New Jersey Grocer, 2016, Issue 3

NEW JERSE Y FOOD COUNCIL

Na igating the

2016, ISSUE 3

Disruption

NJFC

| Board of Directors

OFFICERS

DIRECTORS

Chair Judy Spires Kings Food Markets

Associate Vice Chair Joseph H. McCarthy Bimbo Bakeries USA

Secretary Michael Murphy QuickChek Corporation

Vice Chair Richard J. Saker Saker ShopRites

Treasurer Michael Rothwell Pennington Quality Market

President & CEO Linda M. Doherty New Jersey Food Council

Dan Croce Acme Markets

Peter Rojek Fairway Market

James J. McCaffrey III McCaffrey’s Markets

Jason Ravitz Ravitz Family Markets

Debbie Pregiato Advantage Solutions

Phil Scaduto Food Circus

Michael Biase Mission Foods

Frank Mastrangelo Supervalu, Eastern Region

Ken Weingartner C&S Wholesale Grocers

Andrew Kent Glass Gardens

John Wachter Murphy’s Markets

Rebecca Peifer Unilever

Kelly Johnston Campbell Soup Company

Luis Tejada Goya Foods

Jody Avalione Nestle USA

William Sumas Village Supermarkets

Eva Kohn CBA Industries

Joseph F. Pagano Inserra Supermarkets

David Maniaci Nicholas Markets

Richard Wood Wawa

Michael Sullivan Coca-Cola Refreshments USA

Lisa Angeles Kraft Heinz Company

Leonard J. Sitar ShopRite of Carteret

Joe Sofia Wegmans Food Markets

Howard Kent Krasdale Foods

Colleen Meares Stop & Shop Supermarkets

Christina Minardi Whole Foods Market.

Rafael Cuellar Cuellar Family ShopRites

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N E W J E RS E Y G R O C E R

Retail moves quickly.

Does your accountant?

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Whether it’s protecting customer data, implementing new point-of-sale technology, or navigating the tax impact of a business strategy, work with a team who speaks your language—and moves at your speed.

W W W. M O S S A D A M S . C O M / R E TA I L

Certified Public Accountants | Business Consultants

CONTENTS

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| Issue 3

F E AT U R ES

COLU M NS

Navigating the Disruption

President’s Message Why Participating in the Election Process is Important..............................................................4

Old habits need to be laid to rest if retailers and suppliers expect to succeed in the face of major industry disruption, says the director of retail insights for one of the nation’s leading research and consulting firms.

Reshaping Retail

At its core, the reshaping of retail is not just about selling products but nurturing relationships with customers on multiple platforms and enhancing their shopping experience.

From The Chair New Leadership Development Program Paying Huge Dividends.....................................................7 Viewpoint – Kevin Coupe Bears, Porridge and the Art of Inventory Management......................................................12 Inside the Beltway The Regulatory Environment Trumps All Else in 2016...................................................................18 Washington Report Don’t Let Congress Undo Credit Card Swipe Fee Reform.............................................................. 21

DEPA RT M EN TS NJFC News...........................................................8 Government Relations........................................ 16 Know The Law....................................................22

NEW JERSEY FOOD COUNCIL President & CEO Linda M. Doherty Asst. V.P. for Govt. Affairs Mary Ellen Peppard

Executive Assistant Office Manager Sandy Malecki Meeting Planner Kori Little-Buro

For association members, subscription is included in membership dues.

Annual Subscription: $50

For advertising information contact: Dave Heylen E-mail: dheylen@cagrocers.com © 2016 New Jersey Food Council

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Financial Manager Christine Higgins

30 West Lafayette St. Trenton, NJ 08608 (609) 392-8899 (609) 396-6571 Fax www.njfoodcouncil.com

Editor Gary La Spisa, II

N EW JE R SE Y G R OC E R

Director of Public Affairs Gary La Spisa, II

New Jersey Grocer is the official publicaton of the New Jersey Food Council.

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PRESIDENT’S MESSAGE

L I N DA DOHE RTY

Why Participating in the Election Process is Important

President & CEO

Having worked in Trenton for almost 30 years, now more than ever, people want to share their personal thoughts, frustrations and opinions about the upcoming Presidential election.

And on Facebook, I note how “friends” passionately battle it out trading barbs and unfriending each other over political divisions.

While others claim they are disillusioned with the leading candidates of each political party and threaten to boycott voting in the November election.

My reaction is not to give up on the election process, instead, do some homework by going to the website of all candidates running for election and seek out their platforms on issues important to them.

I also take it one step further and suggest they donate to their favorite candidate who best reflects their political values.

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One reason I feel strongly that every voter should fully participate in the election process is best summed up in a recent article published in the New York Times entitled “Once Skeptical of Executive Power, Obama Has Come to Embrace It”.

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The article reveals the burden of Executive privilege and ways overreaching rules and regulations are stifling economic growth and hurting the business community’s ability to compete in the marketplace by forcing billions of dollars in new costs.

Overarching executive power is becoming an issue by the candidates on the presidential campaign trail too.

And it’s not just at the White House that we are seeing these

overzealous regulatory tactics but in Trenton all the way down to NJ towns and cities with proposed ordinances creeping onto the municipal agenda. Recently, NJFC hired retired Executive Director of the League of Municipalities Bill Dressel to help NJFC monitor these local proposals.

It is of vital importance that we continue to support legislative candidates who stand with us to ensure our industry stays healthy and prosperous. In order to do this, the Food Council Committee for Good Government (FCCfGG), the political action arm of NJFC, is undergoing a campaign now to position the industry to support candidates who support a pro-business agenda in the 2017 races.

In 2017, New Jersey residents will vote to elect Governor Christie’s replacement and all 120 seats of the State Legislature will be up for election.

Currently, the food industry and business community are under siege at the State House as State Legislative leaders focus on running for the office of governor.

We are fighting against a staggering $15 an hour minimum wage, paid sick leave, and predictive scheduling proposals. There is even the threat of a regressive sugar tax being proposed to fill the gaps in future budgets.

Additionally, NJFC has been making considerable headway advancing legislation to reform credit

card interchange fees, to eliminate the State inheritance tax and to remove liquor license limitations.

It has never been more critical that we have a strong voice in Trenton to continue this momentum and support candidates who will fight for our industry and block additional business burdens, overreaching executive power and tax increases.

To that end, it is of vital importance that we continue to support legislative candidates who stand with us to ensure our industry stays healthy and prosperous. In order to do this, the Food Council Committee for Good Government (FCCfGG), the political action arm of NJFC, is undergoing a campaign now to position the industry to support candidates who support a pro-business agenda in the 2017 races.

To achieve this goal, we are asking members to make a voluntary minimum contribution per store or per business. We strongly believe that requesting this small investment from all NJ Food Council members will pay off in dividends for our member companies.

This year, we have added a new feature for members who want to make a PERSONAL donation to the PAC. It’s now easier than ever with an online form that individual members can use to donate personally. You can find the form at http://njfoodcouncil.com/donateto-fccfgg/.

In today’s political climate, corporate and personal contributions are critical for the food business to facilitate a more prominent political presence in Trenton.

Also, contributing to other political action committees such as legislative leadership, county, or state political parties are not prohibited, and in fact encouraged as overreaching regulations and aggressive rules become the new norm. n

To learn more about the benefits of membership in the New Jersey Food Council, visit our website at:

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www.njfoodcouncil.com

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Put Your Association to Work For You!

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FROM THE CHAIR

New Leadership Development Program Paying Huge Dividents Identifying industry leaders with the potential to chart the Association’s future is the program’s goal.

In 2015, the Board of Directors launched a new program to identify individuals with the potential to become leaders in the food business, to understand the mission of NJFC and potentially serve on the committees and the Board.

working in the food industry, possess an interest in the dynamics and trends of government and want to make a difference in the direction of the food business. These future food industry executives are walked through the five session-

The ambitious plan was developed in a Board driven strategic planning process to chart the course for the Food Council’s future growth, and member engagement and activism.

twelve month process which educates them on the purpose of the Food Council and the roles which the State and Federal Government play in our businesses every day.

The Board realized if NJFC is to remain relevant and continue to show value to its members, it was necessary to create a long-term action for young professionals and more opportunities for their participation.

It is the Board’s hope that after completing the program, each participant emerges with a better understanding of the work of the Food Council, our role in business advocacy and how public policy impacts the food industry and drives the business.

