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    Published on: April 19, 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.

    In today's Innovation Conversation, Tom and KC focus on the subject of data.  How is it being used?  How is it not being used in ways that would aid retailers and suppliers?  What are the opportunities to use data about product and data about customers to capitalize on the sweet spot where a retailer can prove its loyalty to the shopper in new and effective ways?  It all comes down, they agree, to a granular use of data in ways that knock down the silos that inhibit growth and success, and persuading people in organizations that when someone comes in with a sledge hammer to known down those silos, it isn't vandalism.  It is construction.

    If you'd like to listen to and save this Innovation Conversation as an audio podcast, click below.

    Published on: April 19, 2023

    The Financial Times has a piece about how dollar store chains in the US "are getting a makeover as inflation drives more demanding middle-income consumers through their doors.

    "The industry’s biggest chains have both announced plans to remodel almost twice as many stores as they will open this year. Dollar General and Dollar Tree will increase the number of refitted stores by 11.4 per cent and 25.6 per cent from last year, respectively.

    "Both are investing heavily in freezers and coolers to meet growing demand for groceries from inflation-hit customers who have shifted more spending from discretionary items to essential items like food.

    "The cost of remodeling and opening new stores will be considerable, marking out the chains from other retailers which are cutting costs and closing outlets. UBS analysts last week predicted that 50,000 US stores, or 5 per cent of the current total, could close by the end of 2027."

    FT writes that "this is not the first time that economic strains have brought a new clientele to dollar stores. They saw an influx of customers during the Great Recession of late 2007 to 2009, and held on to most of them when the economy stabilised."

    KC's View:

    The challenge to traditional food retailers will be if dollar store chains, having gained traffic and market share during times of financial distress, are able to sustain that growth when the economy improves.

    Published on: April 19, 2023

    Netflix has announced that it is shutting down its DVD-rental-by-mail business.

    Variety reports that since 1998, Netflix "has mailed out over 5 billion DVD and Blu-ray rentals to subscribers across the US … Netflix’s revenue from the DVD-by-mail biz has — by design — steadily declined over the years, as the company wanted to push members toward the streaming service. In 2022, the DVD business generated $145.7 million, down 20% from the year prior, which represented 0.5% of its total revenue."

    The announcement came, Variety notes, as Netflix "added 1.75 million net new subscribers in Q1, compared with gaining a whopping 7.66 million for the final quarter of 2022, the period during which its low-cost, ad-supported tier launched (Q1 marked the first full quarter with the ad-filled option). This brings the streamer’s total global subscriber count to 232.50 million."

    “After an incredible 25 year run, we’ve decided to wind down later this year,” co-CEO Ted Sarandos wrote in a blog post on the company’s site. “Our goal has always been to provide the best service for our members but as the business continues to shrink that’s going to become increasingly difficult. So we want to go out on a high, and will be shipping our final discs on September 29, 2023.”

    KC's View:

    Meaning, I think, that somewhere, people will be finding red envelopes and DVDs under their couches on September 29, 2025.

    It is almost impossible to understate the degree of disruption that those red envelopes brought to the video rental business.  A quarter-century ago, Blockbuster owned the business, drawing in families to their stores all over the country and making a veritable fortune on late fees.  The management at Blockbuster never really saw Netflix coming, and when presented with the opportunity to buy Netflix, turned it down.

    The red envelopes also symbolized a great leadership lesson when, about 15 years ago, Netflix tried to separate the mail business from its growing streaming business.  Leadership at Netflix backed off that decision in about a month - they listened to their customers, and understood that they'd overstepped.

    The world is different now, though, and the DVD business is minimal (relative to the company's broader operations).  The red envelopes may go away, but they are a valuable symbol of what is possible, and the degree to which insurgent companies can challenge and eventually supplant entrenched companies.

    We often argue here that there is no such thing as an unassailable business model.  The red envelopes prove it.

