Last year, the burger chain switched to fresh beef quarter-pound burgers from frozen at most of its stores in the contiguous United States. That change has led to a 30% spike in sales of quarter pounders on average over the past 12 months, the company said Monday. It also helped McDonald’s (MCD) burgers gain market share in what the industry calls the “informal eating out” category for the first time in five years, the company said.
McDonald’s made the change to appeal to consumers’ growing interest in ingredient transparency. Buyers today want to know where their food comes from, Marion Gross, the company’s chief supply chain officer for North America, told CNN Business.
The fresh beef quarter-pound burgers have helped boost McDonald’s sales.
McDonald’s said sales of the fresh quarter-pound burger were especially strong in May 2018, when it was first introduced, thanks in part to marketing efforts. More recently, the company included the fresh beef burger in its 2 for $5 deal for the first time. The promotion performed well, CFO Kevin Ozan noted in an analyst call discussing first-quarter earnings.
Going from frozen to fresh beef was a challenge.
“There was a huge transformation that was required” to make the shift, Gross said. Suppliers needed new packaging equipment and more refrigerators, among other things, to make sure the fresh beef was handled safely, she said. Distribution trucks needed the right temperature monitoring systems to transport the beef correctly. And in McDonald’s kitchens, employees had to implement new food safety practices.
Overall, the shift was one of the “biggest, boldest moves that we’ve made in a long time,” said Gross. It’s the biggest supply chain change the company has made since it started serving all-day breakfast in 2015, she noted.
It also put a strain on the company’s franchisees, who had to pay for some of the changes, like different refrigeration and storage systems.
Last year, the company encountered some friction with its franchisees. In October, the National Owners Association — a self-funded advocacy group of McDonald’s franchisees — met for the first time to discuss ways to work with McDonald’s to improve their livelihoods. The company’s aggressive remodeling plan, which includes modernizing stores with digital menu boards and self-order kiosks, has put pressure on franchisees, which also struggle when McDonald’s adds new menu items or makes other big changes.
Gross noted that the shift was “not easy,” but that franchisees ultimately came on board because fresh beef burgers are just better. “The franchisees became believers very quickly,” she said.
McDonald’s shared news of the improved fresh beef sales as it fields questions about whether it will introduce a plant-based protein burger to its US menu.
Several fast food chains, including Burger King, have added menu items featuring meatless meat as consumers show interest in the product. McDonald’s serves a vegan burger in Europe.
Slow Motion Starvation A first glance Walmart with its $418B worldwide 2017 revenues and 5,000 Walmart stores might lead one to assume it is well positioned for the war. Dig a little deeper and we find Walmart’s growth rate was a miserly .63% while Amazon posted a whooping increase in 25.2% sales growth in 2016 and 44.6% in 2017. Amazon with its 105 million Prime members offers a 5% discount for shopping in its 470 Whole Foods Stores. Think about it. Amazon’s Whole Food stores require ZERO advertising expenditure while Walmart spends nearly $3B per year on advertising each year.
Amazon sells branded over-the-counter medications such as Advil, Mucinex and Nicorette as well as options from Perrigo’s generic GoodSense brand.
Basic Care, Amazon’s recently launched exclusive line of Perrigo OTC health products, is a direct challenge to pharmacy retail chains.
CVS Health, Walgreens Boots Alliance and Rite Aid are losing in-store traffic as people shop for OTC products online. Where they shop is Amazon.
In LaVito’s article the most telling revelation is that people are increasingly shopping for OTC products online. Fortune Magazine reported, “For the first time ever, shoppers are going to the web for most of their purchases. An annual survey by analytics firm comScore (scor, -0.92%) and UPS(ups, +1.11%) found that consumers are now buying more things online than in stores.
The survey, now in its fifth year, polled more than 5,000 consumers who make at least two online purchases in a three-month period. According to results, shoppers now make 51% of their purchases online, compared to 48% in 2015 and 47% in 2014.” The shift to online shopping
Amazon is where 55%+ of online shoppers begin. LaVito goes on, “Pharmacies make money when people walk in looking to grab medicine and end up buying cosmetics and other goods. They’re already losing traffic as people shop for those products online, including on Amazon. Giving them another possible reason to skip the store could hurt even more.
