Amazongeddon: The New Supermarket Battleground

Quartz: “In southwest Ohio, the prices of staple foods are hitting the floor. A carton of eggs in Cincinnati supermarkets are going for as little as 39 cents. And gallon-sized jugs of milk are selling for less than a dollar. The American grocery store is about to become a battleground—and consumers will love it.”

“Shoppers in the UK certainly did. Established companies such as Tesco forfeited millions in sales to compete on price with German discount grocers Aldi and Lidl, who began opening more and more stores. Now, those discount brands have made it to the US, and have opened hundreds of stores across the country … These telltale signs of a brewing US grocery-store war are happening just as online retailer Amazon has decided it wants to shoehorn itself into the grocery business by acquiring health food grocery chain Whole Foods for $13.7 billion.”

“But disrupting groceries will be a lot different than shaking up publishing, which is how Amazon got its start. Unlike bookstores of the late 1990s, clawing away at market share by driving prices down is a game supermarket companies are already good at playing.”

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Quantumobiles: VW Catches D-Wave

The New York Times: “Efforts by Volkswagen, trying to remake itself as a technology leader as it recovers from an emissions scandal, show how far into exotic realms of technology carmakers are willing to go. Volkswagen, a German company, recently joined the handful of large corporations worldwide that are customers of D-Wave Systems, a Canadian maker of computers that apply the mind-bending principles of quantum physics.”

“While some experts question their usefulness, D-Wave computers — housed in tall, matte black cases that recall the obelisks in the science fiction classic 2001: A Space Odyssey — can in theory process massive amounts of information at unheard-of speeds … While classical computers are based on bits with a value of either 1 or 0, the qubits in a quantum computer can exist in multiple states at the same time. That allows them, in theory, to perform calculations that would be beyond the powers of a typical computer.”

“This year Volkswagen used a D-Wave computer to demonstrate how it could steer the movements of 10,000 taxis in Beijing at once, optimizing their routes and thereby reducing congestion … Such claims are met with skepticism by some experts, who say there is no convincing proof that D-Wave computers are faster than a well-programmed conventional supercomputer … Volkswagen executives say they will publish the results of their work with D-Wave computers, allowing outsiders to try to debunk them.”

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Kronkiwongi: How Lego Fans Fandom

Fast Company: “In a presentation at the Cannes Lions Festival of Creativity on Sunday, Lego’s senior global director of social media and video Lars Silberbauer, broke down how the brand built and approaches that strategy … The two pillars of the brand’s social strategy are based on two core human social needs: the need to play and build together, and the pride of creation … By facilitating, supporting, and promoting the efforts of its fans, Lego amplifies their passion to a global audience, further fanning the flames of fandom everywhere it goes.”

“Silberbauer outlined three examples of how they do this. The first is through a competition called First Lego League, a Lego robotics competition that’s not run by the brand at all, in which up to 70,000 kids worldwide against each other in building Lego robots that can solve challenges. Second was the crowdsourcing platform Lego Ideas, where the brand invites people to propose and build new Lego sets. Like a branded version of Kickstarter, aspiring Lego designers have to get 10,000 supporters for their projects in order to be considered.”

“The third example was the Kronkiwongi Project.” Silberbauer explains: “The insight behind it is that 98% of us were creative geniuses at age three, but the challenge is that only 2% of us retain that level of creativity. With this project, we wanted to reveal and celebrate, not that we get less creative, but the amazing openness and creativity that kids have. So we asked kids from all over the world to tell us what a Kronkiwongi is and to build one for us.”

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How TJ Maxx Defies Digital Gravity

The Wall Street Journal: “Traditional retailers are in crisis, damaged by rapidly shifting consumer tastes, technological change and cut-throat price competition. And then there’s TJX Co., which is defying gravity with the simple idea that under the right circumstances people still like to shop in stores … Central to TJX’s success are its merchants. The company employs more than 1,000 buyers who buy apparel and other goods from more than 18,000 suppliers around the world. Each buyer controls millions of dollars and has authority to cut deals on the spot, unlike most department stores, which can take weeks to review and approve orders.”

“Stores typically get deliveries several times a week. The schedule ensures a continuous stream of products to lure shoppers. And because TJX doesn’t purchase the full range of colors and styles, stores have one or two items in a particular color or size, giving customers an urgency to buy … Its stores have no walls between departments, so it can quickly reconfigure floor plans. Similar clothes from different labels can be found on the same rack.”

“One area where TJX trails other retailers is on the Internet … Some brands won’t let TJX sell their products online because they don’t want the items to be easily searchable at lower prices. For certain brands that allow online sales, shoppers have to click on items before they can see brand names. The restraints are similar to those in the physical world, where some companies do not allow TJX to advertise their brands. Advertising individual labels is not part of TJX’s marketing strategy.”

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Zero-Margins & The Future of Retail

Vox: “Competing with Amazon is terrifying for any incumbent business because the company’s executive team operates on a radical model whereby the company’s overall net income is nearly zero quarter after quarter … That’s an enormous problem for every grocery chain in America, which already operate on razor-thin margins … A Whole Foods under Amazon’s stewardship will almost certainly accept lower profit margins than it does as an independent chain — and that spells trouble for everyone else in the grocery business.”

