Tops Files Chapter 11

Tops Files for Chapter 11

Heavy debt, pension dispute cited; company eyes quick restructureBy Jon Springer on Feb. 21, 2018Tops Markets LLC on Wednesday filed for protection under Chapter 11 of the U.S. Bankruptcy Code in order to undertake a balance sheet restructuring and renegotiate contracts including collective bargaining agreements and pension obligations to union workers.

The Williamsville, N.Y.-based company, which operates 169 stores under the Tops and Orchard Fresh banners, said its debt holders have provided $125 million in debtor-in-possession financing as well as a $140 million DIP facility from Bank of America. Tops said it would use the new loan from lenders to pay off pre-petition revolving credit, and that the $140 million Bank of America facility would provide liquidity during its stay in Chapter 11.

The company in a statement said it expects to conduct “business as usual” during an anticipated six-month stay in Chapter 11 and that it intends to fully pay its vendors under normal terms. C&S Wholesale Grocers, Tops’ major grocery procurer, has extended the company an extra week of trade terms in exchange for Tops paying a portion of C&S’s prepetition claims.

Tops listed assets of $977 million and debts of $1.18 billion as of the end of its fiscal year Dec. 30. The company lost $80 million on sales of $2.5 billion for the year.

In the filing before Judge Robert Drain in the Southern District of New York, Tops characterized its business as relatively healthy, but said obligations of its heavy debt load had constrained its ability to invest and put it at a disadvantage against both gourmet and discount competitors.

“Tops has built strong market share and our stores continue to distinguish themselves by offering quality products at affordable prices with superior customer service,” Frank Curci, CEO of Tops, said in a statement. “We believe the financing that we received from our noteholders is a vote of confidence in our business. Our operations are strong and we have an outstanding network of stores and a talented team to support them. We are now undertaking a financial restructuring, through which we expect to substantially reduce our debt and achieve long-term financial flexibility. This will enable us to invest further in our stores, create an even more exceptional shopping experience for our customers and compete more effectively in today’s highly competitive and evolving market.”

Tops is owned by six senior executives who purchased the company from Morgan Stanley Private Equity in 2013, along with five representatives of its debtors. In a declaration filed in court, Michael Buenzow, a senior manager with FTI Consulting, said the previous owner “saddled the company with an unsustainable amount of debt on its balance sheet.” FTI was engaged by Tops in December to assist efforts to renegotiate terms with a committee of its debt holders. Buenzow was subsequently named chief restructuring officer.

Tops currently has approximately $715 million of pre-petition funded indebtedness, including $560 million of senior secured notes due in 2022 and an asset-based revolving credit facility from Bank of America with $68 million outstanding. Tops also has $34 million in letters of credit and a $10 million first-in last-out term loan, for a total outstanding amount due Bank of America of approximately $112 million.

Morgan Stanley acquired Tops from Ahold in 2003 for approximately $300 million and borrowed against it several times, often to pay itself a dividend. In 2009, the company issued $275 million in notes, from which Morgan Stanley took a $105 million dividend. An additional $75 million in debt was issued in 2010 to fund an acquisition of Penn Traffic. New notes totaling $460 million were issued in 2012, which redeemed previous debt and paid another $100 million dividend; and in 2013, a $150 million debt issue was used nearly entirely for a $142 million Morgan Stanley dividend.

Tops has also been embroiled in a longstanding dispute with the Teamsters union concerning a withdrawal liability of in excess of $180 million arising from Tops’ acquisition of Erie Logistics LLC from C&S in December 2013, and is party to pension funds with the Teamsters and the United Food & Commercial Workers that are underfunded by approximately $393 million.

Tops said it would endeavor to use tools in Chapter 11 to address its pension obligations and resolve the Teamsters arbitration dispute. Around 80% of Tops’ 14,000 workers are represented by unions.

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Amazon/Dollar Store

Amazon is quietly coming after dollar stores — and it’s a brilliant move

Dennis Green

Amazon is selling items like these for $10 or less.

Amazon.com

• Amazon has a new area on its website for “$10 and under” items that come with free shipping.
• The merchandise is offered by third parties, and the section is full of kitschy items.
• This is usually the domain of dollar and off-price discount stores, which have been thriving in recent years.

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Amazon is famous for its low prices, but not even it could compete with dollar and discount stores.

A new section on the website attempts to change that by curating and displaying items that cost $10 or less, all offered with free shipping. The merchandise is offered by Amazon’s third-party merchant partners and in most cases does not ship directly from the company.