    Interestingly, analyst Martin Peers, in The Information, writes that "Netflix is looking more and more like an old-fashioned television company. In other words, it’s growing slowly but producing lots of cash. The video-streaming giant reported what can only be described as anemic growth in the first quarter."

    It seems to me that this suggests that Netflix has to be on the lookout for the next company with the next red envelope.  While it disrupted Blockbuster right out of business, it also has proved to be a disruptor to the traditional film and television businesses.  But if Peers is right  and "Netflix is looking more and more like an old-fashioned television company," it needs to be vigilant about avoiding the complacency that typified those institutions.

    Published on: April 19, 2023

    From the Hollywood Reporter:

    "Amazon’s Prime Video is rolling out a streaming feature that will allow viewers to increase the dialogue in movies and TV shows.

    "The feature is called Dialogue Boost and, according to Amazon, it lets you raise the volume of dialogue relative to background music and effects, 'creating a more comfortable and accessible viewing experience that cannot be found on any other global streaming service.'

    "Dialogue Boost analyzes the program’s audio and uses AI to spot points where dialogue may be tough to hear. Then speech is isolated and its audio enhanced to make dialogue clearer. Amazon points out this is actually different than using a traditional center channel speaker in a home theater setup because it 'delivers a targeted enhancement to portions of spoken dialogue instead of general amplification'."

    KC's View:

    This seems especially helpful because of the combination of production values that sometimes allow for muddled, mumbled dialogue and the fact that some of us are dealing with ears affected by decades of listening to loud rock music.

    I suspect, though, that some filmmakers will object to this.  They'll argue that it monkeys with their creative intentions, in much the same way that colorization of black-and-white movies does.  I agree with them on the colorization issue, and just hope that Amazon will be surgical in how it tries to optimize the viewer experience with more audible dialogue.

    Published on: April 19, 2023

    Barnes & Noble announced to its customers this morning a revamped membership and loyalty program that it says "is headed by a significant improvement to paid membership benefits, now called Premium Membership. Alongside this, the bookseller is launching a free B&N Rewards program.

    "The new Premium Membership maintains a 10% discount in Barnes & Noble stores, and adds a 10% discount to purchases on and a new spend-and-save reward on all shopping. For every $10 spent in a purchase, one stamp is earned, and for every 10 stamps the customer receives a $5 reward. In addition, Premium Membership gives free drink upgrades in B&N Cafes, a yearly free canvas tote and many other Member-only benefits and offers, including free standard shipping. The Premium Membership annual fee is $39.99."

    The company also said that it is "offering a new, free to enroll B&N Rewards program. B&N Rewards gives customers a spend-and-save reward on all shopping. For every $10 spent in a purchase, one stamp is earned and for every 10 stamps the customer receives a $5 reward. This is the first time the bookseller has introduced a free element to its loyalty program."

    James Daunt, CEO of Barnes & Noble, said that “as booksellers, we will make these ever more personalized, sharing our knowledge and enthusiasm for books with our customers. It is a very exciting new direction for Barnes & Noble.”

    KC's View:

    I'll be interested to see if this actually works - to me, it seems a little complicated and perhaps not as intuitive as it needs to be.

    For me, the key words are Daunt's - "ever more personalized."  If Barnes & Noble is able to use its data in customized and highly targeted ways, proving that - in the phrase that Tom Furphy and I use in this morning's Innovation Conversation - it is loyal to its shoppers, then this will be a smart move.  But if it misses the opportunity, then this could end up being more noise.

    Published on: April 19, 2023

    Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  The Washington Post reports that the US Food and Drug Administration (FDA) has "cleared the way for people who are at least 65 or immune-compromised to receive a second updated booster shot for the coronavirus, an option intended to bolster protection for the most vulnerable Americans even as the pandemic recedes.

    "The action appears likely to provide a measure of reassurance to people whose age or medical issues put them at risk of serious illness if they are infected. Some got updated boosters last fall, soon after the omicron-targeting shots were authorized, but patients and physicians recognize the mRNA vaccines have a history of waning protection within months of administration.

