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    Published on: February 8, 2023

    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 who led the team that developed 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 start off by discussing what some perceive as a shift in priorities at Amazon, away from customer obsession and toward cost reduction, operational issues and right-sizing.  The question is a) whether such a shift actually is taking place, and b) whether Amazon can continue to innovate in such an environment.  From there, they discuss Amazon's approach to physical retail, the future of checkout-free shopping, and then move on to the bottom line - what other retailers can learn from Amazon's responses to its current travails.

    If you'd like to download the Innovation Conversation as an audio podcast, click below.

    Published on: February 8, 2023

    Axios reports that Microsoft yesterday laid out its plans to "add a more powerful version of the AI engine behind ChatGPT to both Bing and the Edge web browser.  Microsoft says it has tuned OpenAI's latest engine for search, and is using internally developed AI tools to improve standard Bing results."

    The calculus works this way - half of 210 billion daily search queries are going unanswered, and Microsoft believes that a version of ChatGPT can answer the other half, making its Bing search engine - which few people use, compared to Google - a stronger and revitalized competitor.  There's a lot of money at stake - Axios cites one estimate that "for every 1% of search market share Microsoft takes, $2 billion in annual ad dollars flow the company's way."

    Axios notes that Microsoft is improving on ChatGPT by "offering citations with its answers, allowing people to fact-check the AI-powered answers they receive. That could also make the shift in search results more palatable to the publishers whose information Bing is relying on."

    KC's View:

    I cannot even remember the last time I went on Bing, but when I went on this morning, this is what I found - it actually looks kind of cool, and it will be interesting to see how adding ChatGPT technology will improve the experience.

    Two things here.

    First, I think there is enormous potential here for retailers, who could use the technology as a sales and education tool in their stores.  Imagine being in the produce department, having a question, and being able to use this tech to ask questions about nutrition, recipes and the like.  To be clear, consumers won't need retailers to do this since the vast majority have smartphones.  But retailers would be wise to figure out ways to be part of the process, adding to the value of the retail or online experience.

    Second, this isn't all happening in a vacuum.  One has to imagine that Apple and Amazon and Meta and Google all are developing their own versions of ChatGPT, which could create a kind of space race as these companies look to accumulate market share in this segment.  All of which will give consumers and retailers more tools, as well as creating an environment in which business transparency will be at a premium - you won't be able to hide your decisions, motivations and actions.

    Tech seems to be a bit of a doldrums right now, but I think that developments like these have the potential to light a new kind of fire of enthusiasm and innovation. Retailers need to figure out how to engaged in the conversation.

    Published on: February 8, 2023

    Really good piece from the Los Angeles Times about the impact - social, cultural, infrastructural - of the pandemic-fueled e-commerce boom, which "accelerated the land grab" for warehouse space in California's Inland Empire.

    The area, the Times writes, has become "ever more hardscaped into the staging point for trains and trucks carrying goods from the ports of Los Angeles and Long Beach to the rest of the nation.  There are 170 million square feet of warehouses planned or under construction in the Inland Empire, according to a recent report by environmental groups. And despite fears of a recession, demand hasn’t ebbed."

    According to the story, "the rapid transformation of semi-rural areas into barrens of concrete tilt-up 'logistic parks' is encountering a backlash. Residents are questioning whether they want the region’s economy, health, traffic and general ambiance tied to a heavily polluting, low-wage industry that might one day pick up and leave as global trade routes shift.

    "Several Inland Empire cities, including Colton and Norco, have placed building moratoriums on warehouses, as has Pomona, which borders the region. Environmental groups are pushing Gov. Gavin Newsom to declare a state of emergency, hoping to keep new warehouses away from homes and schools, where heavy truck traffic can expose children to high levels of toxic diesel emissions that have been linked to respiratory illness."

    The politics of the situation are complicated, as a number of local officials say that the warehouse boom has had a number of benefits - an expanded tax base, jobs, the creation of affordable housing, and improvements to the area's infrastructure.  (To be fair, activist groups say that these politicians also are in favor of the donations they get to their campaigns.)  On the other side, some say that unregulated growth will have enormous and long-term negative impacts on the environment, public health, and local communities.

    Some context:  "The logistics industry has moved into a void left as higher-wage jobs in manufacturing, defense and aerospace disappeared, converting largely agricultural and vacant land into the hub of America’s retail economy. The industry added more jobs in the Inland Empire than in any other part of the state. In 2022, it created 24,400 jobs in the area; in 2021, it created 27,400, according to John Husing, an economic consultant who specializes in logistics in the Inland Empire. Median wage ranges from $18.57 an hour for warehouse workers to $24.93 for drivers, he said."  However, some "economists say many of those jobs don’t pay close to a living wage. The median hourly pay in the region is almost $5 below the California average, and turnover is high because of the grueling, nonstop work."

