How Halifax's library deals with rule breakers.

Everyone has a vacation quirk. My family's is to visit libraries wherever we go. Last week we visited Halifax's central library and uncovered this brilliant scheme they have to make peace with rule breakers.

What is going on in grocery retail?

This is a thought-provoking piece on innovations in grocery retail. 

Farmhouse Market in particular caught my eye. It's a shop in Minnesota that lets customers use a key code to enter and shop 24/7. You can buy groceries alone. There is no on there to help, no on there to watch you, no one there to check you out. For me it flips the downside of zero staff—the fact that no one can help you—into an upside—you can shop anytime you'd like. Many large grocery stores let you shop 24/7 too, but having the option to shop in a smaller shop close to home with better food and less carting around through endless aisles...it sounds compelling. It also upends the Amazon Go grocery test where they hung a zillion dollars worth of cameras watching every move in the effort to let you shop without cashiers. That model is crazy expensive and freaks many people out that they are turning the act of buying cereal into Orwell's 1984. Instead, this couple installed a fifty dollar lock. And Big Brother isn't watching.

One emotion that staff-free retail invokes is trust. Do we believe customers will steal if left unattended? I lived in post-communist Slovakia for a year just after the Berlin Wall fell. The way retail worked there was utterly devoid of trust. In many shops you had to wait in a queue and ask for someone to get your item for you. To buy some noodles I would wait, then point at a box of pasta behind a counter and ask for someone to get it for me. Part of the justification for this nonsense was communism's mission to maximize employment. Jobs for everyone, jobs doing everything. A job getting you a box of pasta. A job handing you a piece of toilet paper at the bathroom (I'm not making that up). But another reason was trust. Since everything was owned by the state, people probably felt about as bad stealing as people do cheating on their taxes in America. A little wouldn't hurt, right?

I haven't thought about what that experience meant to me for years. Then I read this article on Chinese ecommerce. It is fascinating. (I'm sorry it's behind the New Yorker's firewall, if you'd like a copy I can send you a PDF.) It had loads of interesting news. For example, if you're like me and thought Amazon's drone special on 60 minutes was a PR stunt intended to deflect holiday attention from the working conditions described in an undercover Mother Jones article, you may be surprised to learn that they were just copying the Chinese who already use delivery drones. Who knew? But it was the author's own experience coming to America that hit home for me. She is a Chinese immigrant and described shopping for the first time in America after, like me in Slovakia, having to queue-and-ask shop in China. Here is her description of the marvel:

I can still remember the first visit my mom and I made to a Stop & Shop in New Haven, Connecticut, soon after we moved to the U.S., in 1992. I interpreted the unguarded aisles of open shelves as a sign that everything was free. I’d never heard the word “supermarket” before, and it seemed likely that “super” indicated a market where no money was necessary. My mother was awed that store employees, instead of trailing our every move as they did in China, seemed indifferent to our presence. How had shoplifting not bankrupted the establishment? What sort of society would allow such a risk? 

I had always thought of the Slovak model as weird. Here was someone describing how she felt the model I grew up with was weird. I took our get-it-yourself shopping for granted. But a hundred or so years ago, we shopped in America like they did in Slovakia, like they did in China. We lined up in a queue and asked. It made me realize that, of course, duh, retail changes. In high school I had a job at a video rental store. (It was there I watched Better off Dead about a hundred times.) That job no longer exists—for anyone. People don't rent videos from stores. Blockbuster used to employ almost 60,000 Americans. Where did they go? What do they do now?

Of course retail is going to change. Here is a mind boggling list of recent grocery innovations alone. How else will it change? Will it go backwards, like it's done recently adding delivery, something our grandparents took for granted? What will it add? What will it eliminate? Will we eliminate  the next queue — lining up to have people take our money? It seems the answer is inevitably Yes. There are many places, like CVS, where we line up and a machine takes our money. Or there are shops like Apple —or Zingerman's Mail Order, during our warehouse sale — where almost anyone walking around can take your money. There's no need for a single queue. Amazon wants their invisible app to take your money at Amazon Go. Surely that's just a stage, too.

