Tuesday, October 31, 2017

Amazon has slashed seller fees to try to improve its grocery selection online

The economics of selling low-priced packaged goods online are tough.

Amazon Prime logo made out of ground meat at a California Whole Foods location.
 Kurt Wagner
Amazon cemented its long-term interest in the grocery industry when it spent nearly $14 billion to acquire Whole Foods earlier this year. Now it’s making a subtler move aimed at improving its own grocery selection online.
Amazon recently told businesses that sell non-perishable grocery items on Amazon.com that it was lowering the fee it charges them on items priced at $15 or less. Amazon previously charged 15 percent on all grocery items, but will now charge only 8 percent on the lower-priced goods for at least the next year.
“To help you list more products and keep prices competitive, we are offering you a limited-time referral fee discount on Grocery products,” the email said, according to a copy forwarded to Recode. “This fee promotion starts at 12:00 a.m. October 15, 2017 (PST), and will run through 11:59 p.m. October 14, 2018 (PST).”
The move could be looked at as a competition-focused one: While Walmart also charges 15 percent across the board for grocery items sold through its online marketplace, its subsidiary Jet.comcharges only 10 percent for most non-gourmet packaged foods, according to its website.
Perhaps more importantly, though, the fee reduction seems like an acknowledgement that it’s difficult for businesses to make a reasonable profit when selling some inexpensive groceries online.
Take, for example, a business that wants to sell a 40-ounce jar of peanut butter that retails for $5.49. The easiest way to make the product eligible for the Prime shipping program is to store it in an Amazon warehouse under its Fulfilled By Amazon — or FBA — program.
But the FBA storage-and-shipping fee alone for this one jar would be about $4.44 — in part because of its weight — and that’s before you factor in the cost for the seller to make or acquire the product as well as Amazon’s 15 percent commission under the previous fee structure. The economics don’t really work.
As a result, sellers and grocery brands have had to come up with alternatives to sell these lower-priced grocery staples through Amazon. One popular option is selling a certain product in a more-expensive bulk pack, as you might find in a Costco or BJ’s Wholesale Club.
Others sell their items at a wholesale price to Amazon, which then funnels the low-priced goods into membership programs such as Prime Pantry or Amazon Fresh.
The Prime Pantry program lets Prime members fill a box full of grocery items but it costs $5.99 per box for shipping. Amazon also sells low-priced grocery items through Amazon Fresh, but that grocery program costs $14.99 a month in addition to the regular $99-a-year Prime membership fee.
Still, Amazon recognizes that there are plenty of Amazon customers that will never pay for either program and it still wants those people to think of Amazon as a grocery destination. The problem is, it’ll never win that perception by only selling bulk-size packs.
That’s the context that likely played a big part in Amazon’s decision to lower its fee. (Amazon declined to comment.) The question is whether the reduction is a real solution to the problem.
David Rekuc, the marketing director for the e-commerce consultancy Ripen eCommerce, is skeptical that it is. While he believes there are some types of grocery items that might become profitable with the fee reduction, Rekuc says FBA fees or the cost for a seller to ship the item themselves still make it difficult to profitably sell a single unit of a low-priced grocery item — despite the lower commission.
“It’s nice to see and it may move the needle a little bit,” he said of the fee discount, “but it won’t fundamentally change [Amazon’s] penetration in grocery.”

Monday, October 30, 2017

THE FUTURE OF PRODUCE MARKETING RELIES ON EMOTION

NEW ORLEANS — To people predicting future trends, I always think, “Where’s the accountability?”
Does anyone ever look at what futurists said 20 years ago and count up hits and misses?
Worzell was right 20 years ago when he said retailers will learn more about consumers through bar codes and frequent shopper programs. He predicted people will want to know more about where their food comes from, although he attributed that to baby boomers aging rather than the then-infant millennial generation.
He also predicted the rise of “nutraceuticals” where consumers monitor what they eat as a means of medicating themselves and match up food to their genetic code.
We’re not there yet, but Produce Marketing Association CEO Cathy Burns referenced this in her State of the Industry presentation Oct. 19 at Fresh Summit, calling it “body hacking.”
Burns looked to the future with much of her address. She stepped out on a limb with some mild projections about how Generation Z (born 2000-15) will act in the marketplace.
To me, that’s as fanciful as predicting the weather next week in Kansas.
But Burns nailed the analysis of several future trends based on existing trend data.
More demand for riced cauliflower and broccoli? Sure: there were several new products at the expo.
More plant-based diets? Many companies at the expo provided solutions, but I’m not sure we’ll see 47% of our protein from plants by 2020, as she cited.
Food and floral to inspire the senses? Definitely more of that.
She pointed out the popularity of Buzzfeed’s Tasty videos, which claim more than 1 billion page views per month. Its YouTube channel has 4.4 million subscribers.
She said while 99% of food videos are made by professionals, 99% of recipes are made by amateurs. Well, of course, the amateurs are called “consumers.”
Burns said fresh produce has some momentum, and now it must capitalize. But how? That’s always the toughest question.
I like that produce companies increasingly are going for more of an emotional marketing approach. If consumers were rational, we’d all have fruits and vegetables as half our plate, and we know that’s not the case.
Fruits and vegetable as indulgent, fun, easy. If you were one of the 19,500 at Fresh Summit, you no doubt noticed this on the expo floor, and you will notice it in The Packer’s expo coverage.
wholefoodsamazon2.jpgPhoto: Whole Foods Market