    KC's View:

    This is such a complicated issue.  There's no question that the logistics industry that has changed the landscape of the Inland Empire has brought jobs and some economic advantages, but those things come at a cost, largely to the agricultural entities that are being displaced and the middle-income folks who are seeing their communities falling under the shadow of enormous warehouses, breathing in the exhaust of a seemingly inexhaustible parade of diesel trucks.

    It isn't this simple, of course, but I tend to frame the discussion in my mind this way:  Would I want to live in one of the communities being forever changed by this hardscaping?  Would the leaders of the companies and the politicians who support them want to?  The answer to these questions is no … and in the same way that the golden rule ought to dictate our behavior toward each other, maybe it ought to be applied to how we treat our communities and neighborhoods.  Is it to much to say, I will treat every community as if it were my own?

    (BTW … whenever I see the term "Inland Empire," I cannot help but think of Jack Brown, who used those words so often when he served as the president-CEO-chairman of Stater Bros.  He didn't just define that company for decades, but in so many ways he seemed to define that region of California.  I also cannot help but wonder how many people don't know that name and don't remember him.  Maybe that's a function of getting old…)

    Published on: February 8, 2023

    •  Analytics company Jungle Scout is out with its 2023 State of the Amazon Seller Report, looking at third party marketers selling on Amazon.  Among the findings:  "89% of Amazon sellers are profitable, up from 85% a year ago, and despite concerns around inflation, 37% of sellers say their profits increased in 2022."

    In addition, the report says, "61% of Amazon sellers already sell on at least one other ecommerce platform, leading with eBay, Shopify, and Walmart. Still, 52% say they will expand to additional platforms in 2023 — up from 25% who said the same a year ago …

    41% of Amazon sellers use social media marketing to promote their products, up 15% from those who did so a year ago.  While Amazon sellers still favor Facebook and Instagram advertising (respectively, 67% and 49% of sellers who market on social media use these platforms), their popularity is down from a year ago … 31% of Amazon sellers using social media marketing use TikTok ads, up 65% year-over-year. These sellers’ use of YouTube and Snapchat advertising also grew 86% and 41%, respectively, demonstrating growing demand for video content."

    •  The Information reports that "Turkey-based fast-delivery firm Getir had preliminary talks late last year about merging with Flink, the Germany-based startup, in a sign that consolidation in the fast-delivery sector may have another round to go.

    "Flink came away from the discussions uninterested in pursuing a merger, said a person close to Flink. Instead, Flink, which last raised money at a valuation of $2.8 billion in late 2021, would rather raise a fresh round of capital, the person said."

    However, "the possibility of a Flink-Getir merger isn’t dead. Mubadala Investment Co., the United Arab Emirates sovereign wealth fund that is a shareholder in both companies, is encouraging discussions around a merger, according to two people familiar with the matter. Mubadala is a believer in consolidation in the fast delivery sector, one person said."

    Published on: February 8, 2023

    •  Kroger this week announced that it is working with indoor farm company Gotham Greens to bring "greenhouse-grown produce and fresh, plant-based foods to more customers across the country. Kroger customers can find Gotham Greens' produce in more than 300 stores today, with plans to expand to nearly 1,000 stores by the end of 2023, helping bring Kroger's commitment to fresh food for everyone to life. In addition to produce, the expansion of Gotham Greens' plant-based dips, cooking sauces and dressings will put the supplier in nearly 2,000 Kroger locations across the country."

    The announcement notes that "Kroger is focused on reducing climate impact by reducing food waste and is committed to achieving zero food waste to landfill company-wide by 2025. Since 2017, the company has embedded retail best practices to extend freshness and reduce waste in its operations, and Gotham Greens' planet-forward agricultural production methods support the grocer's mission to create a sustainable food system.

    "Gotham Greens' farming practices allow the brand to grow, harvest and deliver non-GMO, pesticide-free salad greens and herbs 365 days of the year. By using hydroponic growing systems in sunlight-powered greenhouses, Gotham Greens' farms use up to 95% less water and 97% less land compared to field-grown farming."