Though it launched quietly, the initiative is a clear move in on dollar and discount stores’ turf. The kitschy assortment of women’s and men’s clothing, electronics, gifts, home decor, household items, and watches looks very similar to what you might find at a Dollar Tree or Ross store. It’s mostly decorative pillows, phone cases, and logo T-shirts.

The recent success of dollar stores and discount stores proves that there’s a market for these goods when marketed appropriately. It makes sense that Amazon would attempt to move in this direction, even just slightly.

Dollar-store sales grew in the US from $30.4 billion in 2010 to $45.3 billion in 2015, according to the Wall Street Journal. Dollar General is planning on opening thousands of more stores, whileDollar Tree has beat earnings consistently. Ross — famous for its “dress for less” slogan — has beenhailed as a “retail treasure.”

Dollar General is opening 900 stores in 2018.

AP

Walmart, the biggest discount retailer in the country, has also posted 13 consecutive quarters of sales growth in the US.

Dollar General CEO Todd Vasos told the WSJ his theory to explain the proliferation and success of dollar stores — and it’s not good news for America’s struggling middle class.

“The economy is continuing to create more of our core customer,” he told the paper in December. “We are putting stores today [in areas] that perhaps five years ago were just on the cusp of probably not being our demographic, and it has now turned to being our demographic.”

Candy Market

The company behind M&M and Snickers dismisses predictions of doom and gloom in the candy business

Kate Taylor

Snickers and Mars chocolate bars.

REUTERS/Dado Ruvic

• Mars Wrigley Confectionary — the maker of M&M and Snickers — says that candy has a bright future in the US.
• Customers’ desires to “hashtag treat yourself” is boosting a new type of sales, according to a top exec.
• The rise of social media and gifting opportunities is also creating opportunities.

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The candy business isn’t as sweet as it used to be.

Changing diet trends have forced Americans to reevaluate how they think about sweets. In January, Nestle announced plans to sell its US confectionery business for $2.8 billion, a move thatexperts said was prompted in part by increasing competition from upstart candy brands and the rise of healthier snacks.

However, Mars Wrigley Confectionary — the maker of M&M and Snickers — said that a new “Treat Report” on US trends proves that there’s no reason to fear for the future. According to the company, it has accounted for roughly four-fifths of the category’s 2% annual sales growth over the last few years.

Flickr/Luke Jones

“98% of our consumers told us that treating themselves can be part of a healthy lifestyle,” Berta De Pablos-Barbier, the president of Mars Wrigley Confectionery US, told Business Insider. “That is exactly in line with what we believe.”

She added: “People say, ‘Hey, hashtag treat yourself.'”

On Instagram, almost two million people have used the hashtag #treatyourself, in addition to the more than three million people who have used the hashtag #treatyoself.

The phrase, which originated with the NBC sitcom “Parks and Recreation,” represents two of the biggest opportunities for Mars in the treat business right now: rewarding yourself and bragging about it on social media.

According to the report, which polled 1,000 Americans using an online survey, 52% of millennials have purchased a treat “because they wanted to share a picture of it on social media.” De Pablos-Barbier says that Mars Wrigley is doubling down on making packaging “prettier,” both for social media and for gifting — another major area of growth in the candy business.

Roughly two-thirds of respondents said that sweet treats are a go-to gift, making it even more important for Mars Wrigley to package things in a way that is visually appealing.

“Gifting is on the high, sharing is on the high,” De Pablos-Barbier said. “74% believe a treat is always sweeter when shared with a friend.”

Retail Disruption

Nooyi: ‘The retail disruption is happening globally’

Feb. 14, 2018 – by Monica Watrous

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Indra Nooyi, chairman and c.e.o. of PepsiCo

PURCHASE, N.Y. — The dramatic changes taking place in retail are not unique to the U.S. marketplace, said Indra K. Nooyi, chairman and chief executive officer of PepsiCo, Inc.

“…the retail disruption is happening globally,” Ms. Nooyi said during a Feb. 13 earnings call. “It’s not just a U.S. phenomenon. The success of the newly emerging retail channels is still a work in progress because none of them have really established a toehold in the U.S. But between the hard discounters, e-commerce, e-commerce of every kind, the pure play, the click and collect, the growth of dollar stores from a few years ago and, of course, the brilliant growth of Walmart, all of this has caused the retail industry to go through a fairly significant change because we are overbuilt in grocery in the country, and all of these alternate channels are now beginning to challenge all the square footage in the marketplace. So we are watching and waiting to see whether this disruption is just a low level of disruption that happens over many years or is this going to accelerate.”