Whole Foods gives Amazon’s net sales a boost

Expansion, new formats also on the earnings call docket
In its first full segment as part of the Amazon.com Inc. portfolio, Whole Foods Market helped generate nearly 3% of its new parent’s net sales for the third quarter ending Sept. 30.  
The Seattle-based e-commerce giant saw 34% growth in net sales as a whole, which translates to $43.7 billion for the quarter as compared to $32.7 billion for the same segment in 2016. In a release announcing the earnings results, Amazon credited $1.3 billion of the sales results to Whole Foods.
Net income was $256 million in the third quarter, or $0.52 per diluted share, a $4 million climb from 2016, which also registered as $0.52 per diluted share.
“We’re really excited to have [Whole Foods] as part of the team now after the acquisition in late August,” said Amazon’s Chief Financial Officer Brian T. Olsavsky during the company’s third quarter earnings call on Thursday.
“I think we’ve had busy months since we’ve joined forces,” Olsavsky added. He pointed to Amazon’s offering of lower prices on a range of “key” grocery items in the stores and its launching the Whole Foods private label products on the website. Amazon Lockers have also been installed at select Whole Foods stores, though this development has caused some friction among co-tenants.
Olsavsky also said that the Prime is slated to become the Whole Foods customer rewards program in the future.
The acquisition of Whole Foods Market gave Amazon a foothold in brick-and-mortar grocery via a company that closed out the opening quarter of 2017—its last full segment before being acquired—up 1.9% in total sales, notching a record $4.9 billion.
However, Whole Foods also endured a 2.4% drop in same-store-sales during Q1. This followed a 2.6% drop at the close of Q4 2016.
Olsavsky commented on the synergy between the two brands and described former Whole Foods CEO John Mackey and his team as “very-like minded with (Amazon), customer-obsessed, ready to work together to continue their mission and expand on their offerings that we can offer customers.”
“So far, so good,” Olsavsky continued while discussing the early stages of the acquisition. “We’re thrilled to finally be working together after the summer of closing the deal.”
Here are a few other learnings from the call:
1. Integration will continue
More integration and “touchpoints” will be visible as Amazon explores ways to serve customers using Amazon Fresh, Amazon Pantry, Prime Now and Whole Foods Markets.
Some may expand and some may become combined.
“There’s no one paradigm for all customer engagement, and we’re looking for the ones that resonate best with customers and we’re going to continue with those,” Olsavsky said.
2. Whole Foods will expand
The CFO confirmed that Whole Foods expansion will occur, but management is not ready to announce what that will look like.
3. Watch for new store formats
“We’re experimenting with a lot of formats,” Olsavsky said. “I think Whole Foods really gives us a vast head start on that and a great base and a great team to work with who has a lot of history. They probably have 10 to 20 years of learnings that we don’t have and wouldn’t have.”
4. Amazon Prime rewards
Amazon Prime will become a platform for a Whole Foods Market customer loyalty program. A timeline was not announced.
What we don't know:
When asked about adding pharmacies at Whole Food outlets, the CFO answered simply: I cannot confirm nor deny rumors.
MOMs-hampden_1.jpg

