business news in context, analysis with attitude

by Kevin Coupe

While I wasn’t writing MNB during my time off, that doesn’t mean I wasn’t paying attention … and here are some of the Eye-Opening stories that struck me as worth noting here …. with commentary provided in italics.

CNBC reported that Amazon said that its third annual Prime Day sales “grew by more than 60 percent from the same 30-hour window in 2016, with a ‘record number’ of Prime members shopping across 13 countries, Amazon said. It added that ‘tens of millions of Prime members’ rang up purchases during the event, up more than 50 percent from last year's shorter Prime Day.”

Indeed, Amazon says that Prime Day 2017 was its single biggest sales ever, with volume passing that of last year’s Black Friday and Cyber Monday. And, CNBC wrote, “This year's performance shows the self-created shopping holiday continues to have room to grow, which is notable given that July tends to be sluggish time for retailers.”

Meanwhile, Bloomberg wrote, “Wal-Mart and EBay Inc. both stepped up the competition on Prime Day. Wal-Mart offered Google Home, a rival to Amazon’s Echo, for $99, a $30 discount. EBay’s home page tweaked Amazon with a slogan, ‘Their Prime Deal is our Everyday Deal,’ and offers including free shipping, price matches and no membership fees. EBay promoted discounts on a variety of products, including electronics, appliances, footwear and power tools.”

CNBC wrote that Walmart and its Jet division tried to match many of Amazon’s discounts on Prime Day, with Market Track saying that Walmart and Jet were far better than other retailers (including Target and Best Buy) at being competitive.

At the same time, Amazon continued to use its Echo/Alexa system as a way to expand its ecosystem, with Bloomberg reporting that it is using “steep discounts to turn its Echo speaker into a best seller on the company’s annual Prime Day, making good on a bet to use the marketing event to push its voice-activated digital assistant into more homes … Even if Amazon loses money on the speaker sales, it gets a toehold for its Alexa platform to become more connected to shoppers who can use the device to check the weather, stream music, hail an Uber, order pizza -- and of course buy more from Amazon -- by voice command.”

However, Bloomberg also reported that there may be some resistance: “Fewer than 1 percent of shoppers are willing to use Alexa to order items that cost more than $25 because they don’t trust the platform to get their order right, according to One Click Retail, which analyzes e-commerce data.”

There was a time, hard as it is to believe, when the term “Black Friday” didn’t exist. There was a time, not so long ago, when “Cyber Monday” was an unknown combination of words. It isn’t hard to believe that we may reflect on the time predating “Prime Day” with some level of nostalgia … even as many of us place orders and take advantage of the deals. (Not me, by the way. I didn’t go on Amazon on Prime Day. I’m not even sure I went online. I was on vacation. I heartily recommend it.)

This isn’t just an internet conceit. There also are days in this country that celebrate shopping at small retailers, a concept created by a credit card company. And towns and villages everywhere have sidewalk sales that they use to grow traffic and sales. It’s just that bigger companies take such things to new levels.

I don’t blame Amazon’s competition for trying to dip their beaks a bit. The more interesting question to ponder, I think, is whether any of the competitors have the kind of muscle to create their own, separate versions of Prime Day. I’m not even sure the degree to which Walmart could do this successfully.

As for the One Click Retail conclusion about the limits to Alexa-based shopping … I think this is temporary at best, even if it is true right now. There are a lot of things that people do on Amazon, and on the internet in general, that a lot of people and companies predicted never would happen. And then, to paraphrase the old Amazon commercial, what used to seem unlikely and/or impossible becomes completely normal.

• Walmart reportedly is in the process of developing facial recognition software that can be used in its stores to identify unhappy and frustrated customers. When such customers are detected, employees will be “pinged” so they can go to the store’s checkout lanes and alleviate any concerns and problems.

The Wall Street Journal reported on a patent application filed by Walmart that said “it is easier to retain existing customers than acquire new ones through advertising. Often, if customer service is inadequate, this fact will not appear in data available to management until many customers have been lost. With so much competition, a customer will often simply go elsewhere rather than take the time to make a complaints.” Hence, the investment in a system that “links customers' facial expressions or ‘biometric data’ as its called in the patent filing to their transaction data - meaning how much they are spending and what they are buying.”

Business Insider notes that “Walmart has previously tested facial recognition technology, but later abandoned the program because it was ineffective. In 2015, the company tested the technology in an unspecified number of stores to try and detect shoplifters and prevent theft.”

I wonder if it is easier or harder to tell if a person is stealing from you, as opposed to just unhappy with the whole experience. I actually think this is a pretty good idea, but waiting until the person gets to checkout - assuming they actually do - strikes me as a mistake. Those kinds of interventions need to be take place in the aisles … and if they do, they are the interactions that can distinguish the physical store experience from the virtual kind.

• The Wall Street Journal had a story about how Walmart has replaced flesh-and-bone employees in almost all of its 4,700 US bricks-and-mortar stores with a piece of technology.