    "People who are eligible for the extra boosters might be able to get them as soon as this week. Vaccine advisers to the Centers for Disease Control and Prevention are scheduled to meet Wednesday to discuss the second booster, and CDC Director Rochelle Walensky is expected to sign off quickly. Federal health officials will not formally urge that people get a second booster. Instead, the 'permissive' policy says they may get one if they want."

    The Post notes that "the FDA is planning this fall to move to a once-a-year coronavirus shot for most Americans – a timetable announced in January that is intended to coincide with annual flu inoculations. The FDA hopes the simplified schedule will encourage more people to get vaccinated. Officials will select a reformulated dose this summer after meeting with outside experts in June. The decision will be based on which coronavirus strain scientists think is most likely to be circulating in fall and winter."

    Me, I'm going to check with my doctor and if she thinks it makes sense to get an updated booster now, I'll get one.  If she thinks I ought to wait until autumn, I'll do that.   For me the bottom line is that I'll do whatever seems smart and timely to prevent serious illness.

    •  The US now has had 106,481,967 total cases of the Covid-19 coronavirus, resulting in 1,158,347 deaths and 104,347,586  reported recoveries.

    Globally, there have been 685,885,403 total cases, with 6,844,023 resultant fatalities and 658,589,057 reported recoveries.  (Source.)  

    •  The Centers for Disease Control and Prevention (CDC) says that 81.4 percent of the total US population now has received at least one dose of vaccine, with 69.4 percent. being fully vaccinated and 16.7 percent having received an updated booster dose.

    Published on: April 19, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  Morning Consult has a new survey suggesting that "remote workers are nearly twice as likely as office workers to order groceries online."

    That's just one of the food-related trends created by a shift to remote working by many in the economy.

    Another finding:  "Remote workers are 10 percentage points more likely than in-person workers to eat breakfast daily."

    The survey notes that "work schedules shape employees’ daily routines and thus their choices about when, where and what to eat. For food & beverage brands, it’s imperative to better understand each worker type to best position both existing and future product and service offerings."

    •  From The Information:

    "For more than a year, investors have had little appetite for Instacart’s stock, available on the private market for tech shares. Now investors who may be hunting for bargains are starting to clamor for a piece of the grocery-delivery startup ahead of an expected initial public offering.

    "Bidders are lining up for Instacart’s private stock after months of low demand. It could be a sign that investors are becoming more bullish on the company’s IPO prospects.

    "Over the past couple of months, investors who buy private company stock have increasingly looked to scoop up Instacart shares, Instacart shareholders and brokers who facilitate trades told The Information. Completed deals remain rare and Instacart’s valuation is still far below its peak in early 2021, when it was valued at $39 billion. But the signs of interest could reflect renewed investor appetite for beaten-down private tech stocks."

    According to the story, "The pickup in demand for shares could indicate investors are more bullish on the IPO prospects of the 10-year-old firm as interest rate hikes slow and the fallout from the banking crisis subsides. Instacart executives had told advisers they were beginning to make moves to finally go forward with an IPO a couple of months ago, a person familiar with the matter said. But tech stocks suffered through volatility in February and the banking crisis hit a peak when Silicon Valley Bank collapsed in March. Those events—negative signs for companies trying to list their stock for the first time—delayed Instacart’s plans again, the person said."

    •  KDKA-TV News reports that "Giant Eagle will start mailing a new weekly circular to Pittsburgh-area customers next month.

    "Giant Eagle moved towards a digital version but announced the return of weekly print ads on Monday, saying they'll be back in mailboxes beginning May 2. 

    "The company said the print copy of the circular will highlight 'the strongest promotions' and customers can scan a QR code to go to the Giant Eagle website and see more items on sale each week."

    I must admit that I don't understand this move.   Sure, there will be some folks who don't/won't/can't access digital versions, but that cohort is shrinking and, I'd guess, is responsible for a diminishing percentage of sales.  Print circulars also don't allow for the kind of data-centric targeting that retailers ought to be doing.  I'm sure there is a rationale for this move.

