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    Published on: January 17, 2023

    Today I am reporting in from the Barclay Center in Brooklyn, New York, where I went not just to see a Brooklyn Nets-Oklahoma City Thunder basketball game, but to check out a number of checkout-free stores using Zippin technology.  In addition to what appears to be strong consumer acceptance of the concept, I think these stores are winners in terms of their ability to deliver on what appears to be the Zippin go-to-market strategy.  And, their ability to offer better than 98 percent checkout accuracy, with vastly reduced shrink, means that they offer strong operational advantages as well.

    One other reason that I was looking forward to seeing these stores - Zippin will be part of the technology track that I am curating at the National Grocers Association (NGA) Show in Las Vegas next month, and I wanted to see the technology in action.   I hope you'll join us for what I think is going to be fascinating focus on relevant and accessible technology innovation.

    Published on: January 17, 2023

    by Kevin Coupe

    I've been interested to read a couple of pieces lately regarding an issue about which I reported less than two weeks ago - a move by the Federal Trade Commission (FTC) to ban non-compete agreements between companies and individuals.

    The key arguments against non-competes are two - one is that they depress wages, and the other is that they depress innovation.  Neither is good for the American economy.  And I don't think I p[aid enough attention to the subject in my original commentary.

    Axios writes that non-compete clauses, usually characterized as "a tool created to retain top talent," has over time "evolved into an abusive mechanism that covers around one in five American workers, including some that earn minimum wage.  Its proposed ban would exempt any seller with at least a 25% ownership stake in the acquired asset, and also would be retroactive."

    Evan Starr, an economist at the University of Maryland who has studied the impact of non-compete clauses, tells The New Yorker that the clauses "are found in all corners of the labor market. They tend to cluster in high-skilled, high-wage jobs. Executives are the most likely to sign them - at a rate of like sixty to eighty per cent, depending on the studies. But they also cover a ton of low-wage workers. One survey that I ran in 2014 found that the modal worker bound by a non-compete agreement is actually an hourly-paid worker who makes a median wage of fourteen dollars an hour. And that’s because hourly-paid workers actually comprise about two-thirds of the U.S. workforce. So, even though you might hear about these more frequently in executive non-compete cases, they’re actually most commonly found among average, middle-class Americans."

    Scott Galloway, the media personality/business professor/serial entrepreneur-investor, writes that "noncompete clauses are what firms use to sequester your human capital from competitors. When a new employee signs a noncompete with, say, Johnson & Johnson, they agree that when their employment ends, they won’t work at another pharmaceutical company for a designated period — usually one to two years. If you’re familiar with noncompetes, you likely associate them with technology jobs, where employers want to protect valuable intellectual property. And that’s the defense most often offered for the restrictions."

    Galloway goes on:  "The irony of noncompetes is they only serve to dampen growth. One of the few places where they’re banned is also home to the world’s most innovative tech economy: California. Job-hopping and seeding new acorns have been part of Silicon Valley since the beginning. In 1994 a Berkeley economist theorized that California’s ban on noncompetes was one of the main reasons Silicon Valley existed at all, and in 2005, economists at the Federal Reserve put forward statistical evidence supporting the theory. Apple, Disney, Google, Intel, Meta, Netflix, Oracle, and Tesla were able to succeed without limiting the options of their employees."

    Galloway writes that "the FTC estimates that noncompetes reduce employment opportunities for 30 million people and suppress wages by $300 billion per year. That’s far more than the total value of property stolen outright every year. Multiple studies also show that noncompetes reduce entrepreneurship and business formation. Which makes sense — it’s difficult to start a business when talent pools are not accessible or allocated to their best use. Downstream, the lack of competition leads to entrenchment, which eventually results in higher prices for consumers — as one study found has occurred in health care. Everybody loses. Except, of course, the incumbent’s shareholders."

    Starr goes on:  "Non-compete agreements are such a blunt tool to use when more narrowly tailored tools can suffice. For example, firms have nondisclosure agreements, which can prohibit workers from sharing information. They have trade-secret laws. The non-compete agreement is the most blunt of all of these, because it protects things by prohibiting mobility in the first place. It's also why firms might value them, because they do protect in such a blunt way."

    I found these arguments to be Eye-Openers, illuminating the issue in a way that I did not understand when I first read the stories about the FTC's moves.

    Full disclosure - I once was threatened with a lawsuit over a non-compete agreement.  I got lucky - I actually had been laid off by the company that was suing me, and that company had gone out of business.  My lawyer simply explained to them that they couldn't have it both ways - they couldn't end my employment at an entity that didn't exist anymore and then say I couldn't start up my own business.  (I'm glad it worked out that way - it was 21+ years ago, and the business I started was MorningNewsBeat.)