The employees used to work in the stores’ back rooms and “count cash and track the accuracy of the store’s books.” But now, the stores have “started using a hulking gray machine that counts eight bills per second and 3,000 coins a minute. The Cash360 machine digitally deposits money at the bank, earning interest for Wal-Mart sooner than if sent by armored car. And the machine uses software to predict how much cash is needed on a given day to reduce excess.”

Judith McKenna, Wal-Mart’s U.S. chief operating officer, says that the change is both natural and inevitable, that “the role of service and customer-facing associates will always be there,” though “there are interesting developments in technology that mean those roles shift and change over time.”

The WSJ wrote that this is part of a broader trend: “Nearly 16 million people, or 11% of nonfarm U.S. jobs, are in the retail industry, mostly as cashiers or salespeople. The industry eclipsed the shrinking manufacturing sector as the biggest employer 15 years ago. Now, as stores close, retail jobs are disappearing. Since January, the U.S. economy has lost about 71,000 retail jobs, according to data from the Bureau of Labor Statistics.”

I’ve read a couple of follow up pieces noting that if the federal government really wants to focus on lost jobs in the US, it really ought to be concentrating on retail, not the coal industry (there apparently are something like 50,000 US coal mining jobs in the US - not a big number, unless you happen to be a coal miner). I think this is a fair point, though I don’t think it means wading in with a heavy hand to try to somehow stop the growth of e-commerce, because that would be akin to trying to stop the wind from blowing.

This isn’t hugely surprising on Walmart’s part - it is a company that long has looked for every possible way to drive costs out of the system. Amazon gets a lot of attention for creating systems and processes that are less reliant on flesh-and-bone than its bricks-and-mortar brethren, but the fact is that every retailer is trying to find ways to do more with fewer people.

The thing is, as customers we all know when we’ve walked into such stores - we need help, or want guidance, and there’s nobody home and/or nobody paying attention. Those moments generally translate into missed sales and, often, lost customers.

BTW…it is worth noting that at least some of those displaced Walmart employees were converted into store greeters. Assuming they weren’t placed in windowless back rooms counting money for a reason - like a lack of social skills - that’s what retailers ought to be doing.

On the other hand, I wonder of those greeters eventually might be replaced by robots with facial recognition software.

Bloomberg reported the other day that Albertsons “has put its plans for an initial public offering on hold,” a reaction to the proposed $13.7 billion acquisition of Whole Foods by Amazon.

According to the story, “Albertsons had been considering reviving its IPO plans, which were initiated about two years ago, with plans to go public by the end of the year. However, the uncertainty about retail created by the Amazon-Whole Foods deal, along with what is described as “struggling financials and rival retailer Kroger's weak performance in the public market,” persuaded Albertsons executives that an IPO would not achieve a desired valuation of up to $12.4 billion.

Lots of uncertainty in the public markets, so I don’t blame Albertans for this decision. In fact, I always think it is a good thing when retailers focus more on Main Street than Wall Street.

GeekWire wrote that “if the Amazon acquisition of Whole Foods goes through, Amazon could become the top grocer in the U.S. by 2030, says Brittain Ladd, who worked on global expansion for the online retail giant’s grocery arm, AmazonFresh.

“Combining the leading online retail company with a respected grocer is bad news for competitors such as Walmart, Kroger and Target. Ladd, who also worked on supply chain, logistics and delivery during his three years at Amazon and is now a strategy and supply chain consultant in the grocery industry, predicts Amazon will rapidly gain market share against these companies over the next few years.

“Ladd predicts Amazon will pass Kroger to become the number two grocer in the U.S. by 2025, and surpass Walmart to claim the number one spot some time between 2027 and 2030.”

There’s a lot that can happen between now and 2030. These kinds of predictions depend on companies and Walmart and Kroger not making big moves of their own. I wouldn’t bet on that. That said, some of them better get it in gear...

TechCrunch reports that even as word spread last week that Amazon appeared to be gearing up for an entry into the meal kit business, it appears that it already is testing the service in Seattle.

According to the story, "Seattle resident Josh Chadd told GeekWire (via Business Insider) about his experience with the service, which involved ordering a pre-portioned Steak Au Poivre box that ships with prepared ingredients and an easy to follow recipe. The meal was one of a number of options that showed up on Amazon’s website, including Tacos Al Pastor, about a week or two ago for Chadd, who is an AmazonFresh customer. The limited trial seems to have begun around the end of June, judging by user reviews posted to the e-commerce site."

There are said to be about 17 meal kits available to order, ranging in price from $14.99 to $18.99.

"This is the clearest indication yet that Amazon intends to offer meal kits as a proper service," TechCrunch writes. "The e-commerce giant often spins up a business in a limited market first, as it has done with grocery pick up and delivery service and AmazonFresh prior to this, as well as its cashier-less retail shopping experience."

Getting into the meal kit business seems like a natural thing for Amazon to do .... but then again, I think it is natural thing for most food retailers to do. Shame on them for paying no attention to this concept, and essentially leaving the door open for the likes of Blue Apron and Chef'd to walk in, steal some market share and demonstrate how disruption works.

• Former Walmart US CEO Bill Simon told Fox Business that he anticipates that Amazon will face far more regulatory scrutiny as it grows, and that people are starting to “complain about how the way they price and they scrape prices across the market.”

