What Blue Apron needs to do to survive the threat of Amazon – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From MarketWatch

For a while, it looked as though Blue Apron was destined to become a culinary juggernaut in the American kitchen.

Founded in 2012, the company APRN, +1.89%  carved out a clever business model by mailing perfectly portioned, pre-packaged ingredients and recipe cards to home cooks in need of handholding. It’s not yet profitable, but growth is impressive. Last year, the company had $795.4 million in 2016 by delivering about 8 million meals per month to customers.

Recently, though, there have been challenges. Shares that the company had hoped to sell between $15 and $17 apiece in June were priced at just $10, hurt in part by Amazon’s AMZN, +0.23%   announced acquisition of Whole Foods WFM, -0.02% earlier that month. They now trade for less than $6, pummeled in part by Amazon’s plans to launch its own meal kits.

The twin revelations about Amazon are no doubt unnerving to Blue Apron’s executive leadership team and investors. And yet, they should also see them as encouraging signs. That Amazon sees so much potential in the industry is proof positive that the meal kit represents a new American staple, and not just—pardon the expression—a flash in our collective pots and pans.

True, Amazon is a formidable rival. And yes, the meal kit business is increasingly crowded. (Current contenders include: Plated, HelloFresh, Purple Carrot, and Sun Basket.) But Blue Apron has an opportunity to differentiate itself. To do so, it must focus on the needs, wants, and values of its target audience: mainly millenials.

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If retailers want to compete with Amazon, they should use their tax savings to raise wages – Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

From Harvard Business Review 

Walmart announced today that it is raising its starting wages in the United States from $9 per hour to $11, giving employees one-time cash bonuses of as much as $1,000, and expanding maternity and parental leave benefits as a result of the recently enacted tax reform. It is part of Walmart’s broader effort to create a better experience for its employees and customers. The new tax law creates a major business opportunity for other retailers as well — if their leaders are wise enough to take advantage of it.

The U.S. corporate tax rate is dropping from 35% to 21%. Retailers, many of whom have been paying the full tax rate, are going to benefit substantially. Take a retailer that makes 15% pretax income. Assuming its effective tax rate goes from 35% to 21%, it could save the equivalent of 2.3% of sales. Specialty retailers with higher pretax income will save even more.

Retail executives have a choice in how they use these savings. I believe the smartest choice — one that will help them compete against online retailers like Amazon — is to create a better experience for customers and to achieve operational excellence in stores. For most retailers, doing both requires more investment in store employees — starting with higher wages and more-predictable work schedules. My research shows that combining higher pay for retail employees with a set of smart operational choices that leverage that investment results in more-satisfied customers, employees, and investors. Read More »

Jeff Bezos’s initial focus on books constitutes the greatest execution of a beachhead marketing strategy ever – Bill Aulet

MIT Sloan Senior Lecturer Bill Aulet

MIT Sloan’s Bill Aulet

From Entrepreneur

Jeff Bezos recently briefly overtook Bill Gates to become the richest man in America. It’s a reminder, much like Amazon’s most recent $13.7-billion acquisition of Whole Foods, of the remarkable power of the company that Bezos has created and the straightforward strategy he used to create his empire. Now, with each new click and each new transaction, Amazon grows its war chest of consumer and market data and the company’s growth appears — at least for the moment –unstoppable.

But it was not always so. Once upon a time, Amazon sold only books. Bezos’s initial focus on books constitutes the greatest execution of a beachhead marketing strategy ever. By creating a narrow and winnable focus for his first product, Bezos was able to build the fundamentals of his company, and create a launching pad for Amazon to grow into different markets over time.

Today, when I want to buy audiobooks, gardening tools or a Spike Lee Brooklyn bicycle cap, I shop through Amazon and know it will all be delivered, courtesy of Amazon Prime, to my front door in Boston in two days. I have come to depend on Amazon’s recommendations and customer feedback to guide my purchases. I now have an Amazon TV system and have installed Alexa systems at both home and at work. My publisher directs me to the Amazon author section to see how many copies of my book have been sold each week, and in what regions. And when I relax at the end of the day, I read the Washington Post on my iPad, which is free with Amazon Prime. And it all started with books.

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With “Go,” Amazon identifies another job it can do better–Lou Shipley

MIT Sloan Lecturer Lou Shipley

MIT Sloan Lecturer Lou Shipley

From Xconomy

Early last year, I “fired” talk radio along with NPR’s morning and evening editions. That same day, I “hired” Amazon Audible as my commute companion.

It wasn’t a difficult decision. Audible is far better than its predecessors at doing the job I need done as I travel to and from my office – provide on-demand access to an array of rich, custom content.

I got to thinking about that firing-hiring recently when reading an article about Amazon’s new “Go” concept: a quick-stop grocery and convenience-meal venture that will allow consumers to grab what they need off the shelves (Amazon’s Just Walk Out technology tracks what’s added to the shopping cart), confirm the purchase, and leave without ever standing in a checkout line.

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Whole Foods CEO’s poor excuse for poor performance – Jose Alvarez and Zeynep Ton

Harvard Business School Senior Lecturer Jose Alvarez

At a town hall meeting announcing Amazon’s purchase of Whole Foods, a Whole Foods employee had this question for CEO John Mackey:

“I have a question about Whole Foods’s commitment to those win-win-win-win partnerships with our suppliers, with our team members— and how that’s going to live on once this merger is complete.”

Mackey’s response was curious, to say the least:

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

“I think, sometimes, our company’s gone a little bit too much team-member focus at the expense of our customers. And that’s one definite evolution that’s gonna happen. I love the passion these guys [Amazon] have around the customer. They put the customer first in everything they do and think backwards. And— we— we’re gonna be the same way.”

If Mackey thinks that investing in people is part of the reason for Whole Foods’s poor performance, he’s wrong. From what we see, the real problem is a lack of operational excellence. Whole Foods may be paying its employees more than competitors do, but it has not created an operating system that leverages that investment. You can’t put premium gas in a clogged-up engine and expect to win a race.

Whole Foods strikes us as an organization that doesn’t standardize where it needs to and doesn’t empower where it needs to. Five stores within a city may have five different people purchasing from the same local farm in five different ways. Their information systems are mediocre at best.  John Mackey’s own words about Whole Foods technology are useful here: “So I think that we can expect that we’ll go to the front of the class, eventually, in the grocery business, from … the class dunce to… the class valedictorian.”

Poor systems and lack of appropriate standardization mean lower labor productivity and higher costs. At the same time, frontline team members appear to have little empowerment to satisfy customers. One of us recently wanted to return a $3 Whole Foods reusable shopping bag that had broken the first time it was used.  You would expect the cashier to just exchange the bag for a new one.  Instead, she called for her manager to resolve the problem.  It was a waste of time for all, including the other customers waiting in line. Paying team members more than competitors do won’t pay off if you don’t empower them to make a $3 decision! Lack of empowerment reduces not only motivation but also customer service.

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