But all that payment stuff, in context, seems like small potatoes now that I think about it. That's just the last part of retail. The money. There is so much more. One of the cornerstones of Toyota's lean operation tools, kanbans, came from how American supermarkets replenished shelves. That idea, born in retail, transformed manufacturing around the world. What else will come from retail? What else will come to retail?  How will we react to it? 

Another fancy coffee roaster bought by a gigantic company. So what?

In a short period of time most of the 3rd wave coffee roasters that have a national profile have either taken on major outside investors or been bought outright: Intelligentsia, Stumptown, La Colombe, and now Blue Bottle. 

Is this a good thing or bad? Some will say, "It depends," but don't count me as one of them. To me it's pretty much all bad. None of these investors have any track record of making food better. They primarily make more of it and, typically, more cheaply by using cheaper ingredients, cheaper labor, cheaper whatever. They don't say any of that of course. They say "We'll expand Brand X's reach so more people have access to it," making them sound like they're doing it for the good of humanity. But the way they expand comes at a price, it always does. Look, these aren't crack coffee people buying coffee businesses. These are money people buying a chance to make more money. Conglomerate acquisitions are what they are, and they are not good for business creativity, they're not good for health, they're not good for the food. 

I don't know the whole story behind any of these buy-outs. I do know that some of the companies, like Blue Bottle, had already taken on investors ($100 million in their case). That was several years earlier. After the first wave of investors came I noticed these 3rd wave notables started packaging cold brew coffee for supermarkets and opening shops and roasting plants far from home base. They were using investor money to expand their products and to expand geographically. The fact that they are now taking on more money—in some cases the new money is buying out the other investors—could mean the expansion went well. Or it could mean it went badly. Either way it'd be a good story. So far I haven't seen anyone writing about it, though. No one is talking about whether these deals were done in a climate of fear or opportunity.

One article that is particularly telling about some of the other elements in play is this interview with James Freeman, the founder of Blue Bottle. To him, fast growth is a given, as he says, "There are a few paths a company of our growth rate can take when we’re pursuing capital." To some extent you have to forgive the guy. He started his company in Oakland, just up the road from Silicon Valley. He had investors from Instagram and Twitter and elsewhere in tech. This is the way they all think. You must grow big. You must get capital big. You must sell out big. That is how success works in that world. It's classic Silicon Valley, down to the galling self-effacement of a mulitmillionaire shrugging off how rich he is after the buyout saying, "I’ve got kids at home, so security feels great."

The good news behind this, the news that enabled it in the first place, is that small roaster coffee technology has come a long way. You can install a roaster in a single shop and pretty much make the economics work. The big companies can buy what they will. They always do. I have faith the small coffee world will still thrive.

Recent reading

Fast food "meat" is probably scarier than you think.

Many environmental footprint studies are flawed. This one appears to be pretty good. It shows the carbon footprint of a loaf of bread. You might be surprised at what's the biggest contributor to greenhouse gas. Hint: it's not transportation.

UPS taxed air and we cut back on shipping air. The same logic applies when you tax food — check out the eye-popping results of Philadelphia's soda tax.

Ibérico pig immigrants, coming to America.

Recent Reading, Food Visuals

A look at the scale of modern American farming.

What 2,000 calories looks like before you eat it.

Recent reading, moguls edition

The making of Shinola. A look inside a bit of the sausage making as a new luxury brand comes into existence right under our noses. 

"The biggest business incubator in New York" is a place that sells friend anchovies? The founder of Smorgasburg, the grandaddy of the new modern food hall movement, talks about the economics of running a modern food court.

Chuck Williams, one of the founders of the modern food catalog and how he got started.

Recent Reading

A nice article on the inspiring work of Jonny Hunter and his Madison, Wisconsin-based Underground Foods. Among many other things, they make a very fine summer sausage. 

How our slate cheese boards are made: images.

Singles Day, November 11, is China's Cyber Monday. Alibaba, China's biggest online retailer found out bra size could indicate spending power. Correlation? Causation? Who cares. Data marketing is weird. 