    I can understand that in certain cases, some protections are needed for companies.  But non-disclosure agreements ought to be enough in the vast majority of cases.  There is absolutely no reason for the vast majority of non-compete agreements to exist or be enforced … and it makes sense to me for the FTC to try to ban them.

    Published on: January 17, 2023

    Axios reports on the annual Trust Barometer compiled by the Edelman pubic relations agency, suggesting that when it comes to competence and ethics, businesses are more highly rated than government and elected officials.

    While people in the business community inevitably will see this as a good thing, it also creates new pressures on business leaders "to take the lead on a wide range of societal issues that government is no longer trusted to manage," with 85 percent of respondents saying they expect CEOs "to take a public stand and take business action on key issues," playing a role "in strengthening our social fabric … "CEOs are expected to use resources to hold divisive forces accountable," the report says.  "72 percent want business to defend facts and expose questionable science being used to justify bad social policy .... 64 percent want companies to support politicians and media outlets that build consensus and cooperation."

    According to the story, "Business holds a 54-point lead over government in competence — and 30 points in ethics."

    KC's View:

    Time for a little context … and a cautionary note, I think.

    First of all, let's be clear - Edelman is a public relations agency.  If you go on its website, it is clear that the vast majority of its clients are, in fact, businesses … and Edelman's job is to make them seem trustworthy and ethical.   If business's numbers are not better than governments' then it means Edelman isn't doing its job.  (Companies don't usually issue reports questioning their own competence and expertise.). By the way, Edelman's website also suggests that the campaigns it is promoting are very public interest-centric, which I think is smart;  it reinforces the message of the Trust Barometer.

    To be sure, it helps that governments and elected officials these days are making it easier for businesses to seem more ethical and competent.  The bar ain't high.

    I also think that some of the suggestions Edelman is making are problematic, depending on the retailer and the circumstances.  It's nice to suggest that CEOs should "take a public stand and take business action on key issues … strengthening our social fabric," but there are a lot of key issues out there on which any kind of stand might not strengthen the social fabric, at least not among certain demographics.  CEOs who take stands have to do so with the understanding that they could be alienating a percentage of their customer base.  This is easier to accomplish when the issues and positions are part of a company's DNA (think Ben & Jerry's, Patagonia), as opposed to being appropriated at a later time.

    Make no mistake.  I like and trust businesses that take stands, and I want to patronize businesses that seem to support causes and positions with which I agree.  But I also am less likely to patronize companies that take positions with which I disagree - because those stands make them, on my mind, untrustworthy.

    It isn't simple.   Though, I suppose the bottom line actually is pretty simple - that this is all easier to navigate if Edelman is your PR agency.

    Published on: January 17, 2023

    Amazon-owned said last week that its online customers now will be able to return products ordered from its site at Amazon-owned Whole Foods stores around the country, taking advantage of an infrastructure already being used for Amazon returns.

    According to the company, shoppers wanting to return Zappos purchases now will be able to access what is being called "Label Free Box Free Returns."  They can go to their Zappos account, and if the purchase qualifies, they can arrange to drop the item off at a local Whole Foods - the original shipping packaging is not necessary, though if the purchase was shoes, the original show box is required.

    KC's View:

    On the one hand, it makes absolute sense for Zappos to take advantage of an existing infrastructure to make returns even easier than they have been in the past.  But for Zappos to link itself in any visible way to Amazon is a departure for the company - it has always seemed to operate autonomously, and the distance has seemed to work for it.

    But maybe under new leadership, after the passing of founder Tony Hsieh, the decision has been reached to strengthen connections.  I just hope it doesn't get to the point where Amazon starts imposing demands on Zappos that don't serve its brand equity.

    Published on: January 17, 2023

    Barnes & Noble's public relations agency must be on the case - there have been two positive stories about the bookstore chain in the last few days…

    Fast Company has a piece about how Amazon, until recently a company beset by management missteps, tough competition from Amazon and cultural shifts that made its big box/category killer stores less essential to customers, now is opening new stores for the first time in years.

    An excerpt:

    "The chain’s new owners, Elliott Advisors, sought to turn the page by bringing in Daunt, the chief executive of U.K. book chain Waterstone (also owned by Elliott). Daunt, credited with pulling Waterstone back from bankruptcy’s brink, basically said he would use the same playbook, most notably giving more autonomy to individual stores to function more like local shops than cookie-cutter manifestations of a top-down corporate vision. The strategy, he said at the time, boiled down to 'running really nice bookshops.'