Matthew Oster, head of consumer health research at global market research firm Euromonitor, knows what’s coming, “It’s a very different world, and having Amazon jump in is not a good sign for existing brands, either branded or private label, because the way Amazon works is its ability to take on unprofitable ventures for a time to see how things go. And the fact they have a near monopoly in e-commerce gives them a lot of scale that can allow them to undercut price. So that aspect should be concerning for whoever their competitors are in that space.”
CVS, Rite Aid, Acme, Kroger, Safeway, Publix, and other large national and regional chains will fight back. But like France against the German blitzkrieg, don’t expect the outcome to be positive. The most immediate casualties will be local pharmacies, grocery stores, butcher shops, and other local businesses don’t stand a chance. As these local business fall, local media collapses.
What makes Amazon such a lethal monster is its mastery of logistics and multiple streams of revenue. It’s 2017 earnings were a whopping $178 billion. In 2016 it earned $15 billion from its web services which accounted for 89% of its operating income. Amazon earned an additional $2.8 billion from its 2017 advertising services. Its advertising revenues are expected to pop to $4.5 billion in 2018. The monster has many heads and all the heads are growing.
Overview: Market Watch, the Wall Street insider websites reports that Amazon’s yearly revenues were $232.89 billion last year. Think about that Amazon’s 2018 revenues for just a minute. GM, one of the foundation companies in the world with its 20,000 dealerships had 2018 revenues of $147 billion. Walmart, with its 4,769 stores had revenues of $499 billion.
So Amazon with NO stores and much lower costs sits at 44% greater than GM and just under 40% of Walmart. If we dig a little deeper we realize that since its founding 25 years ago Amazon has discovered an entirely new business model. Jeff Bezos caught the proverbial “perfect wave” in 1994 or just 25 years ago. Keep in mind the first IBM PC was in 1981 (38 years ago) and the Internet was launched in 1991 (28 years ago).
To understand what Bezos has done with Amazon just take a look at Ford, Tesla, and Chrysler.
Impressive but a very static picture. There is a BUT, and its a big BUTT.
Amazon is growing its revenue and operating margins in double digits. Few companies are on the growth trajectory as Amazon is.
The fact is that Amazon is one of, if not THE most successful companies in the world. Its future is secure as it expands with Whole Foods, its technology services division, Amazon Web Services (AWS), its space program, its 3,326 satellites, its 3,000 GO stores, its 15,000 additional grocery stores, its delivery services, and its brilliant team.
What makes Amazon so good is its disciplined focus on shoppers.
Amazon knows how shoppers have changed and it continues to adapt to those changes.
Here’s how Amazon grows its customer-centric business:
Amazon #1 focus is building its customer list. Local businesses think it is too much effort.
Jeff Bezos is a disciplined leader who follows a strict routine with stringent requirements for team members at every level. Local business owners do not.
Amazon has a set routine that it follows to reach out, engage, and market to customers. Local businesses DO NOT.
Amazon rewards its 105 million Prime Member Customer List with special deals on what is now the biggest online shopping two-days – Prime Days. Prime Days are bigger that Black Friday and Cyber Monday.
One of the biggest reasons local businesses are under threat is that they do NOT recognize what Amazon understands in terms of shopper changes. Let’s dig in local businesses common behaviors:
Local businesses think it is too much effort to build their customer lists.
Local business owners are like firemen responding to the emergency bells ringing every hour. They are NOT disciplined leaders.
Local businesses jump from one “silver bullet” to the next. There is no discipline to how they reach out, engage and market to local shoppers.
Have you figured out the answer to THE QUESTION:“What is the marketing strategy driving Amazon’s success?”
The article lays out the impact of Amazon’s strategy on local communities,
“In every local community when enough local businesses fail, a tipping point occurs – the community falls apart because tax revenues fall; there are no jobs; local governments don’t have money for basic community services; and Main Street becomes desolation row. Suddenly, seeing Amazon boxes on all those porches doesn’t seem like such a good idea.”
Local Businesses are dying one customer at a time.
Death by a thousand cuts is a figure of speech that refers to a failure that occurs as a result of many small problems. Death by a thousand cuts could refer to the termination of a proposed deal as a result of several small issues rather than one major one. This term could also apply to a product or idea that is destroyed by too many minor changes.