    Published on: April 19, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  The Washington Post reports that Iowa is "poised to approve some of the nation’s harshest restrictions on SNAP. They include asset tests and new eligibility guidelines. By the state’s own estimate, Iowa will need to spend nearly $18 million in administrative costs during the first three years - to take in less federal money. The bill’s backers argue the steps would save the state money long term and cut down on 'SNAP fraud.'

    "The measure is part of a broader national crackdown on SNAP, the federal program at the heart of the nation’s welfare system. The proposed legislation was not a homegrown effort but the product of a network of conservative think tanks pushing similar SNAP restrictions in Kentucky, Kansas, Wisconsin and other states. But experts say Iowa’s represents the boldest attack yet on SNAP, and Republicans in Congress have signaled a similar readiness to impose limits on federal food assistance."

    The bill has been passed by the legislature and is expected to be signed by Gov. Kim Reynolds.

    The questions being raised about this movement is whether it is about efficiency and effectiveness, or about political posturing.  I also find myself wondering whether retailers that generate some significant revenue from people using food stamps will be weighing in on this trend.

    •  From the Associated Press:

    "Vermont ice cream maker Ben & Jerry’s said Tuesday it supports a plan to unionize by the workers at a retail shop in the same city where the brand, known as much for its social activism as its products, was founded.

    "Ben & Jerry’s said, in a statement, it shares 'the goal of advancing justice, both inside and outside our company.' The ice cream manufacturer was founded in a former gas station a short distance from its retail shop in downtown Burlington.

    "'That’s why we recognize and support the rights of all workers to unionize and collectively bargain,' the company said. 'Ben & Jerry’s is committed to the goal of operating our company in a way that is fair, inclusive, and equitable, while being a dynamic and fun place for all workers'."

    Published on: April 19, 2023

    Yesterday we returned to the subject of cities in distress, with a story about how the REI in downtown Portland, Oregon, is closing because of concerns about employee and customer safety and store security.

    I commented:

    I've shopped at that store.  I know the neighborhood well, from my summer adjunctivities at Portland State University.  It was the area, not too many years ago, to which I hoped to move.  I'd continue doing MNB, do some more teaching at PSU, and enjoy the Pacific Northwest that, in my opinion, is the most beautiful part of the country, with the best food and wine.

    Emails like this break my heart.  Emails like this have broken Mrs. Content Guy's spirit - there's no way she's moving there now.  Eye-Opening emails like this one illustrate just how difficult a road some many cities have in front of them.

    Portland is said to be one of several cities in the running for a Major League Baseball expansion team.  I must admit to being conflicted about this.  On the one hand, a team would bring much needed investment to the city.  But I also believe that until Portland can figure out ways to deal with the significant issues that face it, making such investments could be problematic.

    One MNB reader wrote:

    I know it’s hard to admit this but maybe the progressive leadership in the city of Portland has led to its demise?

    From another reader:

    Until Portland and cities in similar situations across the country admit they have a problem, they are going to continue to lose businesses.  And as long as the leaders continue to bend to the criminals the problems will get worse.  The losers are those city residents who no longer have good places to shop and end up with higher taxes as the tax base erodes.

    The problems have grown much worse than dealing with petty shoplifting that has existed for years. No responsible company is going to put up with major theft and damage and putting their employees at risk. Until the political leaders and DA ‘s in these cities and states get up and say “I am mad as hell and we are not going to put up with this anymore “, the problems will get much worse.   I would have thought we are at or beyond that point already, but apparently not in the minds and hearts of those who should and could attack the problems. 