Recent reading on meat

The lack of small, local slaughterhouses is often cited as one of the obstacles getting in the way of you and me buying affordable meat from small, local farmers. There's a bill being proposed to change slaughterhouse oversight rules in a way that would make it easier for them to get off the ground. The article quotes from some people we work with like Will Harris and Greg Gunthorp.

One argument against raising animals for meat is that it redirects calories to animals that we could otherwise eat. Except...

"...most of the feed that livestock eat is not edible by humans. Globally, just 18 percent of animal feed is made up of grains or other crops that people might otherwise eat. The rest is crop residues, grass, and waste from milling grain and other food processing. And so, despite the inefficiency of converting calories to meat, animals are able to give humans access to energy that they wouldn’t have been able to access otherwise."

Many more interesting points in the article Can meat ever be environmentally friendly?

When I introduce a new product how much should I make? Here's an idea: zero.

You've got a brand new product. You've never sold it before. In fact, no one has ever really sold anything quite like it. Also, it's not really one new product. It has many variations—color, size and so on—so it's more like dozens of new products.

Here's your problem. How many of each kind should you make?

It's a classic manufacturing dilemma. The typical approach is to guess. No one calls it guessing of course. You dress up the process to make it seem like you're not guessing. You have math and formulas. You have spreadsheets. You title the spreadsheets "forecasts" which is another word for "guesses" but sounds way more scientific. And you are wrong. Always. You make too many of some versions, too few of others.

Another approach is to not make any—at first. You wait until one is ordered, then build it to order. Sure, you have to have all the components on hand so those aren't built to order, but most of the components are probably shared between the different variations so it's not that big of a deal. The big benefit is that you never have the wrong level of finished goods inventory. It's always zero. The only products that exist are the ones that are already paid for.

Apple introduces their watch this week. Build-to-order is the approach that some believe they are taking. There are demo versions of watches out there but, when you buy one, the order goes to China and someone in a pink dust suit starts making your watch. 

Will Apple keep doing this forever? I don't think so. For one, FedExing a single watch at a time out of China is expensive. Another reason is that build-to-order creates a long lead time for the customer—days, if not a week or more (though Apple doesn't seem to care much about long lead times when they introduce products, to some extent it appears to be their strategy). If Apple does build to order they're probably doing it to learn about the demand. Once they see which versions sell in what quantities they can begin to build inventory ahead of time.

Apple Pay may not be a big thing for retail shops, but it may be huge for online shopping.

Most of the attention that Apple Pay and the other new mobile payment systems have received has centered on how (or why) paying for a latte on your cell phone is better than whipping out a credit card. Some people say why bother, but I think that's because credit cards are pretty good for that kind of task. The brick-and-mortar application for mobile payments is small beer. It's an incremental improvement. It's online shopping where Apple Pay may become revolutionary.

The ability to enter a totally secure credit card online with just a thumbprint solves a lot of problems for our mobile website. I'm convinced one of the main reasons people don't shop on their phones — even if they are on mobile-optimized sites like ours — is that they have to type. People have to enter all kinds of info like addresses and credit card info on a phone's dinky keyboard and that sucks. The other reason is that they need to remember passwords but all their passwords are on their laptops or buried in some other secure password-remembering App that's a pain to access.  Apple Pay can solve all that.

Apple Pay could let your finger print be your password to a site. Apple Pay knows your billing address so presumably it could automatically enter that when you finger print too, saving you from typing your  address. Apple Pay could allow the mobile browser access to the phone's contacts where you have 99% of your likely candidates for a ship-to address (chances are if you're sending a gift you know the person and they're already in your contacts). That means you could log in, enter your billing address, credit card info, and ship-to address in one  thumb print and maybe 2 more clicks. Think about that. You find something online with your phone. You click the link to a shopping website. Then you place a complete order in 3 clicks. You wouldn't need to download the company's app, it can all happen in the browser. A website could take an order from a new customer, too, in just 3 or 4 clicks. This could be a big deal. 

Recent Reading on Poverty and Wealth in America

Tipped workers are more than twice as likely to live in poverty. 

Give everyone in America $11,395. A totally radical — yet possible — way to end poverty in America that will never happen.

