Published on: May 15, 2023
Today, a moment of praise for a bricks-and-mortar retailer making a comeback. Good thing, too - this happens to be one of my favorite stores.
Day: May 15, 2023
- KC's View:
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The additional horror is that there have been so many mass shootings in America since then - and so little done about it - that we've become almost numb to it all. And yet, it is almost certain that this week there will be another mass shooting - at a store or a mall or a church or a theater. And we'll do nothing about it all over again.
- KC's View:
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Amazon's troubles in recent months have suggested that the bloom is off the company's rose, and to be fair, that's a narrative that I have bought into - there has been an undeniable sense that Amazon has been more reactive than ever before, and that its priorities have shifted away from customer satisfaction and toward short-term profitability that will satisfy Wall Street.
But, to be equally fair, everything that CNBC and the Journal are talking about in these stories are elements in creating customer value. It may not be the sexy stuff, and it may be more about the mundane than mojo, but in the long run these are the building blocks of long-term success.
Which is why Amazon is talking about them so much. These elements will satisfy analysts and customers. Which is the secret sauce.
- KC's View:
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Too often these kinds of initiatives are cast as efforts at being more "woke," when the fact is that more diverse companies tend to be more responsive to different customers' needs. Different insights create more intelligent companies - and not just emotionally intelligent.
At the same time, companies where a wide range of people feel like they belong are more likely to be companies in which employees feel invested - and that's good business.
- KC's View:
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Interesting that the Journal would specifically cite handbags and diapers - because these two categories represent very different ends of the spectrum.
Handbags are one thing. Companies like Coach or Kate Spade or Chanel can raise their prices because only a certain strata of the population is interested in or has the resources necessary to buy such products. The companies are less interested in market share, I would guess, than profit, because they're focuses on a fairly small segment of the overall marketplace.
Diapers are something else. People with babies buy a lot of them, and every price increase hurts. If you have a kid, a price increase for diapers is as bad as a price increase for gasoline - you feel it.
Even gas prices are moderating, by the way. Axios reports this morning that "it was nigh on one year ago when gasoline crossed a threshold American drivers had never seen before — $5 a gallon. Now, we're back to around $3.50."
The fact is that " prices are down by about 30% since last June — a move that would typically be expected to improve the mood of American consumers." However, consumer sentiment is not what it used to be - which may have something to do with the cost of diapers and other consumables.
I think that companies like Kroger have to be concerned about CPG manufacturers that blithely raise prices, because it puts them at risk from competitors such as Ali, Lidl or Dollar General. And if these CPG companies think that market share can be sacrificed in favor of profit, they may be playing a dangerous long-term game.
It is the old Jurassic Park lesson - just because you can do something doesn't mean you should do something.
- KC's View:
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It is a mistake to over-simplify what's been happening to America's cities, but I also think it is important to admit the mistake that many of us made. (I say "us" because I bought into this construct and talked about it a lot here.)
The theory was based on demographics - young people were getting married later, which meant they were having fewer kids and didn't need bigger houses. They also wanted access to the urban-style amenities, and so they were inclined to move to the city, where they could live in an apartment or condo, and might not even own a car, which would reduce their inclination to visit large suburban-style supermarkets.
A lot of things happened, but the big thing was a pandemic that persuaded people that having more space was better than less space. Plus, if they didn't have to commute to the city to work as often, it changes their priorities.
Axios reports that "an increasing share of millennials, the largest generation, are buying homes and settling down — outside of cities." In fact, a Bank of America survey indicated that "about 45% of millennials expect to buy a home in the suburbs."
The point of the experts to whom CNN spoke is a good one - that cities in many ways have to be reinvented, not just revitalized.
Take San Francisco as an example. You can't just replace the massive Nordstrom that is closing there with another big department store. You have to rethink the use of space, and the needs/desires of the people who want to continue to live there.
Another excerpt from the story:
"'It’s a really tough problem for cities and economic developers,' said Chris Wheat, the president of the JPMorgan Chase Institute. 'How do you make these live, work and play neighborhoods? That was a question before the pandemic, but it’s become more salient now.'
"It hearkens back to urbanist Jane Jacobs’ influential 1958 essay 'Downtown is for People,' in which she argued a vibrant street life was crucial for neighborhood safety and community.
"It is this model, focused on the vitality of the streets and the people who inhabit them, that’s needed to create lively and exciting communities and shopping areas.
"Streets could be blocked to cars on weekends and other hours. Cities can also host street fairs, food festivals, live music, art exhibits and other events to draw foot traffic downtown … If the future of shopping is not giant department stores, a wider mix of stores will be needed to make downtowns more appealing.
"Traditionally, retail landlords seek out the longest leases. But that makes it difficult for new stores to open.
"Cities can provide financial incentives to encourage landlords to offer temporary and more flexible leases and loosen regulations to speed up the permitting process for them.
"This will allow for pop-up stores, seasonal retailers and a mix of food and drink vendors."