Our answer was the Leadership Development Program.

Today, the second class is winding down, their final session is in September and the group will graduate at the Good Government Breakfast.

J UDIT H S PIRES NJFC Chair of the Board, Chairman & Chief Executive Officer Kings Food Markets

After just two years the program has paid off more than we could have hoped. Andrew Kent of Glass Gardens ShopRite and Howie Kent of Krasdale Foods, two members of our first class have taken seats on the NJFC Board of Directors.

This year’s class has already hit the ground running, suggesting the creation of an E-Commerce Committee, which held its first meeting, last month and is chaired by class member James Hazlett of Bimbo Bakeries USA.

Currently we are evaluating applications for the next class that starts the day after Election Day.

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After going through a vigorous selection process, candidates are chosen because of their passion

Please consider nominating your best and brightest young professionals to an experience that will pay off for your company, our Food Council and the industry’s future leaders. n

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The program, led by Leadership Development Committee Chairman Phil Scaduto of FoodCircus Foodtown and Vice Chairman Todd Ferrara of Wegmans Food Markets, is designed to education future leaders in the intersections of government and business.

We are confident that our investments in these impressive young professionals will continue to strengthen the Food Council for many years to come. If your company has not participated in the program, we encourage you to consider nominating members of your team that you believe will be future leaders in your organizations and in the industry as a whole.

Applications for the latest class are still available on our website by clicking here.

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N J FC N EWS

Committee for Good Government to Honor Policy Leaders The Food Council Committee for Good Government (FCCfGG) will hold its annual Good Government Breakfast at the Forsgate Country Club in Monroe, New Jersey, on September 28 at 8:30 a.m.

The FCCfGG will honor Senator Jeff Van Drew (D-1) and Assemblyman Jack Ciattarelli (R-16) as Legislators of the Year for their efforts in support of the New Jersey food industry.

Additionally, New Jersey Department of Health Commissioner Cathleen Bennett will be presented with the Thomas W. Kelly Government Service Award.

“Senator Van Drew and Assemblyman Ciattarelli have both been strong advocates for the food industry in Trenton, supporting policies that help grow our businesses while opposing harmful tax increases,” said Linda Doherty, President and CEO of the New Jersey Food Council. “Now more than ever, it is extremely critical that we have strong allies on both sides of the aisle like Jeff and Jack, ensuring the voice of the food industry is heard in Trenton.”

Senator Van Drew is in his third term in representing the first Legislative District which includes Atlantic, Cape May and Cumberland Counties in the New Jersey State Senate.

He previously served three terms in the General Assembly where he assumed a leadership role when he was named Assistant Majority Leader.

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Sen. Jeff Van Drew (D-1)

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He now serves as Chairman of the Community and Urban Affairs Committee, Vice-Chairman of the Military and Veterans Affairs Committee, and is a ranking member on the Budget and Appropriations Committee.

Over the last three years, Senator Van Drew boasts the top legislative score of any New Jersey Democrat on issues important to our industry according to FCCfGG’s internal scorecard.

In fact, this year Senator Van Drew was one of only a handful of Democrats in Trenton to break with his party and oppose a $15 minimum hourly wage.

In 2011, Assemblyman Jack Ciattarelli was elected to represent the 16th Legislative District in the General Assembly in a district that includes towns in Hunterdon, Mercer, Middlesex and Somerset Councies.

Asm. Jack Ciattarelli A small business owner, (R-16) Assemblyman Ciattarelli serves on the Assembly Financial Institutions and Insurance and the Regulated Professions Committees. Since he first entered the Legislature, Assemblyman Ciattarelli has been an ally of the food industry, and to the business community overall, sponsoring multiple bills supported by the Food Council and accumulating one of the highest overall legislator scores on the annual FCCfGG internal scorecard.

Last session, Assemblyman Ciattarelli worked with the Food Council and other coalition members to advocate for a State Legislative Resolution in support of a single national standard for GMO labeling rather than onerous and confusing state standards.

Additionally, FCCfGG will present New Jersey Department of Health Commissioner Cathleen Bennett with the Thomas W. Kelly Government Service Award.

“We’re pleased to recognize NJ Health Commissioner Bennett with Commissioner Cathleen Bennett the 2016 Thomas W. Kelly Government Service Award,” said Doherty. “We’re grateful to the Commissioner for her leadership, accessibility and understanding of the important role food stores play in keeping New Jersey communities healthy. Recently Commissioner Bennett stepped in to ease the transition of dozens of WIC and SNAP licenses from former A&Ps to their

NJFC NEWS

new owners. Without her intervention, WIC recipients who rely on these programs at each location would have seen a disruption. It’s this type of common sense response that earned her this honor.”

Cathleen Bennett began serving as Commissioner on Aug. 3, 2015, after serving as Director of Policy and Strategic Planning since 2010. As head of the Policy and Strategic Planning, she directed strategic public health and healthcare delivery initiatives including healthcare quality assessment, health statistics and informatics, population health and health equity, regional health planning, and health information technology.

About FCCfGG Since its formation, the FCCfGG has been instrumental in promoting good relations between elected officials, candidates, and the food industry.

NJFC members have the ability to learn about the ideas and opinions of their leaders and candidates on a number of issues which may impact their businesses, as well as communicate their views on important issues to the candidates for public office.

“Legislators, opinion makers and political leaders cannot evaluate the impact of every piece of legislation and regulation on the food industry unless we share with them our views and our unique knowledge and expertise on the issues,” said Doherty. “This kind of communication and political action helps to further the cause of ‘good government’ and a strong free enterprise system.”

Doherty added that in the next state election cycle in 2017, New Jersey will elect a new Governor and all 120 seats in the State Legislature will be on the ballot.

“With the 2017 election cycle approaching, it is of vital importance that we continue to support elected officials and candidates who stand with us to ensure our industry stays healthy and prosperous,” said Doherty. “It is critical that our industry play a role in this next election cycle, and that we continue to stand against higher taxes and increased regulatory burdens that will harm our businesses and employees.”

Ahold USA’s Tom Cormier to Receive FCCfGG 2016 Good Government Award The Food Council Committee for Good Government (FCCfGG) will recognize Tom Cormier, Ahold USA, as the 2016 Good Government Award recipient at its annual Good Government Breakfast on September 28 at Forsgate Country Club in Monroe Township, NJ.

“The lessons he shares from his experience in other states have frequently helped shape the position of the Food Council,” added Phil Scaduto, Vice President of Food for Circus Supermarkets and Chairman of FCCfGG. “It is this dedication to helping advance the efforts for every member of the Food Council that makes him so deserving of this honor.” n

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“Tom regularly volunteers his time, expertise and experience on issues facing our industry,” said NJFC President & CEO Linda Doherty. “He frequently travels to meetings all over the state to share that experience directly with legislators and provide support for our lobbying efforts. Tom has helped

N EW JE R SE Y G R OC E R

Tom has 33 years of experience in food retail and serves as Director of Government Affairs for Ahold USA, which operates stores in 12 states. He is active with state and national trade associations and business groups, including the Food Marketing Institute and the National Retail Federation.

shape our efforts on issues including GMO labeling, plastic bags, locally grown produce labeling, minimum wage, and paid Tom Cormier with New Jersey Governor Chris Christie. sick leave, to name a few.”

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N J FC N EWS

U.S. Attorney to Headline Northeast Regional Loss Prevention Conference Paul Fishman, United States Attorney for the District of New Jersey, will be featured as the keynote speaker at the New Jersey Food Council’s Northeast Regional Loss Prevention Conference and Exhibition on Oct. 26, 2016, at Forsgate Country Club in Monroe Township.

Jersey in June 2009; he was confirmed by the U.S. Senate on Oct. 7, 2009, and sworn in on October 14, 2009.

In partnership with the New Jersey Retail Merchants Association (NJRMA), this widely-attended regional conference focuses on the challenges of loss prevention and security in the food and retail industries.

As U.S. Attorney, he is responsible for overseeing all federal criminal investigations and prosecutions and U.S. Attorney Paul Fishman the litigation of all civil matters in New Jersey in which the federal government has an interest. Fishman supervises a staff of approximately 145 attorneys and 115 support personnel in Newark, Camden and Trenton.

As the chief federal law enforcement officer for New Jersey, U.S. Attorney Fishman is expected to address important initiatives to tackle loss prevention and theft issues in the retail industry, particularly in the area of organized retail crime.