This is what is happening to local businesses as they fail to address how Amazon is taking away their customers one at a time. Take a moment and think about the total number of customers any local business has. For the restaurant down the street it could be a few thousand, for the hardware store a few thousand more, but for the local dress shop it could be in the hundreds. It doesn’t matter what the business is – Amazon is going after its customers.
Here’s how you know this is true. 54% of all online searches begin on Amazon. This is an amazing statistic. Those shoppers, who used to be loyal to local businesses, are now having shopping affairs with Amazon. Shoppers are having affairs with Amazon because they are BORED by how local businesses treat them.
Amazon is a local shopping kudzu.
Amazon takes over like kudzu. Kudzu is an invasive species that grows faster and climbs all over indigenous trees and bushes. Slowly, it suffocates the trees and bushes it has climbed all over.
To fail to understand what Amazon is doing is planting kudzu in your yard or local park. Year by year it spreads. Amazon is NOT going away. Amazon is kudzu for ALL local businesses. Amazon is going after every type of businesses: mattresses, autos, pharmacies, food, and the list goes on and on.
Learning to fight back against Amazon should be the number one focus of every local business.
The My Local Bee article goes on,
“Here’s the Amazon strategy in one sentence – “if you build a bird feeder for shoppers, then you don’t have to spend on advertising to bring them back.”
Amazon and Bezos KNOW that bird feeders are the most important tool in marketing today because they are in sync with shoppers who are walking around with their cellphones 24/7. Here is an mind boggling statistic about Amazon – it is estimated that 66% or 197 million US shoppers visit Amazon EVERY MONTH.
Will local businesses wake up?
Amazon has direct communication with 197 million US shoppers EVERY MONTH. This means 66% of US shoppers communicate with Amazon every month. Local businesses have not put together what it means for Amazon to have 105 million strong customer list, 54% of all online shopping searches, and 197 million shoppers visiting Amazon each month. In some ways it is too painful to wake up to the Amazon cancer.
Amazon is showing local businesses how to fight back!
However, once a local business knows what Amazon is doing then it is possible to do something about fighting back. There are three rules that every local business can implement today.
The Three NEW RULES of Local Business Success
Copy Amazon. Every local business #1 focus needs to copy Amazon and build its customer list. The ONLY reason customers will sign up for direct communication with a local business is because they are going to get something GREAT. Amazon gives free shipping to people who sign up to their Prime program. Free Shipping is GREAT.
Fight Amazon Every Day. A local business fights Amazon by creating one Amazon Beating Deal every day. It then communicates that deal to the people on its customer list.
Communicate excitement. Everybody wants information if, and ONLY IF, it is about a GREAT DEAL, exciting or highly informative.
Understanding these three rules helps us to understand the core differences between Amazon and local businesses and why, if local businesses do not implement these three rules they will fail.
One Final Thought
Amazon, the tech giants, and the retail chains have a choke hold on local businesses and local communities. They are NOT going away. Fight back is not about attacking them but learning how to improve the local shopper experience.
Local businesses are being killed off. Storefronts are empty. More and more main street looks like desolation row. Malls have become decaying relics.
Each local business that closes its doors decreases local shoppers desire to shop on main street. People like EXCITEMENT. They like CHOICE. But most of all people like other PEOPLE.
See other people shopping is what makes local shopping attractive. When shoppers walk past an empty store or restaurant the overall local BRAND is diminished. How bad is it – it is being called The Retail Apocalypse 2019.
The destruction of local businesses and communities
Sinéad Baker in the April 2019 Business Insider article writes that the retail apocalypse has claimed 6,000 US stores in 2019 so far, more than the number that shut down in all of 2018.
In the article Baker summarizes what is happening to local retail:
More store closings have been announced already this year than in all of 2018, according to new research.
A report from Coresight Research found the retail apocalypse to be continuing, with 5,994 store closings announced in the US this year compared with 5,864 in all of 2018.
Some retailers including Fred’s and Family Dollar are closing select stores in a bid to stay profitable, while chains like Payless have announced they are shuttering all of their stores.
One report predicted that 75,000 stores would close across North America by 2026 as reliance on e-commerce rises.
If you don’t know what is happening to local retail then you, like Rip Van Winkle, have been sleeping. The Tech Giants and Retail Chains are culprits in the Retail Apocalypse, but the actual killers are the denial and ignorance of local business owners.