    MNB reader Monte Stowell wrote:

    After reading your missive today about what happened with REI is just the tip of the iceberg for what has been happening here in Portland. Hate to say it, but the catalyst behind what has happened to the loss of many retailers closing up shop in downtown Portland was the riots that occurred after the George Floyd incident. I was born and raised in PDX 76+ years ago, and in the 1960’s when there were protests about the Vietnam war in downtown Portland, but not to the degree of wanton destruction that we saw a couple of years ago. Portland had leadership that allowed the senseless destruction we saw two years ago. What occurred a couple of years ago was businesses leaving or closing their doors as people did not feel safe going downtown. Then Covid hit, and more businesses left. Crime, homelessness, and drugs became commonplace. People did not feel safe shopping downtown and voted with their cars and feet to do their shopping in other places in the burbs of PDX. I remember as a young boy the joy of getting on the St. John’s bus and going downtown with my mom, brother, and sister. Downtown Portland, I sincerely hope time will heal what has happened to you the past 3-4 years. Sad to see what us native Portlanders have seen. 

    From another reader:

    I’m, a long-time reader of MNB and this article is not surprising given the homeless situation in Portland. I’m not sure why you did not identify the challenge in your comments. I felt you skirted the main issue and normally, you tackle them head-on. Portland has created its own problem by enabling the homeless community by making it easy for them to live there and take advantage of their liberal laws. It is a pity that the government rewards poor behavior and they do not provide services that reward the homeless from becoming homeless. I understand there is a mental health element to the story, but have you been to Oregon lately? My wife and I would spend the night in Portland and visit Powell’s bookstore (for the entire day) but not anymore. Portland is a mess, and they have a major homeless issue that they created.

    And from still another reader:

    Teenagers and young adults descended on State Street, a prime shopping district in Chicago’s Loop area downtown. The Chicago Tribune captured eyewitness video of the crowd running down State, attacking bystanders and beating them. Kicking passing cars. Standing on the roofs of parked cars jumping up and down to inflict damage. It was terrifying observing boys and girls hitting and kicking people thrown to the ground for no reason other than exercising a violent night out. Police were overwhelmed. 16 arrests were made. Some of them had guns.

    I live three blocks from there and now worry for the safety of my family. Chicago’s new mayor was quoted saying while he doesn’t condone violence, “it is not constructive to demonize youth who have otherwise been starved of opportunities in their own communities.” I’m sorry but just appalled at this lack of empathy for innocent people recklessly attacked, the rule of law and the requirement for accountability for actions like this. People, families should have confidence they are safe in their neighborhood. Incidents like this provide some evidence of a fracture in our moral imperatives. City leadership should side on safety, accountability and constructive moves to prevent future events like this.

    What happens in the absence of that is loss of neighborhood integrity and quality, as you observed in the Pearl area. Just not right.

    I've long argued here that the permissive attitude toward small crimes like shoplifting allows for the escalation to organized theft and the kind of chaos and anarchy you describe.

    I live in a Connecticut town where small bands of kids often will wander the streets in the late night/early morning hours, wandering into driveways to see if cars are unlocked.  If they are, they ransack the cars.  If someone has accidentally left the keys to the car, they steal the vehicle.  This has happened on my street, in part because we are easily accessibly to I-95, which allows for a quick escape.

    The message to homeowners has been that the police can do very little about these cases.  They don't want to engage in gunfights on suburban streets (probably a good decision), and don't want to engage in high-speed car chases.  And, there apparently is a rule - police cars won't exceed 75 MPH when chasing a suspect.  (Message to lawbreakers:  Drive away at 80 MPH.)

    I've never understood how any of this reinforces the notion of as civilized society in which the rule of law actually matters.

    I do think that some of this is different from issues like drug addiction and homelessness that afflict many US cities, and while I would agree that liberals/progressives have largely not distinguished themselves in their policy choices, I would argue that at least some these decisions have been made because of compassion.  Misplaced compassion, in some cases.

    What I'm not smart enough to figure out is what a sophisticated, nuanced, lawful and, yes, compassionate public policy looks like.  I'm not sure the answer is to simply ship the homeless and drug addicted to Santa Monica or Cape Cod - that isn't really addressing the problem.  It is easy to blame.  Much harder, I think, to formulate a sensible solution to the disease, not just the symptoms.