The conference will also focus on cyber security, credit card data breaches, and the importance of public and private partnerships with law enforcement.

Last year, U.S. Attorney Fishman led federal law enforcement officials working in various government agencies in breaking up a large-scale, organized retail crime scheme involving the theft of tens of millions of dollars’ worth of over-the-counter pharmaceuticals and health and beauty aid products that spanned from 2008 to 2013 in New Jersey and New York.

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N E W J E RS E Y G R O C E R

“We are thrilled and honored to have the U.S. Attorney for New Jersey as our keynote speaker for this year’s Loss Prevention Conference,” said NJFC President Linda Doherty. “Partnering with law enforcement professionals is critical for retailers to help thwart crime and reduce risk.

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“As the chief federal law enforcement officer for New Jersey, there is no one better than U.S. Attorney Fishman to update our industry on the latest federal initiatives to help combat organized retail crime and enhance security in our stores and online,” she added.

Fishman was nominated by President Barack Obama as the United States Attorney for the District of New

The annual conference will also honor food industry and law enforcement professionals for their achievements in the field of loss prevention.

Ed Rohena, Stop & Shop Supermarkets, will be the recipient of the 2016 Loss Prevention Professional Award and four law enforcement officers will receive the 2016 Retail Law Enforcement Achievement Award: Kate Ingram from the New Jersey State Police; Detective Mike Coffey from the Piscataway Police Department; and Detective Mark Bajada from the Toms River Police Department.

Additionally, NJFC will announce recipients of this year’s Loss Prevention Scholarship Program, a program to fund continuing education for NJFC loss prevention associates through the Loss Prevention Foundation.

Applications are due on Sept. 30, 2016, and can be downloaded at www.njfoodcouncil.com.

©2011 The Coca-Cola Company. “Coca-Cola,” “open happiness” and the Contour Bottle are registered trademarks of The Coca-Cola Company.

N J FC N EWS

NJFC Holds Successful Golf Outing The New Jersey Food Council held its Annual Golf Outing on July 18, at the prestigious Suburban Golf Club in Union, New Jersey.

The event was attended by nearly 200 food industry executives representing retail, manufacturers, brokers, wholesalers and convenience stores from across New Jersey.

“The golf outing continues to be one of our most popular events and one our members look forward to all year long,” said NJFC President Linda Doherty.

“The attendees enjoyed a fantastic day of golf, as well as invaluable networking opportunities with food trade and retail executives.”

The group from Food Bazaar enjoys a day on the course.

Attendees enjoyed 18 holes of challenging golf and dined on a delicious barbecue lunch while taking in a spectacular view of the course. The event closed with an evening reception that featured awards, amazing prizes generously donated by members and a swag bag filled with the latest and greatest products from the industry. n

The group from Stop & Shop Supermarkets enjoys the barbecue luncheon before heading out on the course.

Congratulations Winners!

First Place Team: Stan Barrasso, Ed Connelly, Rich French, Rich Guarneri of Acosta Sales & Marketing

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N E W J E RS E Y G R O C E R

ABOVE: NJFC President Linda Doherty and her group celebrate a long birdie putt.

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RIGHT: Emcee Jimmy Ostling of Bimbo Bakeries with prize winner..... (i’ll get the name in next round of changes)

Closest to the Pin: Bill Weimer of Maximum Marketing and Colleen Meares of Stop & Shop Supermarkets Closest to the Line: Ron Kempe of Wholefoods Market and Suzanne DelVecchio of QuickChek Corporation Longest Drive: Vince Williams of Bimbo Bakeries, USA and Mary Elizabeth Warner of QuickChek Corporation

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VIEWPOINT

Bears, Porridge And The Art Of Inventory Management KEV IN C OU PE Founder MorningNewsBeat.com

The question of inventory management always strikes me as reminiscent of Goldilocks and the Three Bears – sometimes the porridge is too hot, sometimes too cold, and sometimes just right.

I think the Goldilocks and the Three Bears analogy is a good one, except that in reality, some people like their porridge hotter or cooler than other people. There is no “just right” temperature for everybody.

I’ve always believed that if there is a reason that ECR didn’t have the kind of industry staying power that some would have hoped. It was because most companies forgot about the “consumer” part of it.

The Wall Street Journal had a story the other day that got me thinking about this. It concerned how some retailers are taking a new approach to inventory. The radical thinking seems to be that “less is more.”

They were pretty good at efficiency, but they looked for efficiencies in their own supply chains, but often ignored what consumers needed and wanted.

Home Depot was one of the companies cited in the piece, with management saying that rather than having floor-to-ceiling displays of merchandise, the idea is to have less stuff, but all of it within the shopper’s reach.

Walmart and Target also were mentioned in the story, which said that they simply want to have less inventory – just what they need to have, when they need to have it. Walmart even has widened its aisles to make it harder to have more inventory.

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The financial calculation, to put it in terms that even I can understand, is that by having less inventory – but the right inventory – chains will be able to grow sales while keeping their cost of goods flat or even lower.

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I’m not sure, but this sounds to me a lot like this thing called ECR – Efficient Consumer Response – that consultants created and retailers embraced back in the Jurassic era as a way for supermarkets to try to compete with a newly aggressive (and, at the time, almost stealth) Walmart on costs. (It was a time, believe it or not, when Walmart was first taking steps to get into the grocery business.)

Back in the ECR days, I was producing a video program called “Supermarket Insights,” for which we’d shoot stories in stores all over the world. It often would become immediately apparent which stores were putting efficiency before effectiveness when I’d go into a store at 7 a.m. and find chickens already cooking on the rotisserie; it was efficient to put them all on at an early morning hour, but it also guaranteed that the chickens bought for dinner than night would be inedible.

I’ve always believed that if there is a reason that ECR didn’t have the kind of industry staying power that some would have hoped. It was because most companies forgot about the “consumer” part of it.

Figuring out the right inventory levels for a particular store has more to do with effectively understanding who the customer is and what the store’s essential narrative is, and less to do with creating inventory algorithms. (One of the advantages that Amazon has is that

VVI E I EWWPPOOI N I NTT

it can do both – being an online store rather than a bricks-and-mortar store means that inventory levels can be essentially endless, and the customer-targeting mechanisms can effectively track what people look at and buy.)

Now, I’m not criticizing anyone for trying to be innovative... But I think one has to be careful about knowing what your story is.

I’ve always had to chuckle at all this stuff because, after all, I’ve spent most of the past three decades doing a large percentage of my shopping at Stew Leonard’s – an independent retailer that generally has stocked something like 2,000 items, and that reportedly does about $2 million a week out of the store that I have patronized almost weekly for 30+ years.

about how these same chains are adopting a moreinventory approach?

Of course not. Because at the end of the day, these companies are looking to solve a wide variety of problems – like the growing market share enjoyed by online competitors – by adopting strategic and tactical approaches that have been crafted out of a desire to be strategic and/or tactical. Not necessarily by an intimate, instinctive understanding of the shopper.

They lurch from strategy to strategy because they’re trying to find an answer, not because they’ve said to themselves, “we know who we are, we know who our shopper is, and we know how our differences can make a difference in their lives.”

Most of the items are fresh, and a large percentage are private label.

The thing is, I think they figured this all out because they started by carrying just a dozen items or so, and grew slowly and organically, carrying what they knew consumers would respond to.

There never was any delusion that they could be all things to all people, or that people wouldn’t have to shop elsewhere for the things they did not have.

But there was utter certainty about what its retail experience was all about, and that certainty has seen the company through good times and bad, and Stew Leonard’s remains a vital retail entity that tells a compelling story from the moment you walk in the front door, and they collect your money for the privilege on the way out.

Tell the truth: having read about the less-inventory approach in the Journal, would you be surprised or shocked if a year from now the Journal has a story

Now, I’m not criticizing anyone for trying to be innovative. I actually started my website – MorningNewsBeat.com – because I wanted to find a way to identify them early and put them into context for a specific kind of readership. But I think one has to be careful about knowing what your story is.

At the recent Food Marketing Institute conference, Nadia Shouraboura, Founder and CEO of Hointer, talked about her company’s efforts to bring a low inventory approach and a retail environment that relies on robotics to a wider number of retail venues. The original Seattle stores focused almost exclusively on men’s jeans.