How do you think wealth is distributed in America? Hint: it's not even close to being as fair as you think it is. (Caveat: the speaker sometimes uses the words "income" and "wealth" interchangeable but they're very different. Income is the money you make. It's a flow. Income comes in this year, and some of it leaves as expenses. Wealth is what you own. You can make a million dollars this year but have zero wealth. Conversely, a good saver — or a person who inherits wealth — can have little income but lots of wealth.)

Who are our oldest food makers?

Sam Edwards' ham house in Virginia peanut country.

I've been working on a spread for next spring's catalog about the oldest companies we work with. Some have been around for decades, some for centuries. We even have one that's a millennium old this year. It's been an interesting experience to think about them more deeply, bringing up lots of questions. Like, why are they still around? More importantly, how are they still around and making great food? How much did they have to change along the way? Who decided what to change and what not to change? How did they transition when their founder left the business? I ran across this article about why there are so many old companies in Japan that explains how traditional firms like Nintendo manage succession (these days it's often done by the owner adopting an adult into the family to run the business—a surprise to me).

Some of our venerable food makers and the year they got in business:

1014 Castello di Cacchiano olive oil in Tuscany

1731 Amarelli licorice in Cosenza

1880 Usinger liverwurst in Milwaukee Wisconsin 

1898 Rizzoli anchovies in Parma Italy

1900 Cope's corn in Rheems Pennsylvania

1900 Roi olive oil and sauces in Badalucco Italy

1903 Raye's mustard in Eastport Maine

1909 Broadbent cured meats in Kuttawa Kentucky

1925 Koeze peanut butter in Grand Rapids Michigan

1926 Martelli pasta in Lari Italy

1926 Edwards cured meats in Surry Virginia

1947 Benton's cured meats in Madisonville, Tennessee

 

Recent Reading on Wages and Resturant Tiplessness

This restaurant has a hybrid model with no tips: a fixed wage or a percent of the business, whichever is higher.

Do you tip baristas more if you pay by credit card?

"We're kind of taking the risk off the server and putting it back on the business." How going tipless changes the pay dynamics in a restaurant.

How many hours do you have to work to buy a beer? An admittedly flawed yet excellent comparison of minimum wage rates across countries.

Silicon Valley wants to deliver your food

Restaurants and small food shops have always been flustered by delivery. On the one hand they could help customers—and find more of them—if they took orders online and delivered. On the other hand there's the problem of how to price delivery, the logistics of delivery and the problem of setting up an online order system and making sure its inventory is accurate.

In the last year there's been a wave of new Silicon valley start-ups that try to help with the last part—the online order system. 

The most prominet are Grubhub and Seamless. They take orders for restaurants. The restaurants figure out how to make the food and deliver it. Grubhub and Seamless take a cut that's probably around 20%. Speaking personally, I've used Seamless a lot in Brooklyn and it's very good. The benefit to a restaurant here is that they only have to figure out the logistics part of delivery. They can put all or just part of their menu online—and make it available at times that make sense to them.  Take Prime Meats in my neighborhood, a fancy restaurant that's full almost every night. They are on Seamless but in order to prevent overburdening their kitchen they initially showed up on Seamless only between 5 and 7pm, when they were slow.

In the novelty arena, you can also order pizza on a smartphone, albeit in a ridiculous way. There's a one button app that, when you push it, delivers pizza in 30 minutes. From somewhere. Anywhere.

In a more interesting twist, Square, the payment processing software company, is buying a food delivery company called Caviar. This is the only Silicon Valley firm I know trying to do the delivery part of the delivery business. Presumably the idea here is that a restaurant can buy their POS system from Square and the delivery software—and delivery logistics team—will come along with it.

This is happening with grocery, too. I just spent time at Bi-Rite and talked with the GM Patrick (ex-Zingerman's Deli manager) and learned about Instacart, which Bi-Rite just joined. With Instacart you place your grocery order online and they find someone to go get it from you. It's not an employee of the grocery store, it's not an employee of Instacart, it's just some shmo who signed up to be a grocery store picker. (They call them pickers, just like we do for people who pick items for boxes on our production line). Like with Grubhub and Seamless, Instacart takes a cut.

