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    Published on: January 12, 2023

    Just before the holidays, MNB had a story about how Dollar General is helping to finance a new Blair, Nebraska, distribution center by charging vendors "10 percent of the estimated cost of purchases required to fully stock the new DC to support regular shipments to the assigned store base."  I found this troubling on some levels - a classic case of a retailer making money on the buy, not the sell - and MNB readers suggested that this was just the tip of the iceberg.

    I wanted to know more … and so I reached out to David Friedler, president and managing partner of Simpactful, who spent a quarter century in the CPG business, to get an accurate read on the problem, and a sense of whether there is a fix for it (or even should be).

    I hope you enjoy my conversation with David Friedler.

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

    You can reach David Friedler of Simpactful at

    Published on: January 12, 2023

    The New York Times reports that "a federal labor official on Wednesday rejected Amazon’s attempt to overturn a union victory at a warehouse on Staten Island, removing a key obstacle to contract negotiations between the union and the company.

    "The official, a regional director of the National Labor Relations Board, found that there was a lack of evidence to support Amazon’s claim of election improprieties and that its objections to the election should be overruled.

    "The decision was widely expected after a labor board hearing officer recommended in September that the company’s objections be set aside. Amazon, which argued that the election was unfair because of improper conduct by both the labor board and the union, said in a statement that it knew the regional director was unlikely to rule against the agency."

    Amazon has said it plans to appeal the decision to the national NLRB office.  CEO Andy Jassy also has said that the fight is “far from over," and that it "has a real chance to end up in federal courts."

    KC's View:

    I suppose that Amazon feels that it cannot let this go, that it has to exhaust every alternative to prevent unions from getting any sort of foothold in the company.  But I cannot help but feel that all this effort is counter-productive, that the company would be better served by spending all this time, money and effort addressing the issues that are led some workers to consider unionization.

    Published on: January 12, 2023

    From Axios this morning:

    "U.S. consumers got a reprieve from soaring costs in December: the Consumer Price Index declined on a monthly basis, the first drop since last summer as falling prices for items including gasoline and used cars dragged the overall index down."

    According to the story, "The hot inflation that persisted through much of last year continues to show signs of receding — offering at least some relief for shoppers, the White House and the Federal Reserve, though some underlying inflation pressure remains … The index, which captures price changes across a basket of consumer goods and services, fell 0.1%, following an increase by the same amount in November. Over the past 12 months ending in December, the index is up 6.5%, falling from 7.1% through November."

    Published on: January 12, 2023

    Actor Ryan Reynolds, who has shown an uncanny knack for mining current events to create advertising for the various brands in which he has invested, has done it again - he has released a new commercial for mobile network Mint Mobile in which the copy was written by ChatGPT, an AI tool that generates text-based dialogue and simulates human conversation.

    As The Drum explains, ChatGPT is "being positioned as a tool that could potentially revolutionize (or at least complement) a wide variety of conversation- and text-based tasks, including creating marketing copy, translating one language to another, fielding customer service questions and even participating in therapy."

    Reynolds instructed ChatGPT to: “Write a commercial for Mint Mobile in the voice of Ryan Reynolds. Use a joke, a curse word, and let people know that Mint’s holiday promo is still going, even after the big wireless companies have ended theirs.”

    The results, he says, are “mildly terrifying, but compelling.”  

    Note:   There is a curse word in the ad, so it may be NSFW.

    Published on: January 12, 2023

    The Atlantic has a piece about the growth of “buy now, pay later” programs - "from 2019 to 2021, the total value of buy-now, pay-later (or BNPL) loans originated in the United States grew more than 1,000 percent, from $2 billion to $24.2 billion. That’s still a small fraction of the amount charged to credit cards, but the fast adoption of BNPL points to its mainstream appeal. The widespread embrace of this kind of lending system says a lot about Americans’ relationship to debt - particularly among the younger borrowers who made BNPL popular (about half of BNPL users are 33 or under)."

    Many of the young people who have embraced BNPL, the story says, do not have credit cards and do not want to accumulate credit card debt.  Marco Di Maggio, an economist at Harvard, tells The Atlantic that "Gen Z was skeptical of credit cards, possibly because many of them had seen their parents sink into debt. Following the ’08 financial crisis, personal debt became a public bogeyman."

    BNPL, the story says, has become popular in part because of social media - Instagram and TikTok have become major sources of promotion of various BNPL programs.  "John Liang, a TikTok influencer with 2.1 million followers, presents the decision to use BNPL as one of pure reason. Standing in front of a green-screened Apple Store, Liang explains that by not paying the total price for a product upfront, he can invest the remainder of his money."