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Continued on p. 16

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The key – and this is most assuredly not rocket science – is having that kind of feel for the shopper, and an extremely strong sense of what your retail brand is. I would never argue that everybody should be like Stew Leonard’s ... but I would argue that the way to success is not by simply saying “let’s cut inventory,” because that’s more like a “strategy-of-the-month” approach.

iStock

And that’s the key. At least that’s what I think.

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VIEWPOINT

Continued from p. 15

But unlike most jeans stores, where there are stacks and stacks of various styles in a wide range of sizes, Hointer simply hung one pair of each style from metal rods, with a description and a QR code easily available.

You downloaded the Hointer app to your smartphone, and then used it to identify the jeans you’d like to try on, and in what size.

The app told you which dressing room to go into, and once you were there a magical robotic and computerized system delivered them to you via a slot so you could try them on. Once you were done, you put the ones you didn’t want into another slot, where they were taken away by the system.

But these days, the company seems to be a lot more focused on being a “retail consultancy” than a retailer.

It’s easier, and that was my argument three years ago – that while Hointer was in the business of selling jeans, it really was in the business of selling technology.

By the way, I’m not denigrating Hointer. Not at all. I think it is a really cool idea. But I do think that there will be some retailers that will look at what it offers and think that it is a magic key that will unlock the future for them, as opposed to seeing it simply as a tool with which they can advance their central argument about why they are relevant to the shopper.

You then could use a self-checkout system to pay, and it was all seamless because the computer knew which jeans it delivered, which ones you kept and which ones you sent back. You could then leave ... and never talk to a salesperson. Ever.

If you don’t know that, and if that knowledge has not seeped into every level of your organization – the way it has at retailers that range from Wegmans to WinCo, from Dorothy Lane to HEB, to name just a few – then all The Wall Street Journal pronouncements and consultant-driven strategies in the world can’t help you.

I was a big fan of Hointer, in fact, I was writing about the business on MNB more than three years ago.

Only you can know the right temperature for your retail porridge. n

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N E W J E RS E Y G R O C E R

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GOVERNMEN T R EL AT IO N S

Government Affairs Update: TTF Dominates Summer Actions This summer, the legislative agenda has been dominated by efforts to advance a Transportation Trust Fund (TTF) and tax reform bill package.

Back in June, legislative leadership appeared to be close to an agreement on a package, which included a 23 cent gas tax increase to fund the TTF, and significant tax reform.

The tax reform bill includes many provisions that NJFC has been advocating for, including a phase out of the estate tax, an increase in the exemption for retirement income, an income tax deduction for contributions to New Jersey charities, and an increase in the Earned Income Tax Credit (EITC).

However, at the end of June, in a last minute deal struck between the Governor and the Assembly Speaker, the Assembly passed an alternative bill.

This bill increases the gas tax by 23 cents to fund the TTF and reduces the state’s sales tax from 7 to 6 percent by January of 2018. However, Senate President Sweeney was not onboard with this new proposal and the Senate adjourned in late June without voting for the bill.

In late July, the Senate President and Assembly Speaker announced an agreement on a new TTF and tax relief proposal.

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Mary Ellen Peppard NJFC Assistant Vice President of Government Affairs

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This plan is substantially similar to the plan initially proposed in June, and includes a 23 cent gas tax increase, a phase out of the estate tax, an increase in the retirement income exemption, an increase in the EITC, and a new provision which provides a personal income tax exemption for New Jersey veterans.

It does not include the charitable contribution deduction. The Senate Budget Committee passed this new plan and the Senate President was poised to post the bill for a floor vote.

However, the Governor indicated he would not support this bill package and reiterated his call for a reduction in the sales tax instead. At the same time, legislative Democrats were working to advance legislation that would amend the State Constitution

to require pension payments be made before all other state expenses.

This has long been a priority for Democratic leadership, however, Senate President Sweeney said that the State could not afford to lose significant revenues from the Governor’s sales tax deduction proposal, and at the same time put the costly pension question on the ballot. He said he would not move forward with the pension amendment until the TTF issue was resolved.

Ultimately, the bill was not posted for a vote in either house, and it’s unclear how long this stalemate may last.

Additionally, there are two bills on the Governor’s desk that are priority issues for NJFC members.

The Governor has not yet taken action on the bill to increase the minimum wage to $15 per hour.

We expect he will veto the bill, and legislative leadership will then start to advance legislation to put a minimum wage increase on the ballot.

NJFC continues to educate policymakers about the detrimental impacts of such a significant increase, including higher food prices, lost jobs and reduced work hours.

Also on his desk is legislation NJFC has been advocating that would extend the designation of all urban enterprise zones (UEZs) for a one-time period of 10 years. Many of our members have been able to establish themselves and create jobs in economically distressed areas due to the tax incentives provided for in the UEZ program.

While we understand the UEZ program is not perfect, we are encouraging the Governor to sign the bill and allow our members to continue to operate in UEZs, which often encompass areas designated as food deserts.

At this time, the Legislature is not scheduled to return to the Statehouse before Labor Day. That could change if the Senate President, Assembly Speaker and Governor come to an agreement on a TTF and tax reform package. n

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N EW JE R SE Y G R OC E R

Contact us today to learn how we can help make this your best year ever!

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INSIDE T HE B ELT WAY

The Regulatory Environment Trumps All Else in 2016 BEYOND THE POLITICAL RHETORIC OF THE PRESIDENTIAL ELECTION, 2016 HAS BEEN A VERY ACTIVE YEAR IN WASHINGTON, D.C. SO FAR. The presidential election leads to a condensed legislative calendar in Congress, but our policy agenda and priorities do not take a day off when Congress is out of session.

The regulatory agencies have been their busiest in recent memory, pushing out final rule after rule before the current administration ends. After just after the first half of the year, we have seen new regulations ranging from food safety to overtime pay to nutrition labeling, and this trend is not expected to show signs of stopping anytime soon.

On May 5, the Food and Drug Administration (FDA) published its so-called “final” guidance on its chain restaurant menu labeling regulation, which also sets the regulation’s enforcement date for May 5, 2017.

The December 2014 rule requires menu labeling at chain restaurants and “similar retail food establishments,” which includes grocery stores, according to the FDA. The Food Marketing Institute has long advocated for the agency to address specific concerns with the rule’s prescriptive requirements that were written for a chain restaurant establishment with menus or menu boards and do not account for the realities of a supermarket setting.

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N E W J E RS E Y G R O C E R

Jennifer Hatcher Senior Vice President Government and Public Affairs, Food Marketing Institute

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As the agency continued to move forward on implementation without addressing our concerns, we have supported federal legislation (H.R. 2017/S. 2217) to modify the regulations to address these subtle but very important clarifications and allowances of flexibility.

We have asked for these modifications, not as a means to exempt the industry, but to allow FMI member companies to provide their customers with the nutrition information they want while continuing to provide a diverse lineup of fresh in-store offerings on which they depend.

FMI strongly supports enactment of the Common Sense Nutrition Disclosure Act (H.R. 2017/S. 2217)

to make this regulation more workable in a grocery store setting.

The House of Representatives passed H.R. 2017 in February with a strong 266 -144 bipartisan vote, and we are actively campaigning for bipartisan momentum in the Senate in order to get the legislation moving there.

You play an important role on behalf of the industry to educate lawmakers and policymakers about the impact of certain policies on the operations of your businesses. Your first-hand examples and relationships with lawmakers are the most critical aspect of these efforts.

For instance, many of you have spent years growing the offerings in your salad bar to offer more low calorie items sourced from your produce department.

If you are required to put up a sign with a calorie count every time you add an item to your salad/hot foods bar, how would that impact your offerings?

To get your lawmakers to make the changes that you need, we need you to contact your lawmakers (visit Foodaction.net), invite them to your stores and tell them your stories and the challenges you face to implement the menu labeling requirements and the host of other new regulations that are making their way into your stores.

Of course, we are glad to help in setting up a visit/ tour or giving you talking points to consider or even a staffer to help guide the process.

In the midst of this eventful and active end-ofAdministration regulatory environment, there is good news. We represent and work for an incredible industry with a far-reaching impact in communities across the country.