How these all play out will be interesting. Short-sighted merchants, or ones that do their own order and delivery, may look at the cut these companies take and say they don't need to pay someone else for something they can do on their own. The problem there is they will be shut out of network effects. The more merchants sign on to Seamless the more common it'll be for customers to shop there. If you're a merchant and you're not there, you'll loose out. Merchants will be saving cost to give up sales, which is rarely a good move.

What's the downside for the customer? On the restaurant side there seem to be very few negatives. Seamless doesn't mark up for delivery so why not order online and get the same food you could have driven to pick up brought to you for free? On the grocery side, I can see inventory being a hard nut to crack. Right now Instacart has no database connection between what's for sale online and what's in stock at the merchant. If something is sold out, the merchant has to remember to go to Instacart's website and mark it sold out. Will that happen? Sometimes, but not always. That will mean upset customers. Instacart gives leeway to their pickers to choose subs or call the customer to see what they'd like, but either answer is a flawed fix, one that will frustrate customers and hurt sales.

Disrupt yourself or be disrupted

You've probably heard of Uber, the car service that works like a cab—except better. You hail an Uber car from an app on your phone. On the app you can see how long the car will take to get to you. When the car arrives Uber texts you (so if you're inside finishing a conversation inside you walk outside and voila!, there's the car—I've used it a lot and it really does work this smoothly). You can select the size of your car (big SUV if you need to haul the family to the airport). You don't need cash and you don't tip. When you reach your destination you walk out the door and Uber automatically charges your card.

Uber is launching in city after city all over the planet and almost everywhere people are having a fit. Well, not most people, just people who drive cabs for a living. Cabbies are angry, ostensibly, that these "untrained," unlicensed Uber drivers are scooping up their business. I get why that sucks if it's true (in Boston, cab medallion prices, which are basically proxies for how valuable being a cabbie is, have gone up, not down, since Uber came to town which suggests it might not be true.) I think their anger is misplaced, though. They shouldn't be angry at Uber. They should be angry at their employers, the cab companies.

After all, there's no reason why cab companies couldn't do this. Uber's technology is not all that complicated. Any cab company could have done this for their customers years ago and can still do it now. I'm sure someone—or lots of someones—who worked at cab companies has thought of it; I'm sure it was brought up in meetings in cities across the world. All these things Uber does are clearly benefits for customers. So why haven't any cab company on the planet made their own app?

Well, it turns out instead of griping, one finally is. Seoul's cab agency is going to make its own Uber-style app. 

The DNA of Uber is, in practice, very simple. Its power lies in the fact that a huge number of people on the planet now carry a computer connected to the internet in their pockets all day long (we happen to call it a phone). When you use something like Uber for the first time it can seem so obvious you wonder, "Why hasn't this existed before?" The elegance and utility of Uber makes the cabbies argument against it seem archaic. Sorry cabbies, you don't stand a chance on this one. And there are dozens of businesses just like you that are next.

Recent Reading

What if UPS and FedEx were like Uber and Lyft, where regular people do the deliveries, not employees? She started a company to see if that can work. 

A 40 fruit tree. Hat tip to Spike. 

Ever wonder what a camel broker eats each day? Hat tip to Val.

Recent Reading

Old things are new again: subscription home delivery of milk—and other local food—is on the rise.

Microlending, meet micropayments. Square is starting a business loan program where you pay off the loan pennies at a time—with each customer credit card transaction.

There's no such thing as cheap food without consequences. The scary story of slave labor shrimp at Costco.

Recent Reading

A gal walks into a restaurant wearing Google Glass, the new computer eyeglasses from Google. Restaurant says take them off, that's our policy. Gal says no. Thirteen Glass fans write nasty reviews of said restaurant. Then 500 more reviewers lash out against gal and Google Glass. Another reason wearable technology is going to have a rough go of it.

Electronic eyes may have a tough time, but illustrated eyes are just fine. Turns out if you put eyes on your packaging, it makes people buy your stuff. Makes me wonder what would happen if the eyes on the packaging wore Google Glass.