There is a well-worn saying, “What you don’t know won’t hurt you.” The writer, Margaret Atwood, has her contrary version of the saying which is, “Sometimes what you don’t know can hurt you very much.”
I am of the school that thinks ignorance is NOT bliss and that “what you don’t know can and will hurt you.” There is NO BLISS to be found in ignorance. Think about what you know now and how if you knew what you know now ten, fifteen, or twenty years ago the mistakes you could have avoided.
So, what’s killing off local businesses is first, foremost, and last – the ignorance and denial of local business owners. The excuses for ignorance are that business owners are too busy to see what is happening – that is total and complete nonsense. Denial is something else entirely. Here’s a denial quote pretty much sums it up, “People don’t know very much. They only think they know to make themselves feel better.”
It is the JOB of business owners to get their heads out of the “too busy” sand. Time to stand up and see reality. Denial is your head in the sand.
This is reality – local businesses are getting killed off. There is not one local business owner who is not afraid. The massacre is not going to stop. The killing isn’t an accident.
IGNORANCE #1: Amazon earns $282.7 billion dollars a year in revenue, it controls over 50% of online sales, shoppers love shopping online, and Amazon makes it easier and easier to shop. Think – one-day delivery. Amazon is going after EVERY local business.
Every local business from the pizza joint to the local jeweler NEEDS to understand IGNORANCE #1. Deny it and you have a death wish. A person with a death wish is shown the danger and chooses to deny it.
IGNORANCE #2: Amazon’s success is built around its customer list. Amazon doesn’t advertise – Bezos thinks advertising is a waste of money. Instead, Amazon communicates. Shoppers are connected 24/7 and they LIKE, WANT, and DEMAND communication. They HATE advertising. Deny IGNORANCE #2 and you go from having a death wish to business suicide.
Too tough. Nasty, Politically incorrect. Nope. It is reality. Local business owners, if they intend to survive need to understand that it is their IGNORANCE and DENIAL that will cause them to fail.
HOW TO GET SMART, FACE REALITY, & WIN
Nobody wants to fail. To keep from letting Amazon and the Retail Giants drive you to destruction local business owners need to Get Smart, Face Reality, and turn their on their passion to win. It all starts with LEARNING.
Learning starts when you look around and see something you want to do and say to yourself, “I don’t know how to do it. I don’t know how to get there. I know if I don’t do it and get there BAD THINGS are going to happen.”
I know the older I get the more I realize how little I really know. The good part of knowing you don’t know is that it means you are open to LEARNING. For example, one of my favorite articles about marketing I found is titled, Amazon is building the world’s largest bird feeder.
The article argues that Amazon’s list is like a gigantic birdfeeder which Amazon uses to attract millions of different kinds of shoppers. I learned from the article and begin thinking about local businesses and what they don’t know.
Here’s what local businesses both don’t know and if they know are in denial about.
Local businesses may have heard about Amazon’s one-day delivery but are still in denial. Here’s the unvarnished truth – what Amazon does ALL the retail giants will do. Target just announced its one-day delivery service. Here’s the point – expect Walmart to do the same. Ditto for all the retail chains. This news should be as shocking to a local business as having your doctor say, “You have cancer, heart disease, and PTSD but other than everything is good.”
Local business owners need to make sure they are NOT in denial about one-day delivery. It means that Amazon, Target, Walmart and the Retail Chains WILL take away more of their customers. These giants are focused on what today’s shoppers WANT.
Mary Meeker, the smartest coach, in the industry shows you how to win.
One person who KNOWS what shoppers want is Mary Meeker. Meeker is the leading expert on the internet and each year she publishes her Internet Trends report. The past sixteen years Meeker has presented her findings to the industry. She has been and continues to be uncannily accurate. She predicted the rise of Google and Amazon, the growth of Chinese technology, mobile, video, and gaming. She is a business intellectual legend. Local business owners should pay attention to what Meeker is telling them.
Digital ads will replace all other advertising models because they can be measured.