Independent retailers remain confident after Amazon-Whole Foods Market deal

Foodservice, good customer care and even expansion are among independent natural products stores’ plans as Amazon makes its mark on Whole Foods Market.
Rachel Cernansky | Oct 23, 2017
Now that independent natural foods retailers have had some time to let the Amazon-Whole Foods Market announcement settle, they are starting to think ahead to how they may adjust their plans in response. No one admitted to any thoughts of slowing plans for expansion, and at least a few major players are forging ahead with bold growth plans already in place. As for how the merger will change dynamics within the marketplace, everyone seems to have their own concerns.
We checked in with a few independent natural grocers to hear how they envision their path forward.
Mother’s Market & Kitchen will continue planned upgrades for existing stores and plans to open two new stores in 2018. As for the company’s retail experience, CEO Mo George-Payette said Mother’s will “continue to insist on excellent customer service throughout the stores and enhance our foodservice offerings, along with a conscious effort to provide convenience to the overall shopping experience.” That will range from grab-and-go items and quick turnaround at the juice bars to order fulfillment through the company’s app, with “much more in development.”
MOM’s Organic Market has one new store planned and two remodels big enough that Lisa de Lima, VP of grocery, said MOM’s considers them new stores: one 8,000-square-foot store is going to 18,000, and a 10,000-square-foot store is expanding to 16,000. The purpose is not only to physically expand but to upgrade and introduce two new concepts for the retailer. De Lima couldn’t disclose what those concepts are but gave this hint: “Currently we don’t do as much with the periphery of the store and concentrate on ‘center store;’ these new concepts will widen our offering on the periphery of the store.”
Nelson said he’s not losing sleep over the Whole Foods deal, but the two concerns he did voice are over the supplements and body care categories—because Amazon has such a simple, efficient ordering and delivery system that could have impacts on the store—and, perhaps more worryingly, potential impacts on the supply chain in general three to five years down the road. “I’m more concerned about the future of the supply chain than I am necessarily about the competition,” he said.
In the end, though, he takes heart in what a recent survey told him—that customers buy about 25 percent of their groceries from Dean’s. “I looked at that 25 percent as an opportunity,” he said. “The reality is, even though none of us like to face it, we’re all going to share customers. And that’s OK, because it’s an opportunity.” Another upside to the Whole Foods deal, he said, is it’s even easier now to differentiate Dean’s as a store that remains committed to its founding principles. “We’re able to say, [Whole Foods] is no longer a do-good entity out to help the world like we are. We don’t go around screaming it, but it makes it a little easier to use that as a point of differentiation.”
Kimberton Whole Foods is also sticking to its growth plans, with a new store opening in February and expansion of an existing store to take on its new, larger format. Past stores have been between about 3,000 and 8,000 square feet in size, and the new ones will be around 15,000. “So we’re upping the game,” Owner Terry Brett said. Kimberton is also growing its prepared foods sections with hot and cold bars, fresh sushi, baked goods and a full cheese wall with more sophisticated cheese offerings.
And while Whole Foods is only a secondary competitor after Wegman’s, Brett said, it is closest to Kimberton in terms of its customer service—an area where he, like other natural retailers, plans to step up his game. “That’s the trick—how do you cut costs or lose margins without losing service? That’s something we’re working very hard on in our training programs,” he said, by focusing on educating team members on the company’s mission to support local farms and artisans, and to be familiar enough with inventory so they can talk knowledgeably about products with customers. And the department heads won’t be going anywhere. “For our customers that really want to be helped and educated in the store—we’re not going to lose that aspect to just be able to lower prices.”