    We had a story yesterday about how McDonald's plans to upgrade its burger line, prompting one MNB reader to write:

    I admire their persistence, and an upgrade would be good, but haven’t we been down this road before?  Remember the Arch Burger, Angus Burger, Chopped Beefsteak, McDLT, Big N’ Tasty…

    One of the apparent goals is to be more like In-N-Out, which led MNB reader Rich Heiland to write:

    One of the reasons I've always gone to In-N-Out is for the experience. I was going in one in California not long ago and when I got to the door and employee who was sweeping up out front ran over to open the door for me. At one point I went to the restroom and an employee was in there and totally violated the man code by speaking to me. "How are you liking In-n-Out?" he asked. I told him "just fine" and asked "how do you like working here?" He answered "I love it. Everyone is so nice and it's fun to see other people having fun." To me McDonald's needs more than just imitated an In-N-Out burger.

    And another MNB reader asked:

    Why do only “select cities” get to have a possibly tastier burger from McDonalds?    

    I think it just takes time to roll it out.

    And finally, this note from MNB reader Steven Ritchey about the idea that execs should spend more time in their stores:

    Having corporate people office at individual stores sounds like a really good idea.  I mean it gets decision makers close to the action, to the customers, where the rubber meets the road.

    It can also be a major train wreck.

    After 45 years in this business, I've seen a lot.  I've seen store managers become exasperated when their division manager, who'd not worked in a store in years, or if they'd ever worked in a store would make a visit, and totally berate the store manager who was frequently a very good manager who'd run circles around their boss over things of no consequence.

    Do   you really think this DM would be welcome at a store full time?

    You'd be amazed at how many corporate managers have never, ever worked in a store.

    My older brother was a Meat Market manager for a local grocery chain.  He worked at one of the inner city stores, a very different location from what this chains typical store was.  His Supervisor had never actually been a meat cutter, had never managed a meat market, yet he was always on my brother about how he ran his market, which was always a top producer in terms of margin,

    Now, I know there are some really good, capable middle managers at corporate, but one bad one having their  office at a store would wreak havoc, and chances are, nothing would happen to them.

    This is something that sounds like a really good idea on the surface, but in actual practice if not done right with the right people could do more harm than good.

    You've described a lot of organizational problems that need to be addressed.  But I'm pretty sure that the best answer is to have the right people and the right systems in place at all levels of an organization, all focused on making stores a better, more cohesive and responsive shopping experience.

    Essentially, what you've described is typical of siloed organizations.  Here's my opinion - in the end, it is the job of a CEO to break down the silos so these scenarios do not exist.  And the CEO who does not do that - who does not recognize and work to solve the problems that you describe - is a CEO who is not doing his or her job, who may, in fact, be doing more harm than good.

    Published on: April 19, 2023

    MNB has initiated a new sponsorship tier that, as I've pointed out here in the past, reflects what I think is a new approach to the topic - I've decided that I really want to forge sustained relationships with companies that have value propositions and missions in which I believe and that, in turn, believe in MNB's value proposition and mission.  My goal is to not just provide a forum for these "charter sponsors," but also commit to helping them grow their businesses in a variety of ways.  In other words, it ain't just about banner and tile ads.  It is about moving the needle forward in terms of innovation and, ultimately, service to the shopper.

    I am happy to announce this morning that Circular Logic has joined the MNB family as a charter sponsor.

    Each week, Circular Logic will provide rationale for why retailers should lean into their weekly ad and strengthen the promotional impact rather than allowing it to continue to decline.  Through a mix of insights, new perspectives, and a few radical ideas, Circular Logic will make the case for why every retailer with a loyalty program should be delivering curated weekly ad offers optimized for each customer.

    This charter sponsorship coincides with what the company calls "the launch of a new drop-in capability, which enables retailers to benefit from our unique approach quickly and without any change to existing vendors or processes.  It has never been easier (or more profitable) to deliver personalization at scale."

    I'm thrilled with the addition of Circular Logic to the MNB family - especially since personalization and customization are two of the things that Tom Furphy and I discussed in today's Innovation Conversation.  Talk about being on the same page!