Advertisers will go after the 2.4 billion interactive gamers worldwide. 25% also subscribed to Twitch, a streaming service owned by Amazon.com, where they uploaded and watched gameplay. Her advice would be, Local businesses should stop traditional advertising
“Amazon stunned analysts and industry watchers in 2014 when managers paid $970 million cash to buy Twitch. The three-year-old streaming site had only 55 million users at the time and catered mostly to people who watched others play video games. The fit with e-commerce escaped most observers. Gaming is the natural evolution of sport for a generation raised with PlayStation and Xbox consoles. It’s also a purely digital experience ripe for transformative business models built in the cloud. Researchers found that 69% of players made in-game purchases, spending an average of $84.67 per year and generate billions in revenues.”
Everything will migrate to the cloud. Cloud infrastructure is dominated by Amazon Web Services, Microsoft’s Azure, and Google Cloud.
Meeker concluded that Amazon, Microsoft, and Google will control the cloud and therefore the future.
“Amazon, Alphabet and Microsoft trade at 48x, 20x and 26x forward earnings, respectively. While that may seem expensive, the best part of their business expansion is still ahead as enterprises move more workloads to the cloud.”
IGNORANCE #3: Any local business owner who doesn’t take the time to understand what Mary Meeker is saying has given up. I know it sounds harsh but the TRUTH is often harsh. I want local businesses and local communities to THRIVE. I want them to see reality, swallow hard, and fight back.
Don’t advertise.Local businesses should stop traditional advertising. Meeker is clear about Google and Facebook controlling advertising. Who shows up in digital ads and Google search are the companies that PAY the most money. Local businesses cannot compete and should STOP advertising. Think of it this way. You walk into a smoky backroom gambling parlor and everything playing cards is a card shark. If you play you are going to lose.
Make video the key to reaching local shoppers. Local is about PEOPLE. Local businesses can let shoppers know about them by making fun and authentic homemade videos.
Learn how to collect and use data. Go back to IGNORANCE #2: Amazon’s success is built around its customer list. Local businesses need to build their customer lists, communicate and collect data. The more data the more targeted the communication.
Communicate with shoppers who are connected 24/7. If you have built your list then you can communicate. No list. No communication. Learn from Amazon.
Don’t trust social media. Here’s a surprise finding from Meeker. Social media is increasingly toxic. Instead of trying to get popular in cyberspace become more real in person. Your customers will love you for it.
Understand shoppers need for social responsibility. You’ve all seen the powerful Shriner’s commercials asking for monthly donations, ASPCA the same, ditto for Wounded Warriors – people genuinely care about others. Shoppers care about local. Local starts with local businesses working together. In fact, The most powerful local business strategy is working together.
Conclusion:
It would be simple to say the Tech and Retail Giants are killing local businesses. It just wouldn’t be true. The local business owner’s ignorance and denial are the two driving factors behind the death of local businesses. If and when, local business owners realize they have the power to control their own destinies they will discover a MASSIVE opportunity.
Google, Facebook, and Amazon spend millions of dollars promoting digital advertising. Here’s the fact: Digital Advertising is a fraud. Research shows that 60% of digital advertising is fraudulent. It could be bots, view-ability, or Chinese click farms. It doesn’t matter what kind of fraud – what matters is how widespread and endemic it is.
Fraud is part of the digital advertising DNA. It is NOT a mistake. It is part of the business plan.
Richard Corriere wrote, “Google and Facebook control 90% of digital advertising. 60% of digital advertising is fraud (Is Ad Fraud Inevitable? George Simpson. “Agencies and brands simply write off fraud as the cost of doing business online.”
Ad agencies make money on digital advertising fraud and they have convinced their clients that fraud is just a part of doing business. Local businesses can’t afford the fraud. But let’s get to the con game that is behind the fraud. So today’s research fact reveals after the fraud comes the CLICK. Overall consumers click .09%.
REACH – .36 shoppers after spending to reach 1,000
Businesses buy digital advertising based on cost per thousand or CPM. This means that a business is paying $45 for a single click. Keep in mind, a click does not mean a customer. It just means that a consumer, hopefully not a bot or click farm, has clicked on your digital ad.
When you think about the level of fraud and con game associated with digital advertising it is no wonder the EU is fining these tech giants billions of dollars and as the New York Times story on Facebook fine reports, Facebook is being fined $5 billion.
The New York Time story goes on, “For Facebook, a $5 billion fine would amount to a fraction of its $56 billion in annual revenue. Any resolution would also alleviate some of the regulatory pressure that has been intensifying against the company over the past two and a half years.
