business news in context, analysis with attitude

Published on: May 12, 2023

Yesterday in this space I talked about the importance of establishing one's capacity for commitment, hard work, innovation and collaboration.  Another key factor is the ability to embrace teamwork.  Which made a recent Inc. article about Steve Jobs' three tenets of great teamwork particularly timely.

Published on: May 12, 2023

The Wall Street Journal this morning starts with this basic observation:

"Amazon.com hasn’t taken over your refrigerator yet. But the size and importance of the grocery market is precisely what compels the Everything Store to keep trying."

The meat of the story:

As it has developed its approach to physical grocery stores, it has focused on "whiz-bang" features - the checkout-free Amazon Go stores, Dash Carts that "let shoppers scan and pay for items as they put them in their carts," and most recently, "Amazon One, which allows shoppers to pay with a scan of their palm."  Plus, it owns Whole Foods, which it bought in 2017 for $13.1 billion.

However, the Journal writes, "Amazon has barely scratched the surface. The company that now generates nearly $525 billion in annual revenue has just over a 3% share of the U.S. grocery market between its branded stores and Whole Foods, according to the latest data from Numerator. Walmart—one of only two other public companies on the planet generating more annual revenue than Amazon—has a 30% share, including Sam’s Club, while grocery giant Kroger sits at 11%."  While it used to dominate the online grocery business with a 21% market share, the story points out, "grocery competitors are encroaching on Amazon’s digital turf. Walmart surpassed Amazon’s market share (including Whole Foods online delivery) in online grocery sales in 2020 and eMarketer expects it to keep its number one position this year and next. Soon-to-be-public Instacart also is gaining ground, having surpassed Amazon’s online grocery market share in 2021, according to eMarketer."

And then, this conclusion:

"Don’t count Amazon out … The company has a long history of solving the thorny problems of getting consumers and their stuff in close proximity. It also has a new boss with a powerful motivation to rejuvenate the company’s sales growth, plus an estimated 167 million members of its Prime shipping service in the U.S. alone, according to Consumer Intelligence Research Partners, who are already inclined to concentrate their spending on the company’s offerings."

KC'S View:

While the Journal didn't make this point, I think it accidentally hit the nail on the head - Amazon's physical grocery stores have been all about "whiz-bang," as opposed to having a clear sense of the unique customer problem/need/desire that they're designed to solve.

And, the Journal accidentally also points to another opportunity - the 167 million Prime members who have never been seen or used as the connective tissue among all Amazon's efforts.  I'm not talking about using them in an exploitive way, but rather understanding that using technology to connect problems/needs/desires expressed via one's online shopping habits to the problems/needs/desires reflected in a bricks-and-mortar shopping trip should manifest itself in enormous opportunity.  Despite all its capability and day-one mindset, Amazon never really has done that - even though this should be the secret sauce that differentiates its offerings.

Published on: May 12, 2023

WCPO News has a piece about why Kroger is ready to go to the mattresses to complete its $24.6 billion acquisition of Albertsons.

It has less to do with growing grocery market share, the reasoning goes, and more to do with growing a retail media empire.

“Long term, the biggest accelerator for profit growth for Kroger is not grocery. It’s actually retail media and advertising,” Dean Rosenblum, senior research analyst for AllianceBernstein, tells WCPO. “And this deal takes Kroger from 40% reach of population in the U.S. to 70%. It solidifies them as the heir apparent to this pretty huge revenue stream that will accrue to the grocers, once somebody figures out how to execute it.”

Th story goes on:

"Kroger has been talking since 2018 about the potential for using its data-analytics capabilities to help consumer-product companies target the shoppers most likely to buy their products. Those capabilities generated a $1.2 billion in operating profit for the company in 2022, CEO Rodney McMullen told shareholders in March."

McMullen said:  “Kroger Precision Marketing is one of our fastest-growing businesses and is well-positioned to win within the U.S. retail media landscape, which is projected to be a $55 billion industry by 2024.  What makes our retail media business special is our ability to help brands achieve a greater return on their media investment."