    "And this, at least by some accounts, is exactly what Daunt has done, and exactly why Barnes & Noble is now a book-culture hero. The most full-throated endorsement yet came from Ted Goia, author of the popular culture newsletter 'The Honest Broker:'  'This is James Daunt’s super power,' Goia declared. 'He loves books.'

    "Some other subplots have helped shape Barnes & Noble’s transformation. Daunt took over not long before the pandemic lockdowns kicked in, which obviously created profound challenges - but also opportunities. Autonomy notwithstanding, Daunt moved the entire chain away from its years of dabbling in a more gift-y and impulse-buy non-book product mix: more books, no more batteries. And it nixed deals with publishers to feature certain titles in exchange for a fee. The company also used the lockdown period to improve and update store designs. Daunt has been blunt about this, calling the stores 'boring,' 'a bit ugly,' and full of 'irrelevant' products."

    Fast Company goes on:  "Goia is surely correct that Barnes & Noble’s redoubled focus on, you know, books, has been crucial to its nascent potential turnaround. And it’s hard to resist his 'simple lesson' that love is the key to culture businesses:  'Creative fields like music and writing live and die based on creativity, not financial statements and branding deals'."

    And, from The Robin Report:

    "There is absolutely no reason for anyone to go to a bookstore today unless they are assured a compelling experience. The only way Barnes & Noble can avoid a Borders-like implosion is by offering a Starbuck’s café, book signings, education of some sort (how about how to write a novel), or other experiences that will cause the consumer to make an effort to visit.

    "Nobody can survive the disastrous fate that 'just selling stuff' assures, even on the internet. Because the exact same stuff, even new stuff, can be found and acquired instantaneously, anywhere, anytime, and for a lower price.Apple does not sell stuff, not even computers. They sell a highly experiential education first, and then it just so happens that they have the most innovative, beautifully designed, and cool digital devices in the world. And guess what, nobody even cares about the price. And guess what else, Apple is the fastest growing, most productive retailer in the entire history of global retailing."

    The conclusion:  "The customer is in charge and all generations of consumers want a reason to go to a store. If you’re a big box, it’s to solve a problem, for the value and the bonus of finding something as a personal reward. If you’re off-price, it’s the thrill of discovering a find. If you’re a department store, it’s the promise of the predictable at affordable price points. If it’s fast fashion , it’s the confidence that you will look like you know what you are doing trend-wise. If it’s a digital native gone physical, it’s allegiance to a tribe. If it’s a specialty store, it’s for a trusted curation. And if you’re a bookstore, it’s the potential of getting smarter, educating your children, escaping into a great story, and meeting like-minded friends in an environment that makes you feel good.

    "Whatever your model, if you just think of yourself as a retailer, and your place of business as a store or website, your offerings as transactions, and your pricing is only competitively valued, you will most certainly die."

    KC's View:

    So much applicable wisdom in here.

    There is Barnes & Noble's embrace of book culture, which ought to be mirrored by food retailers, which ought to embrace food culture.  There's the elimination of "deals with publishers to feature certain titles in exchange for a fee."  Yikes! 

    It is understand that all the action is on the front lines.

    And I want to repeat that last passage from The Robin Report:

    "Whatever your model, if you just think of yourself as a retailer, and your place of business as a store or website, your offerings as transactions, and your pricing is only competitively valued, you will most certainly die."

    This ties into something I've been writing here for a long time - that retailers have to be more than a source of product, but rather have to evolve into being a resource for information, inspiration, aspiration.  It is about connecting not just to people's wallets, but also their hearts, minds and stomachs.

    Published on: January 17, 2023

    •  The Seattle Times reports that a man named Cheddi Skeete is suing Amazon, charging that "he was denied promotions and ultimately fired in March after sharing concerns about the program and its crashes internally … almost a year since he was terminated as a program manager, Skeete is suing his former employer in King County Superior Court in Seattle. Through his attorneys, Skeete claims Amazon discriminated against him because he is a Black man and retaliated against him for raising safety concerns about the drone program."

    Skeete questioned the number of crashes taking place during testing as well as the lack of safety protocols created for the program.

    The Times writes:

    "Back in 2013, Amazon began touting its vision to use autonomous drones to deliver packages – up to 5 pounds – to customers’ homes in less than half an hour. After more than two dozen prototypes, the team – Prime Air – began piloting deliveries in Lockeford, California, last year. 

    "As envisioned by Amazon, customers would place orders for Prime Air-eligible items. Drones would then fly to their backyards, hover, release the package and rise back up. 