The Rise Of Halal Cuisine In An Age Of Islamophobia

Food that met Muslim dietary strictures was once difficult to come by, but the growth of the American Muslim population — and the increase in non-Muslims consuming halal food — has made it much easier to find such offerings in supermarkets like Whole Foods Market.
Craig Ruttle/ASSOCIATED PRESS
It's an evening late in the spring, and the sun is perilously close to setting. I'm getting nervous. Ramadan brings out the Muslim rush when it's time to break our fast, which puts me among the throng outside of Bantam King, a Japanese restaurant in D.C.'s Chinatown where we've all congregated. That's because Bantam King announced on Facebook that it was only serving halal food during the holy month.
A friend enters the shop and greets me. "Hey, assalamu alaikum," she says. Gesturing to the people around us she remarks, "I guess everyone came to try the halal ramen."
Bantam King has made itself a pop-up halal shop — "Ramendan," as the promotion was called. "Halal" is often mistaken for a particular type of cuisine, but in fact is the Arabic word for permissible. Halal food, on the other hand, is any type of food that adheres to Islamic dietary prescriptions — free of pork, its byproducts, and alcohol, while meat and poultry must be processed according to Islamic requirements.
Historically, finding halal food in North America has been a labor-intensive affair. When I was a child in the early 2000s, my family would have to travel from one end of Toronto to the other if we wanted to eat a halal steak.
It's why, back in 1998, Shahed Amanullah created the online halal restaurant guide Zabihah.com, which became a vital tool for people looking to eat halal.
"At the time, I could find only about 200 restaurants through either word of mouth from friends or just searching on the internet," Amanullah said. But finding halal food is getting easier: Today, Amanullah's site boasts well over 7,000 entries. It's how I find most of the restaurants where I eat.
It's no coincidence that the halal food segment is becoming more profitable: In 2016, Bloomberg reported that sales of halal food in grocery and convenience stories reached $1.9 billion in the U.S., a 15-percent increase from 2012.
Globally, in 2015 the halal certified food and beverage market was estimated at $415 billion, according to Thomson Reuters' latest State of the Global Islamic Economy Report. And as many Muslim countries rely on imported food, the U.S. has become a major exporter of halal products.
"As the economy sort of shifts globally, it makes it very appealing to food producers to market halal foods not just domestically but internationally," said Salah Hassan, who teaches Arab American and Muslim American studies at Michigan State University.
Besheer Mohamed, a senior researcher at Pew, says that the number of U.S. Muslims has been growing steadily, from a relatively small base. "We now think that 1 percent of the U.S. population is Muslim," he says. "And so as the number of Muslims grow, interest in Muslim-specific products presumably will also rise just by pure numbers."
But halal food isn't catching on just because devout Muslims are eating it: Amanullah says roughly half of his viewers are exclusive halal eaters and the other half are not.
The growing popularity of halal food in America runs parallel to a darker trendline: the intensifying of Islamophobia in America.
The Pew Research Center recently released its 2017 survey of U.S. Muslims. Roughly half of the participants say they have experienced discrimination, and the share of Muslims who say they have faced at least one instance of religious discrimination has risen modestly.
And the numbers seem to bear out these fears: The Council on American-Islamic Relations recorded a 65-percent jump in anti-Muslim bias incidents from 2014 to 2016, and the number of hate crimes in the first half of this year spiked 91 percent over the same period in 2016.
This coincided with President Trump's Muslim ban, an executive order meant to bar immigrants and refugees from six majority Muslim countries.
So, what gives? Krishnendu Ray, who chairs the department of nutrition and food studies at New York University, pointed to similar examples in communities that endured broad suspicion even as their cuisines became widely sought and consumed.
He pointed to the prevailing anti-German sentiment during and immediately after World War I which, strangely, came at the same time as a surge in the market for German food — although the food was often renamed to make it more palatable. (This is how frankfurters became hot dogs.)
You could see the same phenomenon play out for Chinese people, a group for whom contempt ran so deep that in 1882 the government formally forbade them from immigrating to the U.S. But by World War II, anti-Chinese sentiment existed simultaneously with the chop suey craze. And Ray says that while large parts of the population had disdain and disgust toward Chinese food, there was also a kind of excitement about something "exotic" and different.
Ray calls this idea "culinary colonialism": a mode of acquiring cultural capital — and the idea of worldliness and cool points — by consuming everything. The colonizer seizes the social assets of a person by claiming something like their cultural foods.
"This omnivorousness is related to consuming the other," he says, "other" in this sense meaning the group being colonized. "Just because you are consuming something doesn't mean you have any particular respect for that other."
But Amanullah, the founder of Zabihah, attributes some of the interest in halal food to the current political situation — consuming halal food in a kind of demonstration of one's political beliefs.
"This was very much driven by a reverse Trump effect — because of the highlighted attention towards Muslims in the wake of Muslim ban," he said. "American communities and businesses are wanting to show their solidarity and support for their Muslim neighbors."
Ray says that because the U.S. is starting at such a low baseline regarding halal cuisine, any increase in the consumption can look like a huge uptick in growth.
Ironically, Ray says such an increase can also drive Islamophobia. Anthropologists call it the fear of small numbers — the growth of the halal market becomes evidence of an explosion of Muslim-ness and fuels conspiracy theories about the impending imposition of sharia law.
Amanullah says he sees a little of this with people who are hostile to Muslims using his Zabihah website as a guide for places to avoid. There have also been a few franchisees of bigger companies that offer halal but who've asked to be removed from his database. "The franchises that don't want to be labelled on my site, they tend to be headquartered in parts of the country where Islamophobia is more of a problem," he said.
And then there are the restaurants that have faced a little bit of backlash but realize it's a choice: between a few trolls harassing them on Facebook or bolstering their bottom line. Bantam King is a great example of that, Amanullah says. "They didn't expect nearly the amount of attention they got, but every night at 8:30 they were packed," he said. "They basically had two dinner rushes."
Whether halal food will become a relatively mainstream designation, like kosher food, remains to be seen.
Ray says he is uncertain whether Islamophobia will allow for that to happen, while Amanullah is more optimistic. He says that where food goes, people will follow, and he hopes halal food will be one of those things that normalizes the American Muslim presence in America.
So what does all this mean for Muslims like me? As I sat in Bantam King that day in Ramadan, at the counter because there was no other available seating, I heard a waiter tell the cooks that sunset was at 8:28 p.m.
That was the time for breaking fast that day, so the Muslim patrons would want their meals by then. I was used to meticulously counting down the minutes till sunset, but here I was in this restaurant in the U.S. — and for the first time in my life the non-Muslim people around me were doing the same.
I don't expect food will single-handedly save us all from bigotry. But at least now I can vent over a bowl of halal ramen today, and halal who-knows-what-else in the years to come.