An advantage for PepsiCo is its direct-store delivery system, which reaches a broad range of retail outlets, she said.

PepsiCo has invested in various e-commerce channels.

“Whether it’s convenience store, food service, whether it’s the big supermarkets or the big hypermarkets, we reach every one of them,” she said. “So we are watching the traffic through these outlets. We are watching what kinds of products are being sold, what are people buying through e-commerce and what are people buying through brick-and-mortar. And more importantly, we’re looking to see whether brick-and-mortar stores are really becoming the warehouse to pick for e-commerce, which breathes more life into them. So, this is an evolving story… and the outlook is not perfectly clear because the economics of many of these new digital channels is still being thought through. It’s not perfectly clear that they’re all going to make money.”

Internationally, she said, the company sees much of the same phenomenon.

“China, I think, is the cutting edge of digital sales in the grocery channel,” Ms. Nooyi said. “We are seeing Europe now grow in terms of e-commerce and the hard discounters taking a much bigger presence there. And we’re seeing the same thing in Latin America. So, I think China and the U.S. are cutting edge in terms of retail disruption. And we’re going to have to watch and see how it evolves in the other markets. And our teams are all connected globally and thinking through the best strategy for us to play in this new retail environment.”

Frito-Lay North America’s revenue growth was driven by the Ruffles, Tostitos, Doritos brands.

Retail disruption has been a headwind for PepsiCo, which has responded by investing in various e-commerce channels, including online grocery, direct-to-consumer and pure-play, to drive top-line growth.

“We are leveraging big data and predictive analytics to sharpen real-time marketing messages, dynamic merchandising and tailored offers,” Ms. Nooyi said. “And we’re increasingly collaborating with retail customers to make e-commerce a point of differentiation for PepsiCo. As a result, our e-commerce business is now approximately $1 billion in annualized retail sales, and we are well-positioned to capitalize on what is sure to be a dynamic future in this space.”

Late to the sparkling water party

Net income attributable to PepsiCo in the year ended Dec. 31, 2017, was $4,857 million, equal to $3.38 per share on the common stock, down 23% from $6,329 million, or $4.36 per share, in the previous fiscal year. Net revenue totaled $63,525 million, up 1% from $62,799 million.

For the fourth quarter, PepsiCo posted a loss of $710 million, which compared with year-ago net income of $1,401 million. Results were negatively affected by a provisional net tax expense of $2.5 billion associated with the recently enacted Tax Cuts and Jobs Act. Net revenue of $19,526 million was relatively flat from the prior-year period.

“We had particularly strong performance in the quarter at Frito-Lay North America, with organic revenue growth of 5%, led by impressive growth in variety packs, Ruffles, Tostitos, Doritos and dips,” Ms. Nooyi said. “We also gained market share, both in salty snacks and in the more broadly defined macro snacks categories. The business performed well throughout the year, with strong brand activation and innovative new products propelling the top line, and productivity programs continuing to move margins up.”

Meanwhile, the company’s North America Beverages business has “tremendous room to improve,” with organic growth down 3% in the fourth quarter, Ms. Nooyi said. To adapt to changing consumer tastes, PepsiCo is launching bubly, a brand of flavored sparkling water with no sweeteners, artificial flavors or calories. But, as Ms. Nooyi admitted, “I think we were late to the flavored sparkling water category.”

“I wish we had launched bubly a couple of years ago,” she said. “But the fact of the matter is we have a very good distribution system. Our customer relationships are excellent, and our customers are very, very happy we’re launching bubly.”

PepsiCo is launching bubly, a brand of flavored sparkling water with no sweeteners, artificial flavors or calories.

The company’s Quaker Foods North America segment “had very good performance” in the fourth quarter, she said.

“Hot cereals volume grew mid-single digits, and we gained share in our three key categories of hot cereals, bars and ready-to-eat cereal,” Ms. Nooyi said.

PepsiCo’s international performance was fueled by strong growth in Vietnam, Turkey, Thailand, Philippines, with positive results in Russia, China, Mexico and India.