Within that context, we will always be on the right side of any debate because we continue to serve our customers with safe, healthy and affordable food every day. n

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CONGRESS ENACTED DEBIT CARD SWIPE FEE REFORM, ALSO KNOWN AS THE DURBIN AMENDMENT, AS PART OF THE DODD-FRANK LEGISLATION IN 2010, BUT SIX YEARS SINCE THIS LEGISLATION WAS PASSED, U.S. MERCHANTS CONTINUE TO FIGHT FOR TRANSPARENCY AND COMPETITION IN THE CREDIT & DEBIT CARD INDUSTRY. Recently, Congressman Randy Neugebauer (R-TX) introduced a bill to repeal the Durbin Amendment (H.R. 5465). Shortly thereafter, Chairman of the House Financial Services Committee Jeb Hensarling (R-TX) rolled out his Dodd-Frank reform package (the Financial CHOICE Act), which includes a provision to repeal the Durbin Amendment.

The Durbin Amendment, which was supported by NGA and CGA, placed a cap on debit card swipe fees for the largest banks and introduced competition into the debit routing system. For retailers and merchants, swipe fees are the fastest-growing expense they face, despite technological improvements that have made it much cheaper for banks to process such transactions.

Swipe fees typically exceed a grocer’s profit margins – and that’s just not sustainable.

Swipe fees typically exceed a grocer’s profit margins – and that’s just not sustainable.

Even more frustrating is that Visa and MasterCard are exercising their market power to squeeze out any hope for transparency and competition. The fees are centrally fixed, with no input from retailers, by the credit card companies and not adequately disclosed to retailers, or their customers.

Repealing the Durbin Amendment would only serve to increase profits for big banks while hurting businesses and consumers.

Consumers have also seen benefits in ways that directly contradict the predictions of the banks.

Despite the banks continued insistence that the Durbin Amendment would be the end of free checking for consumers, free checking has increased from 53 to 61 percent since Durbin was implemented, according to the American Banking Association’s own numbers.

Economist Robert Shapiro has noted that consumers saved more than $6 billion in the first year after the Durbin Amendment went into effect. H.R. 5465 would send those savings directly back to the largest 1.4 percent of all banks held under the Durbin Amendment (only banks with more than $10 billion in assets are covered under the Durbin Amendment).

The Durbin Amendment has worked for consumers and businesses for the last six years and began to introduce competition into a system dominated by two major companies. We need to ensure more competition within the debit market – not remove it.

The Durbin Amendment was a step in the right direction, now is not the time to take two steps back.

Tell Congress yourself at www.grocerstakeaction.org n

Peter Larkin President/CEO, President/CEO National Grocers Association

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As an industry that operates on profit margins between 1 and 2 percent, supermarket operators

Lower debit swipe fees have allowed supermarkets to pass along savings to consumers in the form of extended sales and have allowed grocery stores to maintain consistent prices even during shortages that would otherwise result in price spikes.

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And the banks issuing cards under the Visa network, for example, all agree to charge the same fees, eliminating any possibility for competition, or negotiation.

have seen the benefits of increased transparency and consumers have seen the benefit of competition that debit card swipe fee reform has brought to the marketplace.

WA SHIN GT O N REPORT

Don’t Let Congress Undo Debit Card Swipe Fee Reform

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KN O W T HE L AW

GMO Labeling: Coming Soon To New Jersey and the Rest of the Country IN LATE JULY, PRESIDENT BARACK OBAMA SIGNED INTO LAW A BILL THAT WILL REQUIRE LABELING OF GENETICALLY MODIFIED INGREDIENTS, CREATING A NATIONWIDE SOLUTION THAT WILL AVOID A STATE-BY-STATE PATCHWORK OF LAWS. Following the rejection of California’s Proposition 37 in 2012, proponents of labeling food containing genetically modified (or engineered) organisms (GMOs) shifted their focus to other states. Maine, Connecticut and Vermont passed laws that would require GMO labeling, and – as of July 1 – the Vermont law became the first such state law to take effect.

Shortly afterwards, Congress took action and created a nationwide GMO-labeling standard that will preempt the Vermont law and all other state regulation in this area – and that will directly apply to food sold in New Jersey.

Background Vermont may be one of the smallest of the 50 states, but the impact of its GMO-labeling law has been felt across the nation. For food producers and retailers with customers in Vermont, this state law created a de facto nationwide obligation, because labeling all goods in compliance with the Vermont law would be less onerous than ensuring non-compliant products don’t end up in Vermont.

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This might not be so bad in the short run, but what happens when similar – but not identical – laws take effect in other states? Food producers and retailers faced the prospect of several states imposing different labeling requirements for the same product.

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Such a byzantine web of regulation – with massive compliance costs – is clearly bad for the food industry, and could only be avoided by Congress passing a law that creates a nationwide GMO-labeling standard that preempts state requirements. Until recently, efforts at the federal level had not been fruitful. However, the fact that the Vermont law was coming into effect catalyzed Capitol Hill.

The Vermont GMO Law On July 1, 2016, Vermont’s GMO-labeling law went into effect. It required specific labeling for products

that are entirely or partially genetically engineered and offered for retail sale in Vermont. This obligation attached to both manufacturers and retailers, depending on how the products are packaged.

The law required the use of specific phrases (e.g., “may be produced with genetic engineering”), and precluded use of the word “natural,” and other derivations, to describe GMO-containing foods.

Violations of the Vermont law would have resulted in potential penalties of up to $1,000 per day, per product.

The Federal GMO Law Previously, Congress had attempted several times to preempt state GMO-labeling laws with federal legislation, but each attempt had stalled. However, with the Vermont law about to take effect, an agreement was reached in the Senate to move forward with S. 764, a bill implementing a national standard.

The Senate passed the bill on July 7 by a vote of 6330, and the House of Representatives passed it one week later by a vote of 306 -117. The bill was widely supported by New Jersey’s congressional delegation.

In the end, it received support of Sen. Bob Menendez and nine of our 12 members of the House.

On July 29, 2016, the president signed S. 764 into law. Effective immediately, the new law preempts Vermont law and all other state GMO-labeling laws, and the Secretary of Agriculture will have two years to establish a mandatory national disclosure standard for “bioengineered” foods.

Under that standard, manufacturers will need to provide a GMO label consisting of their choice of text, symbols, or electronic or digital links. However, the secretary will be obligated to study the efficacy of using electronic or digital links on labels. If the study determines that the digital and electronic links do not sufficiently inform consumers, the secretary must then provide additional labeling options.

Other provisions of the law require the secretary to: n

establish a procedure for requesting a determination regarding other factors and conditions under which a food is considered a bioengineered food;

n

provide alternative reasonable disclosure options for small packages of food; and

n

provide additional disclosure options for “small food manufacturers,” including use of a telephone number or a company website, and provide such manufacturers with a delay of at least one year in implementing the disclosure standard, once it is finalized.

Finally, the law explicitly precludes the secretary from recalling food based on a violation of the disclosure requirement, and it does not require that the secretary impose monetary penalties for a violation.

Conclusion Vermont may have led the way on GMO labeling, but its own law was short-lived: the new national labeling standard entirely supplants the Vermont law and all other state laws addressing GMO labeling.

K N O W T HE L AW

The law specifically exempts foods from non-GMO animals that consume GMO feed from being considered “bioengineered” solely for that reason, but otherwise leaves to the secretary the discretion to determine how much of a bioengineered substance must be present in food for the disclosure requirement to be triggered. The law also exempts “very small food manufacturers” and all restaurants and other retail food establishments from the disclosure requirement.

Authors Donald Sobelman (Partner, San Francisco office) and Joshua Stoops (Associate, Sacramento office) are attorneys at Downey Brand LLP specializing in environmental law, including regulatory compliance and litigation.

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N AV I G AT I N G T H E D I S R U P T I O N

BY LEN LE W IS

Na igating the

Disruption

THERE’S A SAYING THAT “OLD HABITS DIE HARD.” IT’S CERTAINLY THE CASE IN RETAIL WITH OPERATIONS, FORMATS, PRODUCTS AND PROMOTIONS THAT HAVE BEEN THE NORM FOR DECADES AND JUST REFUSE TO DIE.

N AV I G AT I N G T H E D I S R U P T I O N

But old habits need to be laid to rest once and for all if retailers and suppliers expect to succeed in the face of major industry disruption, said Mike Paglia, director of retail insights for Kantar Retail, one of the nation’s leading research and consulting firms.

“They are also incorporating digital into their purchasing decision – often before going to the store,” he explains. “They also have different expectations about the features and benefits of food whether it’s gluten-free products, vegan or non-GMO.”

“There’s a whole array of disruptors out there within and outside the supermarket industry that need to be watched,” he said. “Within the industry, we have the continuing growth of online grocery, which is really shaking up the way everyone does business – whether it’s home delivery or click and collect models.”