The new "sharing" app: hire people to go grocery shopping for you.

Fourteen great points about mass transit that you might want to know.

Should Zingerman's fear same day delivery?

Another day, another article about how someone is launching a same day delivery service. This time it's Google. They're going to compete with Amazon. Who's now also competing with eBay. And so on.

Should we be worried about any of this at Zingerman's Mail Order?

In general, it pays to be worried about Amazon. They understand retail, they have good service (as long as you don't want to talk to anyone) and they have the cash—and willingness to spend it—for experiments like no other company on earth. And I don't mean experiments like drone delivery. That was an emperors-new-clothes idea that won't happen, a PR stunt that, for some reason, the press fell for. Amazon may experiment in other difficult-to-copy ways, though, like creating local (human) delivery forces that directly compete with UPS and FedEx.

On the other hand, I have zero concerns about Google competing with us. Whatever is in their company DNA, giving good service to customers ain't it. Their adventures in retail have been mostly disasters, I don't expect this to be any different.

But thinking more generally, should a small online shopping company like ours be afraid of these experiments in same-day shipping? Should we be worried about all these super-fast delivery services since everything we ship takes a day or two to get anywhere? 

In the short term, no. Why? The answer lies is in how these companies make same-day delivery work.

To do same-day delivery you need very short lead times on the stuff you sell. The way you get very short lead times—I'm talking hours, not days—is by having all your final inventory on hand within a short drive of your customers, or making it to order, like a pizza shop makes pizzas to order. Make to order is out of the question for Amazon so they need inventory.

Same-day inventory must be reliable. When customers ask for it you need to have it on hand at that moment, you can't wait for it to be delivered to your warehouse tomorrow. To ensure reliable inventory without stocking gazillions of units of every item you need to be able to forecast demand very accurately. To do that you need demand to be steady. What kind of items are demanded steadily? Things people use all the time, like milk and toilet paper. And the greater number of people that use them, the more steady the demand becomes since it's averaged over a larger population. So the way to get really steady, forecastable demand, is to sell staple items to lots of people. In practice, that means Amazon is going to park a huge warehouses of paper towels next to huge cities like Chicago.

That tells you what sort of business they're out to compete against. They're going after grocery stores and smallware retailers. This is about saving people the hassle of driving, parking, finding, paying for and hauling their own essentials. If you're a small company that sells mostly commodity off-the-shelf items in a big city, you should be worried. But for those of us whose primary business is shipping hard-to-find gifts to suburbs it's not very relevant.

What about the long term, should we worry about that? Well, as they say in economics, in the long term we're all dead, so there's that. But generally speaking, anything that reduces barriers to buying online helps online sales. One of the biggest barriers to online sales is time. You can go get something at a nearby store faster than you can get it from an online store. To the extent that barrier is reduced—or removed—the more people will shop online. If some companies can offer it and we can't then we're in a worse position. That's a lot of ifs, and that's a lot of time—a lot can happen before they're answered. I'm happy to watch companies with deeper pockets than ours fight it out and figure it out first.

It's interesting to watch this version of retail history repeat itself. Delivering staple items is essentially a very old business model brought back to life. We used to have all kinds of everyday needs delivered like ice, milk, eggs and coal. Some companies, perhaps unaware that the 20th Century was happening, never stopped.

This kind of delivery used to exist primarily because people lacked personal transportation (which is why they're still around in some cities where many people don't have cars, like New York). Today, deliveries are returning mostly because the biggest, best retailers like Amazon don't have physical stores and, frankly, don't want to build them. We used to think of these internet retailers as national, then global. They still are. But with same-day delivery, Google and Amazon are now going deep local.

Recent Reading, Multimedia Edition

What the hell happens after you click submit? Radiolab makes a masterful edit of Mac McClelland's amazing Mother Jones story of being a picker in a giant fulfillment warehouse. Hat tip Betsy Bruner.

Inside the world's largest pasta maker.

A leathermaker gives a lesson on how to knock off his own product. A sly way to advertise., hat tip Tom Root.