In other words, a retail environment that is more responsive and less restrictive and static.
Published on: May 15, 2023
Yesterday in Buffalo, NY, the Associated Press reports, families and others - including first responders and religious leaders - gathered in the parking lot of a Tops store to remember the mass shooting that resulted in 10 deaths and the wounding of three others.
The store was closed for the day because of the observation of the one-year anniversary of the shootings.
Published on: May 15, 2023
CNBC has a story this morning about the logistics transformation taking place at Amazon, where the company is "focusing on using artificial intelligence to speed up deliveries — by minimizing the distance between its products and customers." The goal is to make sure that inventory is in the right place at the right time.
An excerpt:
"Amazon has been focusing on a so-called 'regionalization' effort to ship products to customers from warehouses closest to them rather than from another part of the country.
"But doing so requires technology that is capable of analyzing data and patterns in order to predict what products will be in demand and where.
"That’s where AI comes in. If a product is nearer to customers, Amazon will be able to make same-day or next-day deliveries, like what its Prime subscription service offers."
Progress is being made, the company says: '"In the United States, more than 74% of the products customers order are now from fulfilment centers within their region."
In a Wall Street Journal story about the same subject, it is pointed out that Amazon has been opening these "same-day centers" around the country, "and could expand to at least 150 same-day centers in the next several years … The facilities primarily store items that are in high demand for quick delivery, such as toiletries and electronics."
CNBC notes that Amazon also is focused on realigning its transportation priorities, focusing on "mapping and planning routes, taking into account variables like the weather." And, Amazon is upping its use of robotics "in its fulfilment centers to help with repetitive tasks such as lifting heavy packages. The company said that 75% of Amazon customer orders are handled in part by robotics."
Published on: May 15, 2023
Interesting piece in the New York Times this morning that charts a shift in the corporate mindset from a focus on "diversity and inclusion" to "diversity and belonging."
The Times writes that "the question of belonging has become the latest focus in the evolving world of corporate diversity, equity and inclusion programming.
"Interest in creating more inclusive workplaces exploded after George Floyd’s murder in 2020. Many corporations turned their attention to addressing systemic racism and power imbalances — the things that had kept boardrooms white and employees of color feeling excluded from office life.
"Now, nearly three years since that moment, some companies are amending their approach to D.E.I., even renaming their departments to include 'belonging.' It’s the age of D.E.I.-B."
Traditional D.E.I. approaches, the argument goes, in many cases actually have exacerbated problems by emphasizing the fact that there are lot of different islands in the workplace, each populated by people of different genders and ethnic backgrounds. But they have not built bridges among all those islands, and have allowed the white males in power to stay cocooned.
A focus on "belonging" actually is designed to build these bridges, the Times writes, adding:
"The belonging obsession is the result of a now-widespread corporate standard: Bring your whole self to work. If you have the flexibility to work wherever you want, and the freedom to discuss the social and political issues that matter to you, then ideally, you’ll feel that you belong at your company.
"Bring your whole self to work emerged before the pandemic but became something of a mandate at its height, as companies tried to stanch a wave of resignations. They were also responding to concerns that many people felt excluded in the workplace. According to a 2022 report by the think tank Coqual, roughly half of Black and Asian professionals with a bachelor’s or more advanced degree don’t feel a sense of belonging at work.
"Last year, the Society for Human Resource Management conducted its first survey on corporate belonging. Seventy-six percent of respondents said their organization prioritized belonging as part of its D.E.I. strategy and 64 percent said they planned to invest more in belonging initiatives this year. Respondents said that identity-based communities, like employee resource groups, helped foster belonging, while mandatory diversity training did not."
Still, the Times writes, some critics worry that the shift is more "about making white people comfortable rather than addressing systemic inequality, or that it simply allows companies to prioritize getting along over necessary change."
Published on: May 15, 2023
The Wall Street Journal reports this morning that "companies continue to jack up prices on a range of goods from diapers to handbags—and some are even bragging about it to investors as a sign of brand strength. In some cases, the increases more than cover the hit from higher raw material, labor and other costs, fattening profit margins.
"The price increases come as inflation is moderating and a weakening economy foreshadows a potential pullback in consumer spending. U.S. household spending rose in March from the prior month, but growth is tapering, suggesting that the pain of higher prices is starting to take a toll."
In fact, the Journal writes, "Consumer confidence tumbled 9% in May from April amid renewed concerns about the state of the economy."
The Journal notes that "Kroger CEO Rodney McMullen said in an interview last week that he was surprised by how openly some company executives have been discussing price increases on conference calls. In the past, 'they would not be as aggressive in talking about it publicly,' he said. 'They are being much more transparent than what I have historically seen'."
Published on: May 15, 2023
CNN has a story about how, while crime usually is cited as the main reason that retailers are pulling up stakes and leaving some cities, it may not be that simple.