However, this doesn’t mean that traditional supermarkets are dead in the water, unless, like A&P that went bankrupt this year, they are unwilling to adapt. He noted that other companies like Kroger, Publix and HEB are doing a great job adapting to change.

On top of that, Paglia said, there are third party platforms like InstaCart throwing its weight around.

“Frankly, all the disruption in the market is forcing retailers to elevate their capabilities in business and on new ways to connect with shoppers,” he said.

Additionally, the growing prevalence of Amazon is not to be ignored, particularly around center store products sold through Amazon Prime and other programs.

“Essentially, this takes items off the shopping list that consumers would have gone to a store to purchase – things like paper towels or a 50 -pound bag of dog food,” said Paglia.

At the same time, another potential disruptor is Walmart’s Neighborhood Market concept.

“Make no mistake,” Paglia warns, “this is a supermarket format that’s got the clout, efficiency and buying power of Walmart behind it. And all the signs point to heavy investment in this format.”

Outside of the supermarket channel is where disruptions really gets interesting, according to Paglia, emphasizing that the focus on consumer demographics is more important than ever.

“It’s all about specific shoppers,” he said. “There’s enormous disruption in terms of income and generational polarization. We are seeing Millennials entering the family formation stages, but doing so in a different way than baby boomers, which, by the way, are still a target demographic for retailers and suppliers.

“But, Publix saw the writing on the wall and knew they would have to accept technology if they wanted to maintain relevance with shoppers. It has given them enormous insight into segmenting stores, assortments and promotions,” he said.

Paglia added that, Publix is being very purposeful and cautious in how it rolls things out, adding it is adamant about putting shoppers at the center of everything it does.

HEB already knows its shoppers very well.

“What makes them a disruptor is a willingness to operate outside their comfort zone,” Paglia said.

“You can see it in their diverse portfolio of stores – everything from the foodie-based Central Market to the Joe V Smart Shop, a discount operation that was modeled after Aldi.”

Kroger has really been the uncontested champion of the industry for some time by taking the long view of the industry and using its long-term relationship with Dunnhumby to revolutionize U.S. retailing.

“The chain made deliberate efforts over the years to tie Dunnhumby data into all their strategic decisions,” Continued on p. 28

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Asked about key demographic differences, Paglia said Millennials are buying smaller homes and are either not having children, having fewer children or having children later than their predecessors.

“This may seem to be a small step, but it was a watershed moment for Publix,” he said. “This is a company that has traditionally been very averse to incorporating technology into its overall value proposition.

N EW JE R SE Y G R OC E R

“The longer we continue to think of shoppers as an homogenous group, the greater the liability becomes,” he added.

Publix, which has a bit of a reputation for being slow to accept change, according to Paglia, has launched a digital coupon program.

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C O N TI NU E D

Continued from p. 27

Paglia said. “Now, they are ramping up their digital and online capabilities to accentuate their leadership.”

According to Paglia, there’s a tendency (in business) to look at things quarter by quarter and making the numbers and it’s the same view taken by Wall Street.

But these chains are okay with investments that may take an extended amount of time to yield returns.

Most companies don’t have that kind of patience.

“It’s easier to respond to a short-term threat than to invest in a long-term opportunity,” he said. “People are slowly starting to realize that the short-term view of growth isn’t as fruitful as it used to be.”

Looking outside the industry, he said, the industry should continue to monitor Amazon.

“They’re disrupting the entire retail industry,” he warned. “It’s reminiscent of what Walmart did several decades ago when many people dismissed the chain’s approach to efficiency and productivity.”

Now, Paglia said, it’s Amazon that’s disrupting things like assortment, fulfillment and shopper engagement.

However, Amazon is at a point where it has to decide whether it wants to be a tech company, or a retailer.

Turning to other disruptive channels of trade, Paglia noted that dollar stores remain the fastest growing class of brick and mortar trade in consumables that Kantar tracks.

“We expect them to grow 6.6 percent annually between now and 2020,” he said.

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On the other end of the discount spectrum are the warehouse clubs whose growth has been tracking in excess of 5 percent annually. Over the next five years, this segment will grow faster than the entire marketplace, he noted.

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“Both segments are business models that don’t play by the same rules in terms of demand for standardization of case packs and mass distribution that conventional retailers and suppliers have been playing by for decades,” Paglia said.

According to Paglia, dollar stores want small pack sizes that some suppliers aren’t set up to produce in their current facilities. Conversely, the clubs want totally unique items that no one else carries and, given the current infrastructure, can be costly to produce.

“Both were the beneficiaries of the great recession and that’s when they began to shine,” he said.

“Everyone was laser focused on value and spending.

As value became more mainstream, these discounters were able to meet everyone’s needs – not just low income shoppers.”

On another front, Paglia warns not to underestimate the disruptive power of online retailers over and above Amazon.

“It’s been very transformative,” he said. “I’m not just talking about purchasing, but even before that in terms of how people consume media and how they interact with brands. Essentially, retailers and suppliers need to think about new ways to connect with shoppers.”

Paglia said some companies cling to the attitude that the way things have always been done will continue to yield growth. But the world has changed at a pace that hasn’t been experienced in the past. At the core, retailers and suppliers must be willing to find growth in uncomfortable places including different shopper groups, additional channels of trade and different product categories.

“We have to rethink the role of the store,” he suggested. “It’s no longer just a place where a truck drops off goods, and products are put on the shelf for shoppers to buy. The store is meant to be a more experiential environment where you’re engaging shoppers on a more personal, or emotional level.”

How personal can stores get? That’s anyone’s guess, according to Paglia.

Fifty years ago, the level of personalization now would have been unthinkable.

“Everyone just put out FSIs and it was a good day if you got a 1 percent redemption rate,” he said.

“Similarly, what we are doing now may be obsolete in 20 years.”

It boils down to how retailers and suppliers go to market, he said, noting the development of a Kantar’s framework called Reconfigure Retail.

“Basically, it focuses on the need for companies to reconfigure their approach to value, engaging shoppers, store formats, and the very nature of commerce,” Paglia said. “All these things are on the

N AV I G AT I N G T H E D I S R U P T I O N

table. Retailers and suppliers will have to address all of them if they want to succeed in the future.”

Re-engaging shoppers means understanding that what’s relevant to one may not be to another. It’s about having meaningful conversations with them and providing what they need instead of trying to convince them they need what you are selling.

In terms of format, it’s a willingness to operate stores that are more differentiated and shopper centric,” he added. “That may mean a smaller format, but it also has implications for the types of products sold and how much space categories receive.

where and how they want to spend their money.

Companies that want to grow need to seek out mutually beneficial relationships with each other.

Many top tier companies do that now, but a lot of small firms still look at things from a transactional view,” Paglia concluded. “We need to develop more symbiotic relationships going forward.” n Len Lewis is editorial director of Lewis Communications, Inc., a New York-based editorial planning, research and consulting firm. He is a contributor to several retail publications and trade groups in the U.S. and Europe and has been a speaker and moderator at numerous industry events. He can be reached at lenlewis@optonline.net or via his website www.lenlewiscommunications.com

“For a long time there was a power struggle between retailers and suppliers,” he said. “In the past decade, power has shifted to shoppers and they will decide

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SUPPLY CHAIN

CONNECTIVIT Y | NEW STRATEGIES | DIGITAL FLUENCY UNCONVENTIONAL FORMATS

THE RETAIL INDUSTRY AS WE KNOW IT IS LIVING ON BORROWED TIME.

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N E W J E RS E Y G R O C E R

CUSTOM

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R E S H A P I N G R E TA I L

BY LEN LEW IS

This isn’t some doom and gloom forecast nor does it portend the extinction of an industry. But retailers must heed THE RETAIL INDUSTRY AS WE KNOW IT the call to arms and recognize that a transformational shift is THIS ISN’T SOME DOOM AND GLOOM FORECAST NOR taking place.

IS LIVING ON BORROWED TIME. DOES IT PORTEND THE EXTINCTION OF AN INDUSTRY.

Going forward, the path to success is paved withMUST new HEED strateBUT RETAILERS THE CALL TO ARMS AND RECOGNIZE THAT A TRANSFORMATIONAL SHIFT IS gies – customer-centricity, digital fluency, operational agility, TAKINGunconventional PLACE. a need for deeper demographic analyses, formats, connectivity at all levels of the supply chain, and new GOING FORWARD, THE PATH TO SUCCESS IS PAVED methods of distribution.