Is he really anticipating such scrutiny? Or hoping? Because the idea that a former Walmart CEO would criticize any other retailer for its pricing practices is sort of rich.

BTW … I would agree with Simon that Amazon will face more regulatory scrutiny. Everybody faces more scrutiny as they get bigger and more powerful.

• Starbucks announced last week that it has named Lucy Helm - who has been with the company for almost two decades, most recently as general counsel - to be its chief partner officer. CNBC notes that Helm has been working in the job on an interim basis leading up to the announcement.

The appointment comes as Starbucks has been embarking on a set of new initiatives designed to improve speed and customer service in the stores, even as an external survey of employees revealed that some three-quarters of them feel that stores are not sufficiently staffed to meet customer demands. Starbucks officially disputes the results of that survey.

In a statement to employees, CEO Kevin Johnson said that Helm is "ideal" for the role, adding, "During her years at Starbucks, she has held a variety of important positions that have, in sum, given her a comprehensive understanding of Starbucks operations and our unique culture. As many of you already know, to work with Lucy is to understand her profound passion for partner advocacy."

A couple of thoughts here.

First, if I were an employee and the company informed me that the new liaison/advocate was someone who until recently was the firm's lawyer ... well, let's just say that this wouldn't necessarily be the most reassuring news I'd ever gotten. That's not to make any sort of judgement about Lucy Helm ... for all I know, she indeed could be the perfect person for the job.

But I also keep thinking about a time when it was the CEO's job to be an advocate for the company partners ... that used to be part of the gig. Is Starbucks getting so big that the folks in the front office are disconnected from what's going on in the stores? I'm not saying this is the case. I'm just asking the question.

• Interesting piece in the New York Post about how a New Mexico man was arrested and charged with beating and attempting to kill his girlfriend after the Amazon Alexa system in their home called the police.

According to the story, the man believed that the woman was cheating on him and was in the process of attacking her when he said, “Did you call the sheriffs?”

“The question was inadvertently picked up by the smart speaker and the voice-powered virtual assistant recognized the phrase as a command - prompting it to call 911, Bernallillo County Sheriff’s Department Deputy Felicia Romero confirmed to the Post on Monday.”

Local law enforcement officials responded to the call and, using a crisis negotiation team and a SWAT team, managed to subdue and arrest the assailant.

I have to admit that one of the things that I find most interesting about this story is the fact that I can’t find anyplace where anyone actually used the “wake word” to activate the Alexa system. That’s not supposed to happen. I’m not exactly worried about this, but it does make me think.

MarketWatch reported on how hundreds of the internet’s biggest companies and activist organizations - including Amazon, Netflix, Yelp, Spotify, the American Civil Liberties Union (ACLU), the Writers Guild of America (WGA), and (go figure!) Pornhub - “are sounding the alarm and rallying internet users against U.S. government plans to roll back net neutrality rules.”

The MarketWatch story provided this context: “Net neutrality, also called open internet, is the idea that everyone as a right to fair and unfettered online access. Under President Barack Obama, the Federal Communications Commission reclassified internet service providers with Title II of the Telecommunications Act, allowing them to regulate providers as common carriers, like telephone networks. Now, under a new administration and agency head, Ajit Pai, the FCC is planning to reverse Obama-era open internet policies.”

Among the companies pushing for a rollback of net neutrality rules are Verizon, Charter Communications, Spectrum (which used to be Time Warner Cable), and Comcast. AT&T has said that it is sympathetic to the pro-net neutrality activists, but the story noted that “critics have denounced AT&T’s support as a publicity stunt.”

I find myself a little leery about siding with Pornhub on anything … but on the other hand, I think I’d rather side with Pornhub than Verizon or any of those other guys. I totally believe in the concept of net neutrality, and think that reversing the current FCC classifications is akin to betraying the public trust. Not that companies like Verizon or Comcast have the public interest at heart…

• I was sorry to read about the passing of Martin Landau, the highly accomplished character actor who first came to national prominence as one of James Mason’s henchmen in Alfred Hitchcock’s North by Northwest, and later in his career was brilliant in Tucker: A Man and His Dream, Crimes & Misdemeanors, and Ed Wood (for which he won a Best Supporting Actor Oscar). He was 89.

Even before I saw Landau in the Hitchcock masterpiece, I saw him in “Mission: Impossible,” the landmark late-sixties TV series in which he co-starred for the first three years, playing Rollin Hand, a master of disguise. Loved that show, and love him in it.

One other thing. If you ever want to win at trivia, one almost surefire way is to ask the names of the original regular cast of “Mission: Impossible.” Most people will say Peter Graves, Barbara Bain, Greg Morris, Peter Lupus and Landau. But they’re wrong - because Peter Graves only joined the series in the second season, with Steven Hill playing Dan Briggs, the leader of the spy team, in the first season. And, Landau only became a series regular in the second season - in the first season, he was always credited as a “special guest star.” I know this all seems arcane, but that’s why they call it trivia … and besides, you can’t get this kind of information on other business blogs.

Glad to be back...
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