“These are impressive results, particularly in light of the challenges posed by global mega trends impacting our industry, from macroeconomic and political volatility, the continued rebalancing of the economic world, to shifting consumer preferences and increasing demand for healthier products, to the disruption of retail caused by the rapid growth of e-commerce and the blurring of channel lines,” Ms. Nooyi said.

PepsiCo’s Quaker Foods North America segment performed well in the fourth quarter.

Cautiously optimistic

Looking ahead to 2018, the company is cautiously optimistic, projecting full-year organic revenue growth in line with 2017 levels.

“We clearly are seeing the macro is improving,” Ms. Nooyi said. “But for all the positives we’re seeing… there’s a whole bunch of headwinds. Retail disruption is one of them. Consumer preferences are shifting in interesting ways. On the one hand, there’s a huge push towards health and wellness. On the other hand, they want to go back to products they know the best. But they’re not consuming it in the quantities that they used to consume it in the past. So, it’s an interesting dichotomy there.

“We talk about reinvesting back in the big brands, but a lot of the growth is coming from the small brands, so we have to launch those brands, too. So we are just making sure that any guidance we provide to you is sensible and something that we know for sure we can deliver. And that’s why organic revenue growth at least in line with 2017 is a sensible guidance. Internally, we’d like to do more, but we want to be very, very cognizant of the headwinds around us, some of which we don’t even understand at times because the consumer is not consistent.”

What Happens to Returns

What Stores Do With $90 Billion in Merchandise Returns

Post-retail sales of returned and overstocked goods totaled about $554 billion in 2016 and have been growing at about 7.5% a year, an expert estimates

Shown, a customer returned a purchase to a Best Buy store in Mays Landing, N.J., on Dec. 26, 2017. PHOTO: CRAIG MATTHEWS/ASSOCIATED PRESS

By

Erica E. Phillips

Updated Feb. 16, 2018 11:24 a.m. ET

77 COMMENTS

Retailers still celebrating their strongest holiday sales in years now face the less-pleasant task of disposing of billions of dollars in returned merchandise.

Often, retailers offload rejected clothes, appliances and toys for pennies on the dollar through a vast ecosystem of resellers, ranging from outlet stores and online auctions to flea markets and salvage dealers.

On one online auction site Monday, 49 washing machines and dryers that had recently been returned to Best Buy Co. BBY -0.19% sold at a 68% discount for $13,300. Sears HoldingCorp. SHLD -0.76% recouped even less the same day when it accepted a 93% markdown on four pallets of sportswear, intimate apparel and accessories, selling them for $5,825. A spokesman for Sears declined to comment. Best Buy didn’t respond to a request for comment.

Final Discount

Retailers are sending more merchandise to the secondary market as online shopping increases returns.

Secondary retail sales, 2016

Online auction

houses

24%

Salvage Dealer

37%

$554.2

billion

Other*

17%

Factory outlets

7%

Value retailers/

Dollar stores

15%

*Pawn shops, flea markets, charities

Source: Colorado State University

Retailing’s secondary market saw volume surge this year, reflecting both the strongest growth in holiday sales since 2011 and the rise of online shopping, where purchases are more likely to be returned.

These post-retail sales, including both returns and overstocked items, totaled $554 billion in 2016, and have been growing at about 7.5% a year, according to Zac Rogers, an operations and supply-chain professor at Colorado State University’s business school.

January and February are the busiest months for resellers and the so-called reverse supply chain, said Howard Rosenberg, chief executive of B-Stock Solutions, which runs online liquidation sites for major retailers, including sites of the Best Buy and Sears sales, as well as similar auction sites for Costco Wholesale Corp., Macy’s Inc., J.C. Penney Co. Inc., Lowe’s Co s., Home Depot Inc., Walmart Inc. and others.

“It’s just mayhem during this period,” Mr. Rosenberg said.

The National Retail Federation said holiday sales reached nearly $692 billion in November and December. About 13%, or $90 billion, is expected to be returned through the end of February, according to a forecast by Optoro Inc., a logistics provider that helps companies like Target Corp. , Staples Inc. and BJ’s Wholesale Club Inc. take back and resell returned merchandise.

The most common returns are clothing and apparel, followed by electronics, beauty products and sports or outdoor gear, said Larisa Summers, head of e-commerce for Optoro.

Roughly half of holiday-season returns go back on the shelf, much of it to be sold again at a discount, said Tony Sciarrotta, executive director of the Reverse Logistics Association and the former head of returns management for electronics company Philips. The other half winds its way through various secondary channels over the next several months, depending on the goods’ resale value and seasonality, he said.