WITH NEW STRATEGIES – CUSTOMER-CENTRICITY, DIGITAL FLUENCY, OPERATIONAL AGILITY, A NEED FOR DEEPER DEMOGRAPHIC ANALYSES, UNCONVENTIONAL FORMATS, CONNECTIVITY AT ALL LEVELS OF THE SUPPLY CHAIN, AND NEW METHODS OF DISTRIBUTION.

ER-CENTRICIT Y | OPERATIONAL AGILIT Y | SUPPLY CHAIN

By Len Lewis DEEPER DEMOGRAPHIC ANALYSES

At its core, this reshaping of retail is not just about selling products but nurturing relationships with customers on multiple platforms and enhancing their shopping experience.

Some recent moves are a good barometer of where retail is headed.

“It’s more about the food experience for us,”

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families,” said Walmart CEO Doug McMillon.

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quintessential box retailer,all sees itself at aof crossroads, At its core, this reshapingWalmart, of retail once is notthe just “We’rebig connecting the parts Walmart about selling products but nurturing into one seamless shopping experience fighting back against alternative retailers like Amazon on fronts other with relationships with customers multiple great stores, easy pickup, fast delivery and than on price. platforms and enhancing their shopping apps and websites that are simple to use.”

“We want to make every day easier for busy families,” said Walmart CEO experience.

The company alsoofgetting more Doug McMillon. “We’re connecting all the is parts Walmart into aggresone Some recent moves are aseamless good barometer sive in grocery delivery through a deal with shopping experience with great stores, easy pickup, fast delivery of where retail is headed.and apps and websites thatUber and Lyft in Denver and Phoenix. are simple to use.”

Walmart, once the quintessential big box Kroger is puttingin$2.5 million in athrough culinarya The company is also getting more aggressive grocery delivery retailer, sees itself at a crossroads, fighting training and education center in Cincinnati, deal with Uber and Lyft in Denver and Phoenix. back against alternative retailers like Amazon Ohio, with chefs from its stores around the Continued p. 32 on fronts other than price. country, to meet the demands of aon growing consumer food culture.

“We want to make every day easier for busy

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C O N TI NU E D

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IMPROVING THE CUSTOMER SHOPPING EXPERIENCE IN ALL FORMATS AND CHANNELS OF DISTRIBUTION

N E W J E RS E Y G R O C E R

Continued from p. 31

Kroger is putting $2.5 million in a culinary training and education center in Cincinnati, Ohio, with chefs from its stores around the country, to meet the demands of a growing consumer food culture.

“It’s more about the food experience for us,” said Mike Donnelley, Executive Vice President of Merchandising for Kroger. “It’s about how to stay more in tune with food trends.”

At the same time, the chain is continuing to decentralize at its manufacturing facilities in order to streamline operations, increase efficiency and lower the cost of manufacturing as well as products in-store.

Overall, industry analysts believe that the transformation of retailing will be build on three main pillars – technology, marketing and the customer experience.

Technology seems to begin and end with what has become one of the most talked about concepts “The Internet of Things” (IoT), an often misunderstood term which basically means connecting every device in the world to every other device through the use of sensors embedded in products and locations throughout the supply chain – from manufacturing to distribution centers, stores and into people’s homes.

A report by Juniper Research forecast that by 2020 retailers worldwide will spend $2.5 billion in IoT– related hardware – including beacons, RFID tags, other types of sensors – a fourfold increase from the $670 million in 2015.

“RFID was the first signpost on this journey but we’re moving on to other sensors,” said Dan Mitchell, Director of Retail and CPG industry practice for SAS, Cary, N.C., a data analytics firm. “The biggest innovation is being able to sense where a consumer is in the store by using their mobile device.”

EXPERIENCE COUNTS To most retail industry observers, technology is the means to an end. Improving the customer shopping experience in all formats and channels of distribution

is the endgame.

Joe Jensen, Vice President of the IoT group and General Manager of the Retail Solutions Division of Intel, emphasized that the real story with IoT is not about the technology or even the ability to gather data, but how to use it to gain insights into consumer behavior and enhance the shopping experience.

One of the ways retailers are moving the needle is through the use of retail laboratories to accelerate innovation and change at a more rapid pace and create a more seamless omni-channel shopping experience.

At the Westfield Center in San Francisco, one of the country’s largest mall operators, the facility’s entire top floor is dedicated to Westfield Labs, whose responsibility is to rethink how customers shop in conjuntion with their mobile devices.

WalmartLabs, based in San Bruno, Calif., employs over 3,000 people. Its goal is to build an “internet technology company,” according to company officials.

It is an incubator for new products and projects that are helping to reshape Walmart’s in-store and e-commerce with search functions for stores and categories, as well as store mapping. It is an integral part of the chain’s plan to revamp e-commerce and catch up with Amazon.

Target opened its innovation lab in San Francisco in 2012. The chain had focused on several areas, including: virtual reality, robotics, and the use of such digital equipment as beacons and other types of location technology activations – including beacons and location technology in order to provide customers with a better shopping experience.

Meanwhile, online shopping will remain one of the most disruptive areas of technology, continuing to transform every segment of retailing.

Online grocery sales – both home delivered and store pickup – run anywhere from $14 billion to $21 billion, according to research.

This would represent approximately two to three percent of the $700 billion grocery industry. But some

R E S H A P I N G R E TA I L

CONT INUED

R E TA I L E R R E C O M M E N D AT I O N S :

• BECOME FAR MORE INNOVATIVE WITH WEBSITES AND DIGITAL OFFERINGS. • F O C U S O N S AT I S F Y I N G C U S T O M E R S A C R O S S A L L C H A N N E L S I N S T E A D O F V I EW ING DIGITAL AS A C OMPET ING C HANNEL. T HE FACT IS T H AT 74 PERCENT OF RESPONDENTS SHOP MORE THAN ONE CHANNEL AND 25 PERCENT ARE U S I N G F O U R O R F I V E D I F F E R E N T O N E S T O S H O P.

analysts believe that Millennial shoppers could boost that percentage to as much as 15 percent over the next 10 years.

Mike Griswold, a Vice President of Research at advisory firm Gartner, has stated that Amazon forced the industry to look at online sales as more than just a passing fad. Food retailers are now asking how they can offer an Amazon-like experience.

“We’re past the phase where we ask ‘Is this something I should do?’” he said. “We’re at the part where we ask ‘How fast can I roll this out?’”

This was underscored in a new retail analysis from PwC. “The bottom line is that the consumer has spoken,” according to the PwC analysis. “They’ve communicated that multichannel shopping is here to stay and with the ability to shop anywhere, anytime with any device, consumers are demanding excellence and consistency at every turn. And they are challenging retailers and brands to keep up.“

This will require changes in the way retailers track and measure consumer behavior, market their products, operate their stores and manage their supply chains. The successful retail business model of the future will be different.

A number of companies are looking at how to interact with customers on different levels. One of the most prolific is Target which has established the Food + Future coLab, a collaboration between the chain, the MIT Media Lab and IDEO, a U.S. based design firm.

This collaboration is yielding some interesting possibilities for combining technology, personalization, new foods and packaging.

One idea is a new scanner that checks food ingredients. A report at the checkout not only tells consumers how much money they spent, but also the amount of calories purchased and the total nutritional content of their order.

A global PwC study revealed that only 20 percent of online shoppers have made their first purchase within the past year, suggesting tremendous opportunity for retailers to create or enhance their online presence.

The coLab team is also focusing on developing smaller stores with a heavier prepared foods offering and new packaging that clarifies the product’s ingredients. Called Good and Gather it is literally transparent and rather than listing ingredients in a small box on the back of the page, they are listed in large type on the front.

However, in the U.S., 67 percent of consumers shop online and sales are projected to achieve a 10 percent compound annual growth rate, which some observers believe is overly conservative.

Interactions with customers are clearly the next big idea in retailing and a new “disruptor” may be the use of robotics which some pundits are hailing as a new industrial revolution.

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The question retailers have to answer is how multichannel shopping behavior will continue to evolve.

better align their business models with consumer sophistication and expectations,” the PwC study reported. “Closing this gap will require a significant increase in agility and flexibility by retailers, driven by a deeper understanding of their customers.”