Published on: May 12, 2023

The Chicago Sun Times reports that a new Save A Lot store has opened in the Englewood neighborhood of Chicago, just one week after "a contentious community forum during which residents said they did not want" the store there.

The store is owned and operated by franchisee Yellow Banana, which took over a Whole Foods location that closed last fall.

According to the Sun Times, "The planned opening — originally scheduled for April before it was scrapped — has led to a months-long conflict between South Side community members who complain about Save A Lot’s reputation and the company that operates 38 stores across the country.

"At the May 3 community forum in Englewood, residents and local leaders met face to face with top officials from Yellow Banana and said that the planned Englewood store was 'not on the table.' Speakers at the forum also complained about the company’s apparent lack of communication — which store officials disputed.

"After getting the public feedback at the meeting — and apparently some from people who weren’t at the meeting, Canfield said — the company decided to open anyway."  Now, a number of community activists are upset that the store opened without their input being taken into account for the store's operation.

The company says that "20 people, all from Englewood, have been hired to work at the Save A Lot, and that local vendors will be added in the future."

Published on: May 12, 2023

The Detroit News reports that Amazon appears to have decided not to open Amazon Fresh stores it had planned to open there, echoing a similar story that emerged this week about Fresh units in the Minneapolis-St. Paul market that won't be opened.

The reports are that locations slated to house Fresh stores are being put up for sub-lease.

According to the story, "This news comes after nearly two years of rumblings about when Amazon.com Inc. would be ready to roll out its Amazon Fresh stores in Michigan. The list of confirmed and reported Amazon Fresh stores had grown to at least nine locations in Metro Detroit and one in Grand Blanc.

"Amazon has not commented on its roadmap for Amazon Fresh."

Published on: May 12, 2023

•  From CNBC:

"Zipline broke through in the drone market flying critical medical supplies such as blood and vaccines in Rwanda and other nations because health-care is more readily funded and regulatory approvals for unmanned flights come faster.

"But the drone manufacturer has been growing its commercial delivery business, with partners including Walmart, and announced three more retail deals on Wednesday: GNC, Pagliacci Pizza and Associated Couriers.

"The company says it should reach one million autonomous deliveries by year-end; it’s at 600,000 now."

According to the story, "The deals are part of Zipline’s recent expansion into home delivery, which features its new drone platform, known as its P2 Zip, for what it says is nearly silent delivery, able to travel up to 24 miles each way from dock to dock to local communities, and can reach 99% of addresses in both urban and suburban areas at speeds much faster than traditional ground-based delivery."

Published on: May 12, 2023

With brief, occasional, italicized and sometimes gratuitous commentary…

•  From the Associated Press:

"The number of Americans filing for unemployment benefits last week rose to its highest level in a year-and-a-half, though jobs remain plentiful by historical standards even as companies cut costs as the economy slows.

"Applications for jobless aid for the week ending May 6 rose by 22,000 to 264,000, the Labor Department said Thursday. That’s up from the previous week’s 242,000 and is the most since November of 2021. The weekly number of applications is seen as roughly representative of the number of US layoffs.

"Many employers appear to have put a premium on retaining workers after some of them were caught short-handed by the rapid post-COVID-19 economic recovery. As a result, most economists don’t envision waves of layoffs even if a recession were to strike later this year as many expect.

"The four-week moving average of claims, which evens out some of the weekly volatility, rose by 6,000 to 245,250. Analysts have pointed to a sustained increase in the four-week averages as a sign that layoffs are accelerating, but are hedging their bets on whether any spike in layoffs is imminent."

•  The National Grocers Association (NGA) yesterday "announced its support for the Save Local Business Act. Introduced by Sen. Roger Marshall (R-KS) and Rep. James Comer (R-KY), the legislation would codify into law the traditional joint employer standard, which conditions employment liability on the clear and predictable standard of 'direct, actual, and immediate control over workers’ terms and conditions of employment' … The Save Local Business Act amends the National Labor Relations Act and the Fair Labor Standards Act to clarify that two or more employers must have 'actual, direct, and immediate' control over employees to be considered joint employers."

