Shelf Talk Digest for April 25, 2019
Thank you for your great feedback on the first edition of this digest a few weeks ago. Please keep sending feedback, especially on what topics are useful to you.
1. Here in New England, Stop & Shop workers went on strike for 11 days across 240 stores (of 416 total in the chain). I got to speak with the local NBC news station and NECN’s “This Week in Business” about the strike and the changing grocery industry.
One takeaway: Research from profs at Cornell University makes a connection between employee satisfaction and revenue. They looked at individual stores in a northeastern supermarket chain. Happier employees lead to happier customers, which in turn leads to higher store revenue. This makes sense, right? And I'm thinking that the fact that Stop & Shop's employees walked out on their jobs means they weren't so satisfied. It will take some work to get their employee satisfaction to the right place.
NECN (7 min conversation, largely about the changing grocery industry)
NBC (2 min news piece, on the resolution of the strike)
The strike's timing was terrible -- the week leading up to Easter and Passover is the #3 sales week for grocery stores, and some data shows that the affected stores had a 75% drop in traffic from shoppers loyal to the chain. “Hannaford saw a 300% increase of foot traffic from loyal Stop & Shop customers, Market Basket saw a 115% increase, Trader Joe’s saw a 75% increase and Shaw’s and Star Market saw a 50% increase.” (Skyhook)
2. One of the big stories about Amazon is that they have a thriving advertising business, having grown to $11.3B, vaulting to the #2 spot in search advertising ahead of Microsoft. About half of that is in search ads. And Amazon is stealing a notable portion of ad money from Google. (WSJ)
“WPP PLC, the world’s largest ad buyer, spent about $300 million on behalf of its clients on Amazon search ads last year, and about 75% of that money came from Google search budgets, according to people familiar with the matter. It spent between $100 million and $150 million on Amazon search in 2017, the people said.” WPP’s spend with Google is over $3B. Omnicom says 20-30% of its clients’ ad money is going to Amazon.
Flip side: Amazon competes with its advertisers. It sometimes highlights its own private label items, even when a paid ad is in the mix.
Amazon has extra value compared to Google in that it can show when ads lead to purchases. Even more impressive: Ads are *only* for products sold on their site, vs. Google which sells ads that aren’t tied to an online store.
3. Walmart is getting jealous of Amazon’s advertising success. They acquired Polymorph Labs to help scale up that business. (CNN)
4. More on Walmart’s success with “click and collect” grocery pickup (and how it’s beating Amazon on this). (Seattle Times)
5. Whole Foods announced price cuts earlier this month. NYT’s analysis showed no change in the net price of their basket of products. (Strawberries increased $0.50 and La Croix dropped $0.50.) This reinforces my opinion that these price cuts follow a common grocery tactic: Try to improve price perception by dropping prices on key items and make up for it elsewhere. (NYT)
6. And Whole Foods shoppers are tired of scanning their Amazon Prime code in exchange for minimal discounts. “‘There is no benefit whatsoever,’ said Claudia Cukrov, an Amazon Prime member who shops at a Whole Foods store in Brooklyn, New York, on a near daily basis.” (Business Insider)
7. Whole Foods opened a bodega-like shop in Manhattan’s Chelsea neighborhood, called Whole Foods Market Daily Shop. It has an acai bowl station, bagels, and fresh juice. It also has opened its versions of food halls in Brooklyn’s Williamsburg and another in Manhattan’s Bryant Park. (Eater: 1, 2)
8. Ollie’s Bargain Outlet has 312 stores, ~$1.1B in revenue, and ~$130M in net income (12%), remarkably high for retail. They are opening 40 stores a year and focus on selling highly discounted goods, many of which are sourced from closeouts. And they sell nothing online. (Which might contribute to their high margins…) (Forbes)
(Trivia for Bostonians: Before starting the company, Ollie’s stopped in a Building #19 store when visiting Boston. They stole the model. I always wondered why Ollie’s seemed so similar, all the way to the typeface they both use in their ads.)
