports networks."

    Apple reportedly has pulled out of the competition "because it doesn’t 'see the logic'" of spending that kind of money;  reports suggest that Disney-owned ESPN may or may not still be in the hunt.

    The story notes that "DirecTV has owned the rights to NFL Sunday Ticket for nearly three decades, but these rights will expire at the end of this football season."  The Athletic has reported that "the NFL was asking for more than $2 billion per year for Sunday Ticket rights, a price that was at least $500 million more than what DirecTV had been paying to air Sunday games."

    KC's View:

    Amazon may be retrenching and rightsizing, but that doesn't mean it isn't spending money that it sees will advance its goal of inextricably intertwined itself in every aspect of our lives.

    Published on: December 20, 2022

    •  From the Wall Street Journal this morning:

    "Amazon.com Inc. agreed to settle two European Union antitrust cases related to allegations about its treatment of third-party sellers on its platform, ending some of the bloc’s most advanced cases targeting a U.S. tech company. 

    "The online retailer won’t pay a fine as part of the settlement, something it first proposed in July, but it will be forced for up to seven years to adhere to commitments to change certain business practices that EU regulators had alleged were harmful to third-party sellers on its platform. 

    "As part of the deal, Amazon is committing to give third-party sellers that use Amazon an equal shot at being selected as the default option for the buttons in Amazon’s so-called Buy Box and to qualify for its Prime shipping program. The Buy Box contains the 'Add to basket' and 'Buy now' buttons on the Amazon website. The company will also abstain from using nonpublic data about sellers on its marketplace in order to compete against them."


    •  The Wall Street Journal reports that the European Union has charged Facebook parent company Meta Platforms "with antitrust violations for allegedly distorting competition by tying its online classified ad service to its social network.

    "The European Commission, the bloc’s antitrust enforcer, on Monday issued a charge sheet against Meta that said the U.S. tech company automatically gives Facebook users access to its Marketplace service, potentially pushing aside competitors. The commission said it is also concerned that Meta imposes unfair conditions on competing for online advertising services through its terms and conditions.

    "Meta will have an opportunity to argue its case before the commission makes a final decision. If the commission concludes the company breached antitrust rules, Meta could face a fine of up to 10% of its global annual revenue."

    Published on: December 20, 2022

    •  From Bloomberg:

    "CVS and Walgreens, two of the largest US pharmacy chains, are limiting purchases of children’s pain-relief medicines amid constrained supplies and high demand.

    "CVS is restricting shoppers to two products each for in-store and online purchases. Walgreens is limiting online orders to six products and isn’t setting limits for in-store purchases. Walmart isn’t placing any purchase limits, while Kroger said it is asking shoppers to limit purchases to two kids pain medicine products. Rite Aid isn’t limiting purchases."

    The story notes that "pediatric medicines containing acetaminophen and ibuprofen, which relieve pain and reduce fever, have been hard to come by across the United States and Canada since at least October as respiratory viruses spread. Rates of hospitalization for respiratory syncytial virus, or RSV, and influenza have reached heights not seen in recent years. The drugs don’t kill the viruses, but they do relieve symptoms."


    •  The Oregonian reports that "gas-powered cars, light-duty trucks and SUVs are on their way out in Oregon.

    "Policymakers for the Oregon Department of Environmental Quality on Monday approved a rule that bans the sale of new gasoline-powered passenger vehicles in Oregon by 2035.

    "The effort comes as Oregon aims to cut climate-warming emissions by 50% by 2035 and by 90% by 2050. The transportation sector accounts for almost 40 percent of greenhouse gas emissions in Oregon and is the biggest source of pollution in the U.S.

    "The new rule, based on vehicle emission standards adopted by California in August, requires car manufacturers to sell a certain percentage of zero-emission vehicles – electric cars, plug-in hybrid electric vehicles and hydrogen fuel cell vehicles – as part of their total sales, starting with 35 percent in 2026 and increasing to 100 percent by 2035."

    The story points out that "the ban on gas cars does not affect cars already on the road and does not require Oregonians to stop buying gas-powered vehicles. Used gas-powered cars will continue to be available for sale within the state. Customers who want a new car that runs on gasoline will have to shop out of state.

    "But more than a dozen states also are looking to follow suit. Oregon will be the third state to adopt the standard. Vermont and Washington just adopted a similar standard. The Clean Air Act allows Oregon and other states to either follow federal vehicle emission standards or align with California’s more stringent rules."

    Published on: December 20, 2022

    Got the following email from an MNB reader:

    I spent over 35 years of my career selling retailer brand and manufacturer's brand products simultaneously to almost every retailer in North American with products across the store.  There are no absolutes in the business, some retailers/wholesalers demand national brand quality in their private brand products and test them regularly to ensure that is the case, while others might be willing to compromise for the right costs on some items.  There are brands that cannot be duplicated due to innovation, unique processing equipment or unique spice blends in the taste but if they are popular brands, you can be assured that a private brand manufacturer is trying very hard to duplicate it due to retailer demand. Retailers now have the scale to support retailer brand product innovation and to give manufacturers the volume needed to buy the same equipment that national brand manufacturers have.

    A little known fact is that  national brand quality can be a moving target and in many instances, products with the same ingredients, run on the same equipment can come out with slight variations in color taste and texture that are within an acceptable range.  It can also be difficult to make the exact products in different production plants, even with the same formula and ingredients due to local water and equipment set ups.  National brands constantly look to "value engineer" products and your favorite item can be very different when comparing samples over a long period of production runs as incremental changes in ingredients to save costs can create surprising differences.

    A consistent finding is that there are two distinct consumers with some buying mostly national brand products and others buying mostly private brand products in their shopping cart.   There is not much switching once a consumer has determined which product meets their needs for a given category.  When I have supplied the leading brand as well as the retailer brand in categories at the same time,  the  sales data backs this up across several different categories over long periods of time.  If low cost was the only factor, retailer brands would have more than the current low 20% market share, because surveys show that over 70% of shoppers buy retailer brand products, and if perceived higher quality was the only factor, then national brands would have more than their current share.  It is no different than someone who is a Cadillac buyer probably does not start off looking in the Chevrolet dealer and the Chevy Malibu shopper doesn't go to the Cadillac show room.  But a Cadillac buyer might go to the Chevy dealer for a pickup truck even though Cadillac may offer trucks.  The value proposition for each is derived from different factors and the factors are hard to change.

    We have such a large, diverse population that no one product or type of product satisfies everyone.  The successful retailer understands the make up of the population that shops their store and is able to merchandise a mix of retailer brands and manufacturer brands to meet the value needs of many different people at the same time.

    Published on: December 20, 2022

    In Monday Night Football, the Green Bay Packers beat the Los Angeles Rams 24-12.