    "In April 2022, a Bloomberg investigation found the program was beset by technical challenges, high turnover and safety concerns, according to internal documents, government reports and interviews with 13 current and former employees, including Skeete. A crash that June prompted federal regulators to question the drone’s airworthiness, Bloomberg wrote."

    Published on: January 17, 2023

    •  The National Association of Convenience Stores (NACS) and NielsenIQ have released their third global convenience retailing industry report providing industry-leading data, macro trends and analysis for 35 countries in North America, Europe, Asia-Pacific, and Central and South America.  Among the findings:

    All but two countries saw gains in convenience store sales during Q3 2022 versus Q3 2021 … Q3 2022 growth rates for many countries nearly doubled or tripled the rates from Q2 2022 … Inflation continues to be a major issue for stores around the world but is highly regionalized in its overall impact on sales.

    •  The New York Times writes that "Bed Bath & Beyond, the struggling home goods retailer, is in talks with the private equity firm Sycamore Partners to sell assets, including its Buy Buy Baby stores, as part of a possible bankruptcy process, people familiar with the matter said. The retailer is also in talks with other suitors about possible transactions … Bed Bath & Beyond said this month that it was looking for fresh funds after a disappointing holiday season, including a sale of itself in pieces or as a whole. Buy Buy Baby remains a crown jewel for the retailer, but it might be difficult to sell the business as a stand-alone unit, because creditors might resist losing what is arguably the company’s most valuable entity. One way to get around that is for potential buyers to acquire the entire company and close a number of Bed Bath & Beyond locations, one of the sources said.

    Published on: January 17, 2023

    Responding to last week's In Conversation piece with David Friedler, president and managing partner of Simpactful, about the current state of vendor fees and deductions, one MNB reader wrote:

    Congratulations for having this conversation about vendor fees and deductions.  Over the years, I felt that you were ALWAYS siding with the trade because you never addressed this issue from the vendor viewpoint.

    Maybe you should bring back your Friday Happy Hour just to discuss this with the vendor community.  Happy Hour might last for days if you had this as a topic.

    As long as I don't have to supply all the alcohol.  Might get expensive.

    And, from another reader:

    Great topic today as my COO and I were discussing placement and charge backs yesterday at length.

    Brief: I am the National sales guy that sells to retail accounts, many through UNFI and KeHE. I am also on a couple IWG groups for the SFA. I have been lucky to work on a few focus groups with new and existing manufacturers. My past 3 positions have been startups, and I love it!

    What retailers and distributors are doing is extortion. Smaller and new manufacturers are unable to compete after the fees are calculated, we have seen many get put out of business from these deductions. And even we are looking at different channels. Manufacturers think they are ready for retail.

    2% Shrink fee.  1.5% marketing fee.  Free fills, just taken and not approved.  E comm fees.  Anything ordered at store and then not wanted they credit back.  And then they have a set fee ($60) to bill you back for a $4 item.

    I had a proposal come in from Shaw’s (your area) yesterday, $15,000 per SKU which is $112 per store or at my cost is almost 6 cases of product. And there is no guarantee that they will keep it on the shelf for a year. Do they want to make money on the buy or the sell!

    I think you answered your own question.

    Last week I took note of a Food & Wine piece about black limes, a product that, to be honest, I'd never heard of before.  I commented:

    I bring this up because to me, it illustrates an area in which retailers can play a larger role.  I'll bet that there are a lot of people out there who never have heard of black limes, and might want to add them to their kitchen repertoire.  Educating people about their use is one way to sell more product, and create a differential advantage when compared to less ambitious retailers.

    MNB reader Deanna Haney responded:

    Yep.  Never heard of them.  And I love your take on the retailer increasing sales (and loyalty, by the way) by educating consumers.

    It seems to me that this is an example of something Whole Foods did/does?  I’m not sure and I haven’t lived near a Whole Foods in several years; so haven’t been in one recently.

    Thanks for your constant insight.

    On Friday, MNB shared a new short documentary from Hope Depot entitled "Hope Builds," which details the impact of three major natural disasters - Hurricane Andrew in 1992, a tornado that tore through Joplin, Missouri in 2011, and a California wildfire in 2018 - on communities, and how the retailer enabled both disaster preparedness and recovery efforts.

    I commented:

    The point of the video, it seems to me, is that Home Depot wants to be seen not in terms of the nails and wood and tools it sells, but in how those things come together, in the hands of caring people, to serve communities in their time of dire need.

    It is an approach that food retailers should note - the meat and the pasta and the veggies and all the other items they sell should not be seen in a vacuum, but rather as components in a larger effort for people to feed and nurture themselves and their families.  To see them in a vacuum ignores the bigger picture, and misses the nobility of what food retailers do every day.