Foodservice and Food Delivery
9. Recent IPO filings have shed light on some food delivery stats. UberEats is bigger than Grubhub/Seamless at $1.5B in revenue, but it loses money on every order as it is growing its revenue share. UberEats earns 10% on each order, but it pays its drivers a higher rate. At some point it will need to make adjustments so they can be profitable. Meanwhile, Grubhub had 2018 net income of almost 8% on $1.0B in revenue. (USNews, Grubhub)
10. McDonald’s spent $300M to buy Israel’s Dynamic Yield, a provider of “algorithmically driven ‘decision logic’ technology.” “When you drive up to place your order at a McDonald’s today, a digital display greets you with a handful of banner items or promotions. … in a pilot program at a McDonald’s restaurant in Miami, powered by Dynamic Yield, those displays have taken on new dexterity. Algorithms crunch data as diverse as the weather, time of day, local traffic, nearby events, and of course historical sales data, both at that specific franchise and around the world. In the new McDonald’s machine-learning paradigm, significant display real estate goes toward showing customers what other items have been popular at that location, and prompting them with potential upsells. Thanks for your Happy Meal order; maybe you’d like a Sprite to go with it.” (Wired)
11. Burger King is introducing plant-based burgers made with fake meat from Impossible Foods. (Bloomberg)
Marketing (and Millennials)
12. Millennials want accountability: They are much more interested in effectiveness than labels. Though this insight is about Millennials’ political opinions, there are parallels in brand marketing. In consumer goods, this insight sheds some light on why longstanding traditional brands aren’t faring as well with Millennials compared to older generations. They are interested in products that deliver what they want instead of simply trusting a brand name based on its reputation or history. Pollster Kristen Soltis Anderson talks with Engagious about this phenomenon. (Engagious: 38 min audio)
13:00: Brands need to be thoughtful about the generational terms they use and the differences across generations, from X to Z.
20:20: Millennials have a distrust of Facebook but this hasn’t translated to other companies that have much more data on us.
27:10: Be careful with micro-targeting to be sure it makes a measurable difference.
13. Mintel’s Global Packaging Trends Report suggests that e-commerce product listings need to replicate the label experience that a shopper would have in store, especially for new and novel products. This makes sense! (NOSH)
14. Wine producers have been very effective in connecting with consumers. (HBR)
15. The Freakonomics podcast covered the interesting background behind the bananas we eat today. Even though nearly everyone eats them today, they didn’t show up in the U.S. until 1876, shown at Philadelphia’s Centennial Exposition as an exotic luxury. The first widely-sold commercial variety we ate (Gros Michel) was completely wiped out due to an infectious fungus, last sold in 1965. The Cavendish variety took its place as a hardier fruit, and there’s worry about disease wiping it out today.
16. A school district in Indiana is turning its leftover cafeteria food into packaged take-home meals for students who have poor access to food outside of the meals they get at school, with help from non-profit Cultivate Culinary. (KATV)
Unrelated (and interesting)
17. Worth watching: The Barkley Marathons. A famous prison escape sparks the idea for a cult-like ultramarathon in Tennessee that has seen only 10 finishers in its first 25 years. “A portrait of utter misery, and yet also very, very funny.” This was a great and slightly horrifying watch. (Watch on Amazon)
(via Wirecutter and NextDraft)
I read about the Barkley Marathons in two of the favorite things I read:
NextDraft: Daily news roundup from Dave Pell. It’s more concise, amusing, and useful than anything else I read. (Newsletter Signup)
Wirecutter: They review… everything. It started as a tech review site, added on home items, and then was acquired by The New York Times and continues to operate exceptionally well. I have happily purchased dozens of their recommendations, from my refrigerator to my computer monitor to baby & kid gear. (Pro tip: Their kid gift ideas have made me a very popular uncle.) (Website, Newsletter Signup )
With best regards,