“This would be a joke of a fine — a two-weeks-of-revenue, parking-ticket-level penalty for destroying democracy,” said Matt Stoller, a fellow at the Open Markets Institute, a think tank that is a vocal critic of the power of tech companies.”
Here’s the real story – Google, Facebook, and Amazon DO NOT CARE about fines because they are making so much money promoting the fraud and associated con game. Drug cartels EXPECT to lose shipments of drugs worth millions of dollars and they consider the losses as a “cost of business.”
It is just unsuspecting local businesses who can afford fraudulent digital ads as “cost of doing business.” Take heart. Local businesses are starting to wake up to exciting new alternatives.
It is achieving this mind blogging revenues by systematically taking business away from local businesses. Amazon is growing its revenue and operating margins. The question then becomes, “What is the marketing strategy driving Amazon’s success?”
Amazon’s success is built entirely around growing its 105 million customer list. The best article I read on Amazon’s marketing strategy comes from the local business website My Local Bee https://mylocalbee.com/. In their blog there is a post which details Amazon’s marketing strategy – “Amazon is building the world’s largest bird feederhttps://mylocalbee.com/blog/post/amazon-is-building-the-worlds-largest-bird-feeder.”
My Local Bee lays out the impact of Amazon’s strategy on local communities, “In every local community when enough local businesses fail, a tipping point occurs – the community falls apart because tax revenues fall; there are no jobs; local governments don’t have money for basic community services; and Main Street becomes desolation row. Suddenly, seeing Amazon boxes on all those porches doesn’t seem like such a good idea.”
Local Businesses Need to Wake Up
Amazon is taking away customers from local businesses one customer at a time. To fail to understand what Amazon is doing is akin to smoking three packs of cigarettes a day – it’s not if you get cancer but when. Cancer kills. Amazon is cancer for ALL local businesses. Amazon is going after every type of businesses: mattresses, autos, pharmacies, food, and the list goes on and on.
Learning to fight back against Amazon should be the number one focus of every local business.
The My Local Bee post goes on. “Here’s the Amazon strategy in one sentence – “if you build a bird feeder for shoppers, then you don’t have to spend on advertising to bring them back.” Amazon and Bezos KNOW that bird feeders are the most important tool in marketing today because they are in sync with shoppers who are walking around with their cellphones 24/7. Here is an Amazing statistic; it is estimated that 66% or 197 million[i] US shoppers visit Amazon EVERY MONTH.
Once a local business knows what Amazon is doing then it is time to do something to fight back. Amazon is showing local businesses how to fight back by building their customer lists. Amazon has DIRECT communication with 197 million[ii] US shoppers EVERY MONTH. This means 66% of shoppers communicate with Amazon every month. If any local business does not understand the long-term consequences on their local business is ASLEEP.
So how do local businesses FIGHT BACK. There are three rules that every local business can implement today. Here are the Three Rules.
The Three Rules of Local Business Success
Copy Amazon. Every local business #1 focus needs to copy Amazon and build its customer list. The ONLY reason customers will sign up for direct communication with a local business is because they are going to get something GREAT. Amazon gives free shipping to people who sign up to their Prime program. Free Shipping is GREAT.
Fight Amazon Every Day. A local business fights Amazon by creating one Amazon Beating Deal every day. It then communicates that deal to the people on its customer list.
Communicate excitement. Everybody wants information if, and ONLY IF, it is about a GREAT DEAL, exciting or highly informative.
Understanding these three rules helps us to understand the core differences between Amazon and local businesses and why, if local businesses do not implement these three rules they will fail.
Amazon #1 focus is building its list. Local businesses think it is too much effort.
Jeff Bezos is a disciplined leader who follows a strict routine with stringent requirements for team members at every level. Local business owners are not.
Amazon has a set routine that it follows to reach out, engage, and market to customers. Local businesses DO NOT. Instead, one day a sales rep sale the local business a Yelp account. The next day a Facebook rep says you have to advertise on Facebook. The lack of a strategic routine is what is killing local businesses.
Fight Back
Amazon, the tech giants, and the retail chains have a choke hold on local businesses and local communities. But they can be beaten by any local business owner who decides to change.