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“It’s clear from our results that retailers need to

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While Amazon started the robotics ball rolling with its drone technology, Walmart is now testing drones to handle inventory at its warehouses. By taking approximately 30 images a second, these drones can catalog a distribution center’s inventory in less than a day compared with a month needed by human workers.

Along those lines, a research report entitled “Robot Revolution” by Bank of America Merrill Lynch, found that up to half of retail jobs, including cashiers, could be replaced by robots or computerization in just 20 years.

San Francisco-based Simbe Robotics has developed Tally, a robot that roams through a store scanning the shelves for misplaced or low inventory in about onethird the time needed by human workers, according to company CEO and Founder Brad Bogolea, who said that Tally can inventory an entire supermarket in about an hour.

RF Spot, Los Altos, Calif., has an in-store sensing robot to track and maintain apparel inventory at Tesco stores in the UK. Carnegie Mellon University is developing AndyVision, a robot inventory system that also scans the store’s shelves to tell staffers when inventory of an item is running low, or if merchandise is out of place.

Additionally, the market for robot assistants will hit about $6.5 billion this year, according to the Fung Center.

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The Fung Business Intelligence Center, a Hong Kong-based firm that analyzes supply chains and retail said in a new report: “Retail has always been about getting inventory from its place of manufacture to customers. The many steps along the way – from packing, transporting, unpacking, and merchandising the product – are using automation and robotics to their limits, in many cases. Changes and new opportunities for robotics will take place in the coming years, probably before robots become commonplace in the sales floor.”

Amazon has already used robots in its distribution centers to cut costs and speed up deliveries. Walmart is six to nine months away from using drones to check warehouse inventories and has applied to U.S. regulators to use drones for home delivery and curbside pickups.

Intense competition throughout the industry is driving the retail trend toward strategic alternatives like merger and acquisitions in order to optimize capital and increase growth.

In a recent report, Duff & Phelps, a consultant and specialist in M&A activity cited Kroger’s recent acquisition of Roundy’s to expand into Wisconsin and Harris Teeter to increase its presence in the Carolinas and Mid-Atlantic markets.

A year in the making, the merger of Ahold and Delhaize is near completion, a move that will give the combined company more than 6,500 stores. This is the latest in an ongoing market consolidation in the U.S. over the past five years.

Meanwhile, with traditional supermarkets under fire, the format that has gained much attention, and market share, is the limited assortment, or small format grocery store.

For example, since 2006, the average supermarket square footage in the U.S. has fallen, according to Packaged Facts. Trader Joe’s, Aldi, Bfresh in Boston and Green Zebra in Portland are small formats

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offering a curated shopping experience with a heavy focus on private label.

All signs point to the continued proliferation of small store formats, according to analysts, with several recent entrants standing out.

For example, Whole Foods, long known for upmarket prices and products is going after a new wave of lower income but discriminating shoppers with its new 365 small store format. It is expanding more rapidly than previously forecast thanks to a positive reaction from a broad range of consumers, the company said.

recent “Thought Starters” event, that in-aisle advertising must be a collaboration between retailers and manufacturers and should go along with a discussion about where products are placed.

“You have to ask, what’s on the consumer’s mind,” he said. “Most grocery stores approach food from a category manager’s perspective, where they’re measured on sales and profit. So they want this item next to this item. The consumer doesn’t care. They just worry about the needs of the day.”

Those needs include food delivery systems which have become one of the hottest areas in retailing.

But industry observers believe that Aldi’s aggressive expansion in Southern California, with 45 stores slated to open by the end of the year, will have the greatest impact on the West Coast.

“Consumer demand for online food offerings has increased in recent years, providing an incentive for traditional brick-and-mortar retailers to enter the online segment,” Duff & Phelps noted.

This move is part of the German chain’s $3 billion investment in the U.S. which will see some 650 stores open over the next five years, with California an integral part of that plan, according to company officials.

This includes companies like FreshDirect and Peapod, a unit of Ahold USA. Amazon has launched AmazonFresh and recent press statements indicate they are in strategic discussions with the UK online grocery retailer, Ocado.

As Bryan Gildenberg, head of Research for Kantar Retail, has said: “California has an older, low-income population that find the retailer’s simple, midsize stores easy to navigate.” Another is Ahold USA’s BFresh stores, a 10,000-square-foot urban format that focuses on prepared foods made from scratch.

Additionally, when Albertsons acquired Safeway in 2015, Groceryworks.com came with it. Albertsons is expected to grow this business significantly, it was noted.

Formats like this present a significant challenge for center store brands. Research from Mintel indicates that two out of five consumers believe the center store is made up excessively of “junk food.”

Target, which came into the grocery business with a vengeance over the past two years, is in the process of creating a new identity. The goal, according to industry sources, is to look more like a department store and less like a supermarket. The chain is testing the format, dubbed LA25, in about 25 stores in the Los Angeles area. The project involves making 35 changes to the look of each store.

This perception is more prevalent among younger shoppers and those that have a higher level of education. However, in an effort to revitalize brands this could promote the development of technologies that would drive in-aisle advertising.

X T B I G I D E A I N R E TA I L I N G .

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Joel Gregoire, Senior Food and Drink Analyst at Mintel, said during a session at Canadian Grocer‘s

Although technology is clearly driving change, new brick and mortar formats are not to be denied.

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ALDI IS CHANGING ITS STRATEGY HERE AS WELL. The premier no-frills, deep discounter is testing a more upscale format in Germany that could find its way to U.S. operations, thereby changing the game for small store formats.

Cut cardboard boxes and crates are giving way to wood paneling and more organic produce. Aldi’s “Future Store” is the chain’s answer to intensified competition as well as changing consumer tastes.

In terms of demographics, millennials as well as the up-and-coming Gen Z population will have a significant impact on the entire retail business. But a recent report from Coca-Cola cited several strategies for capturing sales from this segment. n Market

in the Moment: In-store POS displays and shelf talkers drive bigger impact with millennials, and point-of-purchase shopper marketing is critical.

n Deliver

Differentiated Experiences: Because millennials look for ready-made or easy-to-make meal solutions, there is a big opportunity to win their meal and snack business and use this as the mechanism to drive loyalty and store preference.

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to Impulsiveness: The impulsiveness of millennials provides ample opportunity to create better connection points to drive purchase intent, but it takes strong in-store communication and variety to reach them. Beverages, snacks and ready-to-eat café or deli items are big impulse purchases.

On-Trend and On-Budget: Offering budgetfriendly, smaller products that fit their lifestyles and household needs allows them to have rich consumption experiences without the high price tag.

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The issue is not only who will be shopping the stores, but where. Over the past several years, considerable time has been spent discussing urban retailing. The rush to the inner city has been a valid response to a shift in population among younger people as well as older empty nesters.

However, there is some evidence that the pendulum is swinging the other way.

New figures from the U.S. Census Bureau shows that the population surge toward big cities is slowing as people uproot again for jobs in the suburbs. The top 50 cities accounted for 20 percent of the nation’s population last year, down from 21 percent the prior year and the third consecutive annual slide and a significant decline from 2011 when cities, specifically revitalized downtown areas, accounted for 26.7 percent of U.S. population growth.

However, high real estate and rental costs in urban areas are driving more people in their late 20s to “exurbs” and suburban areas where real estate and rents are comparatively less costly and job opportunities are increasing. Not surprisingly most of the cities showing population growth are in the West.

At the top of the list was Irvine, Calif., with a 3.43 percent growth, followed closely by Gilbert, Ariz.; Henderson, Nev.; Scottsdale, Ariz.; Denver, Colo.; and Orlando, Fla. In a 2013 book entitled “Reshaping Retail” from McKinsey & Co., the authors noted: “Individual retailers are going to have to understand how and where they are going to play.” In other words, they must choose one or two (but not several) archetypes and understand how to transform their businesses accordingly.

However, who lives in these locations could also changing the nature of the business. The Pew Research Center reports that for the first time since the late 1800s, younger people, 18-34 years old, are more likely to live with their parents.

Overall, the study found that 32.1 percent of people in this age group are living with their parents, surpassing the 31.6 percent who live with a spouse or partner. Others in the study live alone, with roommates or other family members.

Indicating the implications for retail, a senior Pew researcher noted, “Forming a new family is not nearly as important as it was for young adults.”

“This will mean a dramatic and long term journey, bringing in new staff and skills, embedding new processes and embracing new organizational structures. But those who get ahead now may enjoy a sustained advantage for decades to come.” n

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