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? 

Assembling the Sears and Roebuck catalog, 1942

Recent reading, design edition.

Explaining graphic design to four year olds.

A comparison of Lush and Body Shop's website. Hat tip to Joseph Richardson.

An incremental design improvement, made over a weekend kaizen event, and the result is a machine that has outlasted four "improvements". A great article on why the B-52 is still the main big plane for the U.S. armed forces. 

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.

Filson catalog cover

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.

Weird choice of words and images

Nothing says homegrown thanksgiving  like a bluetooth iPhone temperature probe.

Other Merchants...Kermit Lynch

"I have never been one to worry too much about food and wine pairings. I give it some thought, for a minute or less. First, I tend to think regionally. I've always believed that the wine and food of a given region grew up together and go together. Then I ask, what am I in the mood to drink? It's that simple, and it works for me. Maybe I'm missing a lot, but I find that I am not creative about imaging how a wine and food will complement each other. I'm just not wired that way." 

- Kermit Lynch

Kermit Lynch is a wine importer. You'll see bottles with his label in a few wine shops and restaurants, more on the coasts than in the midwest. Buy anything you find without hesitation. They're always interesting, his taste leans toward French and Italian traditionalists who don't filter. He has a small retail shop in Berkeley, California, too. In the heart of American wine country he sells no American wine. The business just turned 40.

I've read his wine writing for over a decade and have yet to find a single thing I don't agree with. When I met him for the first time we tried some wine and he looked up after a couple sips and said, "After all these years I still can't tell what kind of grape a wine is made from just from tasting it. Lots of people can, but I need to read the label." The closer I get to food the more plain arrive the confessions.

Other Merchants...Casa Camper

This is probably the single most boring picture I never took in Spain. It's the refrigerated food case at Casa Camper Hotel (I found the image on the internet). Casa Camper is a blood red hotel, a good looking place in Barcelona, a very good looking city. You might know Camper as a quirky shoe company, which it still is. The hotel is a new thing for them.

They perform a number of interesting service twists that make the hotel feel intimate and alive in a way few other hotels ever have for me. The biggest one is that they give away things most other hotels charge for. Like food. It's all free. The fridge case is just off the lobby. It's filled with little sandwiches, Weck jars of yogurt and fruit, water, fresh squeezed juice, glass bottles of soda and so on. The food is healthy, tasty, easy to graze on. It changes every day. They tell you up front: eat it whenever you want, take it anywhere you want, we want you to enjoy it. That gives you a sense of control while, at the same time, making it feel like you're being given something very generous.

 

Other Merchants...Billy Reid

Billy Reid is a southern clothing designer who opened his first shop in Manhattan a couple years ago. The clothes are good and worth a visit, but it's the shop's hospitality that I'd like to draw attention to.

Here's a picture I took of a table near the door this summer. It's stocked with fresh lemonade, cucumber water and mismatched glasses. Help yourself, it's free, it's hot out. (In the winter there's a decanter of bourbon on the sideboard.)

It's so easy and so memorable. Why don't more companies do things like this?

Other Merchants...Etsy, darling

I just bought something from an Etsy seller in Hong Kong — which is one of the amazing things about Etsy — and this was the note they included. Obviously English isn't their first language. But there's no way they looked up a translation and got "Darling" unless they wanted to say something that bizarrely intimate, which I think is kind of great.

I also like some of the cards from this seller in Indonesia.

A lot of people bash on Etsy, some of it for good reason. But the way it's created a personal way to sell things internationally is fascinating.

Other Merchants...J. Crew

There are a lot of merchants I learn from, big and small. I'll write about some of them in a new category of posts (click "Other Merchants"). If there are any you think I should know about please shout!

J. Crew

I don't think there's a better clothing mass merchant these days than Mickey Drexler at J. Crew. He's like the Steve Jobs of moderately preppy. His taste, fit and overall merchandising are diabolically good. Their stores are fairly well run, which is saying a lot for a company that has over 200 locations, mostly in malls. Stylistically, Mickey almost never makes a wrong move and, eight years in, he just seems to be getting better. If I had to compete with him I'd be very scared.

I particularly like how he's picking iconic brands both popular (Timex) and somewhat unknown (Loro Piana, the legendary Italian fabric maker) and mixing them in. Sometimes they're sold as an item with a J. Crew twist. Sometimes they're part of a garment. In either case, he doesn't hide them, but he also makes sure you know it's J. Crew that's running the show in how they're included. He also uses facts and education to help sell clothes rather than just trend, which is how I've always tried to sell food.