Last year, NGA points out, "the National Labor Relations Board announced proposed regulation on the joint employer standard that would expand the current standard of what constitutes a 'joint employer,' putting independent community grocers at risk of legal uncertainty and increased litigation."

•  From the Associated Press:

"The Supreme Court on Thursday backed a California animal cruelty law that requires more space for breeding pigs, a ruling the pork industry says will lead to higher costs nationwide for pork chops and bacon.

"'While the Constitution addresses many weighty issues, the type of pork chops California merchants may sell is not on that list,' Justice Neil Gorsuch wrote in an opinion for the court.

"Industry groups have said the law would mean expensive, industry-wide changes even though a majority of the farms where pigs are raised are not in California, the nation's most populous state, but instead in the Midwest and North Carolina."

According to the story, "The case before the court involved California’s Proposition 12, which voters passed in 2018. It said that pork sold in the state needs to come from pigs whose mothers were raised with at least 24 square feet of space, with the ability to lie down and turn around. That rules out confined 'gestation crates,' metal enclosures that are common in the pork industry."

•  From Marketing Daily:

"Warby Parker may have started as a digital brand, but the latest results prove its reinvention as an old-school retailer is paying off.

"For the first quarter, the New York-based company says net revenue climbed 12.2% to $172 million, compared with $153.2 million in the first quarter of last year.  Warby Parker trimmed its losses to $10.8 million, versus the $34.1 million it lost in the comparable period. In part, that’s due to a 35% reduction in marketing spending.

"Both sales and profits exceeded Wall Street forecasts. Sales have 'been encouragingly stable despite a choppy consumer spending backdrop and a pullback in marketing, and management appears to be progressing towards profitability targets,' writes Mark Altschwager, an analyst who follows the company for Baird. He continues to rate it as likely to outperform its peers."

Just want to get this on the record.  I'm a huge Warby Parker fan, and I was thrilled the other day when they opened a store a couple of miles from my house.  But this just feels like they are overbuilding, and that the pace could end bringing down the whole enterprise.  I hope I'm wrong, but it just feels that way.

Published on: May 12, 2023

…will return.

Published on: May 12, 2023

I have no idea the degree to which "The Diplomat," on Netflix, accurately reflects any sort of reality when it comes to international governmental wheeling and dealing.  (Politico writes that many State Department employees around the world "find it preposterous — and utterly amusing … They binge it while understanding that their jobs are "not nearly as sexy as Ambassador Wyler’s romps through foreign policy.")

"Romp" is exactly the right word - because "The Diplomat" is one of the best series fielded by Netflix in some time, smartly written, directed and acted, and created by Debora Cahn, who was an executive producer on "Homeland" and started her career as a writer on "The West Wing."  

The story focuses on the aforementioned Kate Wyler, a career diplomat who instead of taking her expected posting in Afghanistan is named Ambassador to the Court of St. James in the UK, where she is expected to help defuse an international crisis that could turn into a world war.  (She's also being tested to see if she might make a good vice presidential candidate.). Life is complicated by her troubled marriage to Hal Wyler, a legendary US diplomat currently on the outs because of some indiscreet comments and struggling with the fact that his wife is now occupying the limelight.

Keri Russell and Rufus Sewell play the Wylers, and they are terrific - there's a Tracy-Hepburn frisson to some of their exchanges, and Sewell is especially good at keeping us wondering about his actions and motivations.  Among the supporting cast, Rory Kinnear is excellent as the UK prime minister, as are David Gyasi as the UK foreign secretary, and Ato Essandoh and Ali Ahn as members of the US embassy staff.  (The always great Michael McKean has a few terrific scenes as a seemingly befuddled US president.)

"Romp" is absolutely right word, and it is a welcome one.  "The Diplomat" is bingeworthy TV, and the best news when the eighth and final episode ended was that it has been renewed for a second season.  Can't wait.

That's it for this week.   Have a great weekend - Happy Mothers' Day to all the moms out there - and I'll see you Monday.

Sláinte!!