    •  Ahold Delhaize-owned The GIANT Company of Carlisle, Pennsylvania, said yesterday that "four electric vehicles will join its fleet serving the greater Philadelphia community. The electric vans will fulfill GIANT Direct customer deliveries while reducing the company’s environmental footprint, safeguarding nearly 9,000 gallons of gas each year … The electric vehicles are the first of its kind to join The GIANT Company’s 164 vehicle fleet and can travel 108 miles per charge. Their zero-tailpipe emission design combined with their avoidance of gasoline will prevent 171,963 pounds of greenhouse gas emissions annually. Over the next few years, The GIANT Company plans to introduce more all-electric vehicles to its fleet."

    •  The National Federation of Independent Business (NFIB) is out with its January jobs report, saying that "57% of owners reported hiring or trying to hire in January, up two points. Of those hiring or trying to hire, 91% of owners reported few or no qualified applicants for the positions they were trying to fill. Twenty-seven percent of owners reported few qualified applicants for their open positions and 25% reported none."

    The report goes on:  "Small business owners’ plans to fill open positions remain elevated, with a seasonally adjusted net 19% planning to create new jobs in the next three months, up two points from December but 13 points below its record-high reading of 32 reached in August 2021.

    "The percent of owners reporting labor quality as their top business operating problem remains elevated at 24%. Labor costs reported as the single most important problem to business owners increased two points to 10%, historically among the highest readings in over 49 years."

    Published on: February 8, 2023

    •  From the Dallas Morning News:

    "Walmart is hiring 500 people for new tech-focused jobs in its 730,000-square-foot automated grocery distribution center south of Dallas in Lancaster that will open this year.

    "The jobs pay $20 to $34 an hour and include asset protection, systems and maintenance roles, Walmart said. The automated facility will move more than two times the volume of a traditional distribution center, Walmart said, while improving accuracy, quality and speed.

    "The grocery operation will feed Walmart’s local stores. Next door is a 1.5-million-square foot online fulfillment center that isn’t open yet but will fill customer general merchandise orders. Both buildings are in the Dallas County Inland Port area and are scheduled to open later this fall."

    Published on: February 8, 2023

    Executive Suite is sponsored by Robin Russell Executive Search.

    •  The Western Association of Food Chains (WAFC) has named Andrea Dimond, most recently Head of Sales, Grocery West for Dreyer's Grand Ice Cream, to a new role of Senior Director of Educational Strategy & Development. 

    I thought it was interesting that in the announcement, WAFC noted that Dimond has a Master’s in Food Industry Leadership from the University of Southern California, and also is a graduate of the USC Food Industry Management (FIM) Program.  The food industry's connection to USC, much of it facilitated by WAFC, was at the core of a conversation that I had here with Stare Bros. COO Greg McNiff.

    Published on: February 8, 2023

    Yesterday we referenced a piece in The Street analyzing the proposed Kroger acquisition of Albertsons.  Essentially, it argued that even combined, the Kroger-Albertsons market cap is still far less than that of Amazon, Walmart and Costco.  The Street argues that "inherently, Kroger and Albertsons are small, local players in relation to Walmart, Amazon, and Costco. Merging -- as the two grocery chains are trying to do -- would give them more scale, more buying power, and a bigger network of stores to leverage delivery and loyalty programs against."  However, even merged, The Street suggests a combined Kroger-Albertsons entity "would still be at a major disadvantage to Amazon, Walmart, and Costco."

    I think this is precisely the argument that Kroger and Albertsons will make to the Federal Trade Commission (FTC), but it is not an argument that sat well with a number of MNB readers.

    One wrote:

    The Street's conclusion that a combined Albertsons-Kroger would still be a "small, local player" based on market cap vs Walmart, Amazon, and Costco is just silly.

    Kroger and Albertsons sell groceries in the United States, while the other three companies are multinational retailers of categories well beyond food. The US government will consider grocery market shares of the companies, finding, for instance that a combined Albertsons-Kroger is about 50% of Walmart's size in many food categories, which the government may not find to be too large, but certainly won't find to fit the definition of "small, local player."

    MNB face Glen Terbeek wrote:

    When I read the headline (Still a Small, Local Player) I hopefully thought they meant “focus on the local store and it’s shoppers”.  What a disappointment, the article was all about the old measures of financial size and buying power.

    Remember, shoppers only care about “their” store, not the size of the chain.  I know several "small, local player" independents that have wonderful shopper loyalty.  Larger size could enable a retailer to better focus on each store defined by its shoppers, if organized and measured accordingly.  In flat population growth, store saturated markets, winning the loyalty of each shopper is critically Important through locally focused stores. 

    Another MNB reader wrote:

    The justification for the Kroger-Albertsons merger always mentions increased  "buying power."

    Isn't that a tacit admission that they would be violating the Robinson-Patman Act - even to a greater extent than they likely now are?