“The good retailers have been through this for many years and they’ve improved their processing,” handling hundreds of thousands of items a day in some facilities, Mr. Sciarrotta said. Many of those processing centers add a second shift this time of year to handle the higher volume. “They’re trying to clear the barn as fast as possible,” he said.

The retail industry is undergoing another major shift — to e-commerce. How did we get here? Photo: Associated Press

How much a retailer recovers through secondary channels can range widely. An item restocked on store shelves might sell at a 30% discount, said Dale Rogers, a logistics and supply-chain professor at Arizona State University. But markdowns escalate quickly if goods or packaging are damaged. Retailers’ steepest discounts come from selling returns in bulk.

Sometimes retailers find it is cheaper to just throw returned merchandise away. Optoro estimates five billion pounds of returned merchandise ends up in landfills each year.

But as the volume of returns has grown, so have online liquidators, primarily business-to-business services like B-Stock, Liquidity Services Inc.’s Liquidation.com and Optoro’s Bulq.com (Optoro’s Blinq.com is for shoppers). Since 2008, online auction sales have grown 66%, and combined sales through factory outlets, dollar stores and value retailers have more than doubled.

Also in the mix are bargain hunters and small online sellers, who say January and February are the best time to stock up.

“Everything is at a discount,” said Heather Hooks, a 38-year-old mother of three in Trenton, Ill., who runs a small business selling discounted items on eBay and Amazon. She usually buys her inventory through online auctions or from sales racks at big box stores. “This time of year is really good as far as sourcing items.”

Truck Driver Shortage

Truck driver shortage impacting food deliveries

Expect delays and price hikes

Gloria Dawson | Feb 14, 2018

The trucking industry is facing a shortage of qualified drivers, with more items to deliver than ever before. Trucks move about 70% of all freight in this country, and shipments and costs of produce and packaged good have already been impacted.

“Shippers and wholesale suppliers, they’re certainly going to feel the hit,” said Rod Suarez, an economic analyst with the industry trade group American Trucking Associations (ATA). “The consumer won’t really notice. It will be more of a bottom line for companies.”

In 2017, the ATA predicted the trucking industry would experience the highest level of driver shortfall, and by 2026 the ATA estimates the shortage could swell to over 174,000 drivers.

“Across all segments, freight costs have escalated as trucking capacity has tightened nationwide,” Thomas P. Hayes, president and CEO of Tyson Foods, said during the company’s fourth-quarter earnings call in February. “We expect these costs to continue to rise as carriers compete for drivers and new federal regulations come into play. We estimate this will add more than $200 million to our costs this year. At the same time, marketplace dynamics are driving wages higher, pushing up our labor cost. These additional costs are included in our outlook. However, we’re assuming we’ll recover the majority through pricing.”

Sysco, Hersey, Campbell Soup, McCormick & Co. and J.M. Smucker also mentioned freight costs concerns during recent earnings calls.

“One of the first pieces I see it affecting on our time is lead time,” said Paul Burton, director of logistics and distribution at JTM Food Group, a company that supplies and manufactures food products for retail, restaurants and schools. “The food industry tries to run a lean supply chain. It’s tougher to run a lean supply chain when your service isn’t what it once was.”

Many retailers operate with minimal back stock, and when trucks are late to deliver, it’s easy to run out of product. For JTM, “It’s hurting our cost,” said Burton. “It’s affecting our budgeting and projections.”

A number of factors contributed to the driver shortage. Drivers are aging out — the average truck driver is 49 years old — and high licensing fees and long drives can turn off younger workers. And a new federal mandate requiring most truckers use electronic logging devices hasn’t helped.

The mandate, which requires drivers to use an electronic device plugged into the truck’s engine to record driving time rather than a paper record, “has good intentions and there’s certainly some good outcomes that will come, but the overall net effect on the trucking industry will be a loss of productivity,” said Suarez. “We see a lot of drivers and a lot of motor carrier companies themselves have simply closed up because they don’t want to deal with [electronic monitoring] or drivers have left the industry because they don’t want to deal with it.”

Burton views the federal mandate differently: “It forces them to make them legal.” But he does advocate for changes in the hours of service regulation. For example, while a truck is being unloaded a driver is still considered on duty, limiting the time he or she can be on the road.