    One MNB reader wrote:

    Thank you for sharing this video.  My family lost homes in the Camp Fire in Paradise in 2018, and I watched from a distance.  We sent lots of socks, toothbrushes, blankets, etc. but still felt like we couldn’t possibly help with a disaster of this scale.  It’s companies like Home Depot, who have implemented policies over the past couple of decades that make it possible for these communities to get back on their feet.  I’m shocked and amazed that Paradise is up and running as quickly as it is, but not shocked at the character of the people who can do amazing things with a little help.  Being bigger than what you sell can go a long way. 

    Last week we turned an Eye-Opener segment over to MNB reader Paul Martinez, who wrote about a WinCo endcap devoted to merchandise sold by Claire's, better known as a mall retailer selling jewelry for girls.

    I commented that I thought this was smart for WinCo, which suddenly may show some fresh appeal to a customer base that has not traditionally found it fun or productive to go to supermarkets.

    Which prompted the following email:

    My name is Julie Scorsatto and I have had the privilege of meeting you and hearing you speak at GMDC under the leadership of Patrick Spear.  

    The article you posted this morning regarding Claire's and WinCo is near and dear to my heart and I appreciate the post!  I am the National Account Manager for WinCo at Claire's and the checklane project is something I helped launch last year.  Given WinCo's smaller store count and regionality, it's awesome to see them get mentioned in the press.

    Hope to see you at upcoming events as the world opens up a little more everyday.

    Last week we took note of a new survey suggesting that more than half of respondents said that in the past 12 months, they've actually walked out of stores where they intended to purchase items because the lines were too long.   Of those, the survey says, "84 percent said they have done so at least twice in the last year alone" and "80 percent of shoppers said since the pandemic they have had to stand in line more often when shopping in a retail store."  It is a phenomenon retailers are aware of - 92 percent of retailers admitted "that wait times at busy periods have had a negative impact on their companies’ revenues."

    MNB reader Rich Heiland reacted:

    I have walked out of our local Kohl's for this very reason. The last time I was in the store I got one or two things. The store has registers on both sides but only one side was open and that had two clerks. The line was probably 20-plus people deep and most had multiple items. I left. But before I did I overheard several conversations from people who had a good bit of merchandise and were fuming. One woman said "I wonder what they'd do if we all just dumped this stuff on the floor and walked out."

    I am not faulting the clerks, who were doing the best they could. My old adage in business, during tough times, always was "you can't slash your way to success." 

    By the way, went home and got what I needed on Amazon Prime. Tried to contribute to local jobs but there is a limit...

    Responding to another story, MNB reader Mike Moon wrote:

    I can get on board with a gathering area in the store for seniors (we used to call them delis), but I'm not sure an intentionally slow checkout lane would be successful in America.

    We always told our cashiers to be friendly, smile, and say hello, but always asked them to keep the conversation brief. I have seen people stand in the back of the store and talk to their neighbor for an hour, but when they get to the checkout, they want out NOW. Getting in a lane that has a chatty cashier just (ticks) them off.

    MNB fave Glen Terbeek chimed in:

    In today’s world, the retailer needs to compete on values above and  beyond distribution values.  Social values, ie "Chat Checkout" are just one possibility,  Solutions, information, ideas are some other potential values, defined at the local market level, is how to compete for the shopping experience in the future.   Competing on price for standard items alone is just the cost of being in business in todays saturated marketplace.

    One MNB reader double-doubled down on another story:

    On In-N-Out's expansion eastward: As a Californian, I worry this will accelerate our out-migration trends. All those Californians who have refused to move East because they couldn't get a good fast food hamburger will have no reason to stay. Overreaction? I don't think so.  Look at how many Californians have moved to Texas just since In-N-Out starting opening up there. Not a coincidence.

    Ok, maybe I'm being facetious. Maybe.

    And finally, this email from MNB reader Dave Jones:

    Well done securing Greg McNiff to discuss WAFC and education. He is a great leader and one of the most vocal advocates for the program and the education of the next multiple generations of talent. My previous company supported the program for 40+ years, a very worthwhile investment for any company in our Industry.

    Published on: January 17, 2023

    In the National Football League Wild Card weekend…

    Seattle Seahawks 23, San Francisco 49ers 41

    Los Angeles Chargers 30, Jacksonville Jaguars 31

    Miami Dolphins 31, Buffalo Bills 34

    New York Giants 31, Minnesota Vikings 24

    Baltimore Ravens 17, Cincinnati Bengals 24

    Dallas Cowboys 31, Tampa Bay Buccaneers 14