    And would that not make their competitors less able to compete, potentially causing some of those to go out of business? 

    The result is a lessening of competition.  Everyone in the industry knows that buying power is more than the price you see on the invoices.

    And from another MNB reader:

    After years of competing with Kroger with a retailer with around 100 stores and nearly a billion in annual sales, I never, ever, considered Kroger a small, local player. Albertsons, albeit a third the size of Kroger is still large enough to command leverage with their brands and suppliers vis-a-vis true small local players, with 100 stores or less. Kroger was always able to buy better and defray fixed costs over more stores, very much like the bigger players mentioned in the article.  Consequently,  I think this merger is much more about expense reduction than price reduction, with the exception of Kroger being much better at price optimization than Albertsons.  After the smoke clears and the deal is done, don’t be shocked if not much changes from a shopper’s perspective.

    And, one more:

    Market capitalization is not an appropriate arbiter of market dominance - Walmart, Costco, and Amazon are not necessarily food-centric, which is how I’d characterize Kroger/Albertsons.

    I certainly would agree … the problem is that Kroger/Albertsons continue to justify the merger by comparing themselves to Walmart, Costco and Amazon…

    We also had a story yesterday about Albertsons announcing a new initiative, dubbed Sincerely Health, that it describes as a "digital health and wellness platform … designed to help improve lives by connecting, educating, encouraging and rewarding customers on their health and wellness journey so they can make informed choices regarding food, physical activity, sleep and mindfulness."

    I commented:

    In general, I applaud any initiative that tries to connect the dots between food and all the ways in which we're able to track our fitness and wellness.  Part of the problem that I think a lot of consumers have is that there is a ton of data, myriad ways to compile it, and yet some level of confusion exists about how to turn data into something actionable.

    If that's part of the goal here, that's a good thing.  The fact is that it also will give Albertsons a lot of data to use in figuring out to be both relevant and resonant to its shoppers, but as long as it isn't creepy intrusive, that's also a good thing.

    MNB reader Dian Emerson wrote:

    Call me skeptical here….some reactions to offer.  I am a former Safeway employee of 20+ years and was in the audience for one of Steve Burd’s pronouncements (during the Theranos era) that Safeway was going to become “a healthcare company that sells groceries” to stunned silence.  We all know how that turned out.

    That was then and this is now, and as you famously point out on almost a daily basis- the core business remains the stores and their customers.  Digital is here to stay, but I can’t help thinking that it is all around the edges here.  Fundamentally, my local Safeway (other than self-checkout) is really no different in its approach, merchandising or product selection than it was decades ago.  The health app changes nothing about my shopping experience, nor would it keep me from shopping elsewhere-whether that be Trader Joe’s, Costco, or local independents.    

    And finally, I really don’t know who their target demographic really is, or how this stands out from the myriad other apps out there in the health space-including one’s health care insurer.  I am not really sold on having my local grocery chain the custodian of my health/wellness info, and the FAQs for Sincerely Health cheerfully proclaims that “Yes, we implement and maintain security measures and controls to protect your information. And we share your information with our business partners as described in our Privacy Policy.”

    I didn’t take the time to download the app or delve headlong into the Privacy Policy for sure-but have no reason to think it would be anymore transparent than any other such policy.  ”Our business partners” is potentially a pretty broad (and unknown) list of entities.

    So, I am going to pass on this one.

    From another MNB reader:

    I have to confess as a “Senior Citizen” age 65 who takes medical care seriously I am so frustrated with the current verifications and paperwork.  It seems that every time I walk into a medical, dental, or vision office They want me to fill out new or updated paperwork even if I have been a patient for years.   I thought technology was going to make things easier?   Now that buildings full of lawyers are involved in CYA (and you know what that means) every LLC wants you to let them off the hook for liability, but wants you to confirm you will pay them everything they feel they are owed if your insurance doesn’t cover it.   Why can’t there be a basic form that is accepted by every health care provider?  Whomever figures this out will be the next Jeff Bezos, but I doubt it will ever happen since there is no money in it.  Bottom line for me:  make it easy to do business with you and I will be your customer for years to come.  Unfortunately in health care we are a captive audience.  

    The other day we pointed to how Stew Leonard's leveled with its customers via email about why some prices are up, some are down, and where some of the real bargains are,  and suggested that this approach - being an advocate for the shopper, not a sales agent for the supplier - is the exactly right strategy.   One MNB reader responded:

    Stew nailed it as usual, I would love to see the CEO's of Shaw's, Hannaford or Stop and Shop do something like this, if they truly want to resonate with the customer.