The most important thing to do now is to “stabilize the transportation industry,” said Burton. His company feels the impact of the driver shortage as ingredients come into its warehouse and when its snack foods are shipped out. “It’s hard for every piece of the business to function on an on-time base if the transportation end of it falls apart,” he said.

Suppliers and the trucking industry are looking for solutions.

Motor carrier companies are raising salaries and helping applicants with licensing fees, and hauls are shorter than they were a decade ago, so drivers need to spend less time away from home, said Suarez.

“We need to glorify the industry,” said Burton. “We need to let young people know that it’s not bad to be a truck driver. You can make good money driving a truck, and you can be home. You don’t have to be gone all the time. We need to look at our industry. Ground transportation is a dinosaur right now.”

Retailers and operators are hoping the industry modernizes quickly.

Roger Lowe Jr., CEO at Lowe’s Market, has already experience problems getting items in stock at his warehouse, he said during the National Grocers Association show in this week.

“I think the trucking shortage is going to be a huge challenge moving forward.”

Amazon Go

Reverse-engineering Amazon Go: What you should know

February 14, 2018

Sometimes you can learn more from thinking about why something works rather than just how it works –and that’s especially true for a new format like Amazon Go. We spoke with two industry experts who spent several days observing and studying the Seattle store, and reverse engineered their observations in order to understand why Amazon Go works so well for customers and how it’s defining a new competitive space in the retail ecosystem.

What is it?

It’s hard to categorize Amazon Go’s format. It’s been called a convenience store because of its size (1,800 SF of selling space, 2,400 total), but the product mix and shopping occasions served are very different from your typical convenience outlet located in a crowded, city center office worker environment – there’s no tobacco or hot coffee.

And, although the emphasis is on food, it’s definitely not a restaurant or grocery store. Instead, Amazon Go seems to be defining a new competitive space in the retail ecosystem.

Competitive advantage

Our reverse engineering produced this short but important list of three ways that Amazon Go has creates competitive advantage over other outlets that sell food.

1. When consumers use the store

Most stores are built mainly to serve either food-at-home or food-on-the-go but Amazon Go is built to serve both.

The assortment supports two eating occasions – grab-and-go and heat-and-eat. What makes this work especially well is that both options are available during the entire day, and it’s so easy to get in and out that shoppers give no thought to visiting a couple of times a day.

The store effectively serves as both refrigerator and pantry for regular customers, virtually eliminating the need to buy ahead.

2. How consumers shop the store

Amazon Go is built for fast in-and-out visits: You can get in, buy a sandwich and a drink and leave in less than 30 seconds. The speed of the trip is enabled by two features:

• Most of the product is displayed on the walls in an easy to follow, logical order that aligns with the needs of most customers.
• Open space in the center of the store makes it easy to avoid being delayed by another customer, so there’s virtually no waiting. This is true even when a lot of shoppers are in the store.

Shopping is also faster because:

• Most orders involve just three or four items and the products are compact in size, so there’s no need for a shopping cart.
• All the products are displayed within easy reach, mostly within the knee to shoulder level “strike zone.”
• There’s no need to interact with staff expect for purchases of alcoholic beverages.

3. Low operating costs/high utilization business model

The business model behind this store directly addresses the main vulnerabilities of today’s self-service grocery store. It provides Amazon the flexibility and pricing that allows much lower prices, if necessary, without sacrificing profitability.

The efficient utilization of assets means they can attract capital with a competitive rate of return (even though Amazon has not historically needed to).

• Operating costs are kept low because there’s no need for most customers to ever interact with store staff, and backroom processing is driven by real-time signals about what’s selling.
• High inventory turns are achieved by setting shelf inventories to meet immediate demand and by continuously but unobtrusively restocking based on replenishment cycles as short as one hour.
• Asset utilization is kept high by encouraging a steady flow of business, because it’s so easy for shoppers to get in and out quickly. At this point, weekly sales per square foot are estimated to exceed $45, with plenty of capacity to go higher.

BMC POV

Our reverse engineering of this first Amazon Go store holds two closely related implications for those who are striving to get a glimpse of the future of food retailing.  In the future:

• High-performance retail units will be achieved by stores that are built to serve narrow, well-defined market segments. The main performance driver will be hyper-localized assortment, but tightly targeted value propositions will also be a contributor.
• Store performance measurements will depend on the target store’s customers and will be influenced by outlet design. In this case, the key performance measure is customer throughput per hour – this is not about increasing basket size, it’s about moving more paying customers in and out of the store.