    Di Maggio, on the other hand, suggests this argument is specious:   "He said it made little sense economically and psychologically. He pointed out that investments don’t typically yield appreciable returns over just six weeks. And even if they did, most consumers who find an extra $20 or so in their pocket don’t think to buy stocks or bonds with it - they spend it on something else. A recent study he co-wrote supports this notion, finding that BNPL use causes a permanent increase in total spending of about $60 a week, stretching the average household retail budget 30 percent. Another study found that, on paper, people who borrow from these financial-technology firms look as creditworthy as their conventional-banking counterparts, but 'after they get the loan, they are much more likely to be delinquent'."

    According to the story, "Many financial-technology firms frame their mission as one of inclusion - they say they’re building a bigger tent for America’s un- and underbanked, which include gig workers and young people with poor credit histories. Klarna, for instance, recently launched a 'creator platform' to match merchants with influencers who have access to their target audiences. But because BNPL providers aren’t subject to the same scrutiny as banks (most of them engage in forms of lending not explicitly covered by the Truth in Lending or Dodd-Frank Acts), consumer protections are scant. BNPL programs increase the likelihood of borrowers dipping into their savings and incurring overdraft and other fees."

    KC's View:

    At least at this level, debt is debt.  The Atlantic argues, "As familiar as Americans are with the concept of credit, many of us, upon encountering a sandwich that can be financed in four easy payments of $3.49, might think: Yikes, we’re in trouble."

    I'd agree.  Going down this road just means that eventually you're going to owe your soul to the company store.  

    I wonder if it makes sense for retailers to provide access to financial literacy classes for shoppers, maybe by working with local community colleges.  Consumers kept out of debt may end up being better and more prosperous long-term shoppers.

    Published on: January 12, 2023

    The Wall Street Journal reports that "sandwich chain Subway has retained advisers to explore a sale of the closely held company, according to people familiar with the situation.

    "The process, which is in the early stages, is expected to attract potential corporate buyers and private-equity firms, and could value Subway at more than $10 billion, the people said. Still, it is possible there won’t be a sale or other deal."

    Subway is not officially commenting on the speculation.

    According to the Journal, "Subway’s approximately 21,000 U.S. locations did $9.4 billion in sales in 2021, up 13% from the year prior as the chain recovered from the pandemic and operational improvements boosted sales, according to industry research firm Technomic. The company had around 37,000 stores around the world as of 2021 and was the biggest restaurant chain by U.S. locations."

    In addition, the story says, "A deal for Subway would be a bright spot for M&A, which has been lackluster as market volatility and fears of a recession take their toll. Deal volume dropped by 41% in the U.S. last year to $1.5 trillion, according to Dealogic. The retail sector has been particularly challenged, as consumers change their spending habits following the pandemic."

    KC's View:

    Subway has faced operational issues over the past few years, but to me there is no issue more damning than the fact that the company is having trouble convincing people that its tuna fish sandwich are made with real tuna.

    Published on: January 12, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  GeekWire reports that "Amazon is closing an Amazon Fresh Pickup location in Seattle’s Ballard neighborhood, signaling another move by the tech giant to pull back on brick-and-mortar operations."

    The location is one of two that Amazon opened back in 2017 - the other was in the parking lot of Starbucks headquarters in the SoDo neighborhood -  in an effort to make it easier for shoppers to pick up online orders.

    I'm not sure it is fair to suggest that this reflects a move away from bricks-and-mortar.  In fact, Amazon has far more physical locations now than it did when it opened these, with far more options for shoppers.  It strikes me as more likely that these two operations were seen as redundant, and likely were little used.

    •  The Information reports that "Twitter’s ad business is not recovering.

    "Clients of WPP-owned GroupM, the world’s largest ad-buying firm, have cut their spending on Twitter by between 40% and 50% since Elon Musk took control of the company in late October, according to people familiar with the matter. Standard Media Index, an ad industry firm that tracks spending by nearly all national advertisers, says it is seeing a smaller amount of forward bookings for Twitter for this month and February compared to past years.

    "Meanwhile, there are signs that Elon Musk’s cost cutting is undermining Twitter’s ability to turn around its ad business, while the company’s outreach to marketers is further alienating ad executives. Last month, for instance, ad executives meeting with Twitter ad sales representatives were told they had to become comfortable with Musk’s unpredictability and uncertainty, according to two people with direct knowledge of the conversations. But controversy and uncertainty are anathema to many big advertisers, which prefer predictability, including knowing where their ads run and what type of content they’ll appear next to. Asking advertisers to radically change their behavior is simply not a viable option, according to ad executives. The argument from Twitter's ad executives failed to persuade marketers to resume advertising."

    No surprise here.  This is what happens when you hand management of a company like Twitter to someone with the emotional maturity and impulse control of a third grader on a sugar high.

    Published on: January 12, 2023

    •  USA Today reports that Bed Bath & Beyond plans to close 62 stores in addition to the 58 previously announced closures, bring the total number of stores being shuttered to 120.

    According to the piece, "The company said it was on track to cut $500 million in costs in its third-quarter fiscal report, which revealed a net sales decline of 33% to $1.26 billion over the prior year on $393 million in losses."  The company also reportedly is considering filing for bankruptcy protection.