    One MNB reader had an observation about the story comparing the hot dog-and-soda combos at Costco and Sam's Club:

    In Cancun at CostCo you get pickled jalapeños as an additional topping -  which are delicious!

    Sounds wonderful.

    Yesterday, we pointed to a report from The Street about how, as Starbucks CEO Howard Schultz prepares to step down from the role for a third time, he is promising " one last major surprise to fans of the brand."

    I commented:

    Let's be clear - Howard Schultz deserves enormous credit for making Starbucks one of retail's great stories, and essentially inventing a category.

    But … since he was named incoming CEO last October, Laxman Narasimhan has been virtually invisible to the outside world.  I wonder how many CEOs would take a top job in which they'd have to hang around six months before actually being allowed to do the job.

    And now, with this "game changer," Schultz - in my mind, at least - confirms that whatever he says about his dedication to the company, it is really all about him.  This is his surprise, his transformative platform, his alchemy.  This is all about ego … and if Schultz had any class at all, he would want Narasimhan to be in a position to take the credit and to start his tenure with a transformative move.

    This is venti narcissism, with three shots of hubris.

    MNB reader Mark Johnson wrote:

    Wow........this might be your best one-liner yet:

    "This is venti narcissism, with three shots of hubris."

    Still laughing MAO!

    There was a story yesterday about how c-store chain Sheetz has ended a policy that employees felt was discriminatory against people with dental issues. reported that the policy stated that "applicants with missing, broken, or discolored teeth were not eligible for employment" because those hires would not be able to comply with the company's "smile policy," which requires that frontline workers greet customers with a "warm and welcoming smile."

    The policy got a lot of attention in the media when one woman said she lost her job after her abusive husband knocked out her teeth.

    The story says that "Sheetz officials issued a statement saying that the company's culture is centered on respect and inclusivity, and the smile policy was found to be inconsistent with these values. The company states it is now committed to ensuring all policies are equitable and celebrate the diversity of its employees."

    I commented:

    I'm sure the policy wasn't meant to be discriminatory, and sometimes certain results can't be foreseen.

    I just hope that abusive husband's ass is in jail, and that it stays there for a long, long time.  

    One MNB reader responded:

    Living in north central PA, I understand why Sheetz had this policy.  Dental health here for some, is not a priority, layer on those who abuse drugs which rot one’s teeth and selective hiring would be a priority.  There are always one-offs such as the abuse issues or accidents which cause teeth to be knocked out.  These are explainable and I would think must people would fix but those people who choose to ignore dental health or abuse drugs, well, not the best presentation for a company’s brand, especially food service. Btw, I am not an elitist, many programs in PA to help the less fortunate including colleges offering dental care so their students get real life practice in the dental hygienist program. 

    More comments about Sandy Koufax's decision to not pitch game one of the 1965 World Series because it fell on Yom Kippur.  One MNB reader said it was "perhaps the most heinous display of narcissism in the annals of professional sports."   I was chagrined by this, and noted that after Game One, Koufax had an amazing Series, pitched three games and was the MVP.

    I also noted that some thing are unimportant, some things are important, and some things are very important, and quoted the great Robert B. Parker, who once said that "baseball is the most important thing that doesn't matter."

    One MNB reader wrote:

    Parker got it right.  Koufax got it right.  And YOU got it right !!

    Another MNB reader wrote:

    BRAVO on your FaceTime comments this morning regarding Sandy Koufax and his decision not to play and also highlighting his performance in the World Series.

    And, from another reader:

    Bottom line is that it was Sandy's decision for his beliefs...thus it was the right decision.  What anybody else thinks is irrelevant.  

    There was a player 10ish years ago who skipped the World Series for the birth of his son.  Also the right decision.

    Simone Biles skipped the Olympics for her mental and physical wellbeing.  Still the right decision.

    Making space for ourselves, our beliefs, and our families is always the right choice and no one else is qualified to judge that. 

    I totally agree.   But not everyone does.  One MNB reader wrote:

    What Koufax did after he made his self-centered decision has absolutely nothing to do with his thinking when he made his self-centered decision.  Or perhaps the Jewish gods had assured him that he’d be rewarded for determining his religious-beliefs were more important than his teammates, fans, and employer.

    First of all, yes … his religious beliefs should be more important.

    (I debated long and hard with myself whether to post this email.  In so many ways it is distasteful in its language and sentiments, having nothing to do with Sandy Koufax.  But I decided to use it precisely because of what it says and how he says it.  Jewish Gods?  Last time I checked, Jews had a single Deity, the same one as Christians.  We should never forget that people like this think the way they do and say the things they say.)