Sure, crime has worsened in many places, driven by homelessness and the fentanyl epidemic. But there are other forces at work, as well: "a glut of stores, people working from home, online shopping, exorbitant rents …. and difficulty hiring workers.
"To reinvent downtown retail, drastic changes may be required.
"That means denser neighborhoods with a broader mix of affordable housing, experiential retail, restaurants, entertainment, parks and other amenities, which won’t happen overnight … How policymakers remake their downtowns — with retail as a crucial attraction — will be crucial to cities’ fiscal health and regional economies."
Published on: May 15, 2023
Axios reports this morning that the Conference Board is out with new figures suggesting that "workers in the U.S. are pretty happy: Job satisfaction is at a 35-year-high."
According to the story, "The numbers complicate the popular narrative about unmotivated workers quiet quitting or putting in the bare minimum.
"Job switching and a strong labor market play a big role here. Those who recently started a new job — a number that's been historically high over the past few years — saw much bigger jumps in work satisfaction."
And the workers who are unhappy? Well, they change jobs until they find one that makes them happy. That's the advantage of low unemployment numbers.
Published on: May 15, 2023
• The April 2023 Brick Meets Click/Mercatus Grocery Shopping Survey is out, reporting that "overall eGrocery sales for April 2023 totaled $8.2 billion, up 0.9%, versus a year ago. Year-over-year performance varied widely across the three key segments as Delivery sales jumped 20%, Pickup dipped 3%, and Ship-to-Home plunged 19%.
"The extremely strong gains for Delivery during April 2023 were driven by a rebound in monthly active users (MAUs) and a higher average order value (AOV). Delivery’s MAU base grew 11% versus the prior year but finished up only 1% on a two-year stacked basis versus 2021 as the segment’s customer base fell 9% last year. Over the past several years, the expansion of new delivery providers and service offerings has attracted more customers by making it both a more available and attractive way to shop, depending on the mission or occasion. In addition, Delivery’s AOV rose about 5% on a year-over-year basis while the other two segments experienced a pullback in spending per order versus 2022.
"April’s decline in Pickup sales was largely the result of lower order frequency and a reduced AOV; this was offset somewhat by moderate growth in its MAU base (in the mid-single digit range). The decline for Ship-to-Home sales, on the other hand, was the result of a deterioration across all key shopping metrics, including continued contraction of its MAU base along with double-digit drops in both AOV and order frequency among active users."
Published on: May 15, 2023
• From the Virginia Mercury:
"The Supreme Court of Virginia turned down a request by Wegmans to reconsider a February decision that found neighbors had a right to challenge local approvals of the grocery giant’s plans to build a massive distribution center in Hanover County.
"The denial, issued May 11, was terse and offered no explanation of the reasoning of the judges, whose earlier decision in Morgan v. Board of Supervisors of Hanover County was unanimously in favor of the neighbors.
"'We are gratified that once again the Court has unanimously declared that Wegmans is wrong,' Brian Buniva, the attorney for Roderick Morgan and four other Hanover residents, said in a text message.
"What practical implications the ruling will have for the Hanover project are unclear. The distribution center is nearly complete and expected to begin operations this summer, even as the Supreme Court of Virginia decision sends the case back to a lower court for further review."
• From CNBC:
"Shoppers are hungry for deals as they pay more for food and necessities. People are looking for clothes and accessories as they juggle parties, vacations and days at the office again.
"But that has not helped Nordstrom’s off-price chain, Nordstrom Rack. The brand remains a weak spot in the overall Nordstrom portfolio, with sales totaling $4.81 billion in the most recent fiscal year, below pre-pandemic levels.
"In the holiday quarter, Nordstrom Rack’s net sales dropped about 8%, underperforming the roughly 2% decline of the company’s namesake banner.
"Despite Rack’s struggles, the Seattle-based department store operator is betting it can turn the lagging chain into a growth driver. It plans to open 20 stores this year with more coming after that.
"Nordstrom Rack has formed a dedicated leadership team, which includes some off-price veterans. It sharpened its focus on the well-liked brands that sell well.
"The success or failure of the Nordstrom Rack turnaround effort could shape the company’s future. Nordstrom’s overall sales were stagnant even before the Covid-19 pandemic. Now, discretionary merchandise is under pressure because of inflation and higher costs for essentials have nudged consumers toward off-price names."
• From Bloomberg:
"The global cost-of-living crunch has pushed coffee drinkers to get their fix from cheaper brews. But a shortage of robusta beans is making it increasingly difficult to find a budget-friendly cup.
"While many coffee lovers prefer the high-quality arabica beans sold in cafes, robusta is normally less expensive because the tree is hardier and requires less care, making it easier to produce in large quantities. The variety is often used in instant coffee, espressos and ground blends sold at supermarkets, which have experienced a comeback as cash-strapped consumers seek alternatives.
"Key growers, however, are finding it difficult to keep up with the surge in demand, with wholesale prices this week hitting the highest level in nearly twelve years."
Published on: May 15, 2023
…will return.