“Whole Foods could deliver value to Amazon without necessarily delivering profits. The stores would create a useful additional channel for selling Kindles, Echoes, Fire TV boxes and other Amazon hardware. And by linking discounts to Amazon Prime membership, it could drive sales of those. More subtly but perhaps more importantly, encouraging Whole Foods shoppers to in some sense ‘log in’ with their Prime accounts would generate tons of new user data that could feed the larger Amazon beast.”

“The bottom line is there are lots of ways that a cheaper, but fundamentally similar, version of Whole Foods could contribute to the Amazon gestalt even while run as a zero-margin business.”

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Amazon Patents Shopper-Control Technology

The Washington Post: “Amazon was awarded a patent May 30 that could help it choke off a common issue faced by many physical stores: Customers’ use of smartphones to compare prices even as they walk around a shop. The phenomenon, often known as mobile ‘window shopping,’ has contributed to a worrisome decline for traditional retailers.”

“But Amazon now has the technology to prevent that type of behavior when customers enter any of its physical stores and log onto the WiFi networks there. Titled ‘Physical Store Online Shopping Control,’ Amazon’s patent describes a system that can identify a customer’s Internet traffic and sense when the smartphone user is trying to access a competitor’s website.”

“When that happens, Amazon may take one of several actions. It may block access to the competitor’s site, preventing customers from viewing comparable products from rivals. It might redirect the customer to Amazon’s own site or to other, Amazon-approved sites. It might notify an Amazon salesperson to approach the customer. Or it might send the customer’s smartphone a text message, coupon or other information designed to lure the person back into Amazon’s orbit.”

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Robo-Shop: Will Cashiers Cash Out?

The New York Times: Our mental image of job-killing automation is robots in factories or warehouses. But the next jobs to disappear are probably ones that are a much bigger part of most people’s daily lives: retail workers and cashiers in stores and restaurants … Half the time worked by salespeople and cashiers is spent on tasks that can be automated by technology that’s currently in use, according to a recent McKinsey Global Institute report. Two-thirds of the time on tasks done by grocery store workers can be automated, it said.”

“Retailers say automating certain tasks doesn’t necessarily displace employees, but frees them to do other things that are more valuable to customers. Lowe’s, for instance, said its customer service robot answered simple questions so employees could provide more personalized expertise, like home project planning … But shoppers often prefer to save time by interacting with fewer people, especially when they just need coffee or paper towels.”

Erik Brynjolfsson, director of the M.I.T. Initiative on the Digital Economy, comments: “The bigger and more profound way that technology affects jobs is by completely reinventing the business model. Amazon didn’t go put a robot into the bookstores and help you check out books faster. It completely reinvented bookstores. The idea of a cashier won’t be so much automated as just made irrelevant — you’ll just tell your Echo what you need, or perhaps it will anticipate what you need, and stuff will get delivered to you.”

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New Realities of the Grocery Experience

The Wall Street Journal: “The challenges for grocers today include a new reality: The days of shoppers filling carts during a big weekly trip to their neighborhood supermarket appear over for now. Consumers are more targeted in their shopping habits. They are less loyal to retailers and more willing to buy groceries online. And they are buying more from stores at two poles: ones with cheap prices, and ones that offer high-quality fresh food, often at a premium.”

Natalie Kotlyar, a consultant, says shoppers expect “convenience, selection and the right price and they want it now. Everyone is trying to meld those concepts to create the perfect shopping experience.”

“Chains that don’t adapt quickly to the changes in consumer behavior and business dynamics won’t survive, say analysts, who, along with some supermarket executives, expect more consolidation in the coming years and predict more grocery stores will close. To compete with Amazon, Wal-Mart is offering curbside pickup and home delivery in test markets. Kroger is expanding its platform for customers to order groceries online and pick them up at the stores. It also said it has invested $3.8 billion in lowering its prices over the past decade.”

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Nike Goes Local & Gets Physical

The New York Times: “Nike shaped itself into one of the globe’s most recognizable brands. Now it has a new idea: Go local. Facing pressure from investors and competitors like Adidas, Nike said Thursday that it was shaking up its organization to focus more on consumers in just a dozen cities around the world and on releasing new products faster in those places.”

“To keep its products relevant and make its service more personal, Nike aims to develop what it called a ‘local business, on a global scale’ and ‘deeply’ serve customers in 12 cities, including New York, Paris, Beijing and Milan. Those places are expected to deliver 80 percent of the company’s growth over the next two and a half years.”

“Despite the move to online shopping that is transforming retailing, Nike is not giving up on its physical stores. Instead, the company will use the stores to try to foster relationships with customers and further link the shops to its digital efforts. Nike, which is known for sponsoring star athletes like LeBron James and Rafael Nadal, will also try to speed up how quickly it designs and works with its suppliers to deliver new gear. The company wants to cut its product-creation cycle time in half.”

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