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Regulatory Wrap-up: Weekly review of legislative developments — Dec. 3

BY CSA Staff


Wages

Federal – With the newly-elected U.S. Congress set to take office in January, a House committee plans to hold a hearing entitled, “Mandating a $15 Minimum Wage: Consequences for Workers and Small Businesses.” The committee is currently controlled by Republicans and the Democrats who are set to take over in 2019 have stated they will hold hearings and advance a $15/hr minimum wage mandate early in the next Congress.

Michigan – The Republican-controlled senate passed new legislation to delay the state’s scheduled minimum wage increase and reestablish the tipped wage. The bill extends the phase-in period to 2030, increasing at a rate of 23 cents annually until it hits $12. The phase-in could be stretched out even later if the unemployment rate is 8.5 percent or higher. The tipped wage would be capped at $4.00/hr under the new language. The new bill now moves to the house for consideration where it is likely to pass. Should that happen prior to the newly-elected Democratic governor taking office, advocates for the increase may initiate litigation or could refile the issue for the 2020 ballot.

New Jersey In an opinion piece, Assembly Speaker Coughlin announced that a bill to raise the state’s minimum wage to $15/hr will be introduced in the coming weeks. Legislative leaders and the governor have called for the legislature to advance an increase but negotiations around the tip credit and other issues have hampered movement to date.

Wilmette Village, IL – The suburban Chicago village board reversed their decision to opt out of Cook County’s $13/hr minimum wage ordinance. A nonbinding resolution appeared on the Nov. ballot and passed by wide margins, indicating public support for the increase. Several other local jurisdictions in Cook County could follow suit. The state is also likely to pick up the issue in 2019.

Paid Leave

Kansas The outgoing Republican governor signed an executive order providing paid parental leave to all government employees under the authority of the executive office. The move comes as a Democratic governor-elect is set to take over in 2019 and could serve to enable a broader conversation on paid leave mandates for private employers.

Michigan – The Republican-controlled senate passed new legislation that adjusts the paid sick leave provisions passed prior to Election Day. It lowers the required number of annual accrued hours that employers must provide from 72 to 36 and creates an exemption for businesses with fewer than 50 employees. The new bill now moves to the house for consideration. Advocates for the initiative have already pledged to put the issue back on the 2020 ballot if the law is substantially changed.

Washington – The state paid family leave law goes into effect Jan. 1, 2019. Companies must participate in the state-run program or create their own program, provided it meets certain criterion.

Albany County, NY – The county legislature postponed action on the much-debated paid sick leave ordinance until 2019.

Wilmette Village, IL – The suburban Chicago village board reversed their decision to opt out of Cook County’s paid sick leave ordinance. A nonbinding resolution appeared on the Nov. ballot and passed by wide margins, indicating public support for the proposal. Several other local jurisdictions in Cook County could follow suit. The state is also likely to pick up the issue in 2019.

Rick Santorum – Former U.S. Senator, presidential contender and current conservative political pundit, Rick Santorum, authored an opinion editorial calling on Republicans to work with Democrats to establish a national paid leave program for working families.

Scheduling

Boston, MA – The city council heard testimony from business groups and some advocates regarding the proposed “fair workweek” legislation that would apply to city contractors. However, the language defines city contractors broadly and much of it mirrors other laws passed in localities across the country.

Philadelphia, PA – The city council continued debate on the proposed “fair workweek” legislation and made some amendments to the language. It remains to be seen whether there is enough support on the council to pass the bill on to the mayor. The council’s next meeting is scheduled for Dec. 6.

H&M – The fashion retailer announced an update to their benefits package for part-time workers to include paid leave and a guaranteed minimum number of hours per week.

Labor Policy

California – A business group has initiated a legal challenge over the state’s decade-old Private Attorney General Act (PAGA) which allows individuals to bring suit against employers for labor code violations.

Taxes

U.S. House U.S. House Republicans introduced a tax package that addresses some technical changes to the Tax Cuts and Jobs Act that passed earlier this year. Most notable for many operators is correction of the drafting error related to the Qualified Improvement Property (QIP) provision. While the package may see some action in the House, it is unlikely to move in its entirety in the Senate prior to adjournment for the year.

Trade

China – President Trump announced a tentative truce with China in the ongoing trade war between the two countries. The two leaders met during the G20 in Argentina and reached an agreement that lacks specific details beyond the United States not implementing the scheduled increase of tariffs on $200 billion worth of Chinese goods. The tariffs on those goods will remain at 10 percent and in return China has agreed to increase imports from the United States. The agreement reportedly is set to expire on March 1, 2019 and discussions between the two countries will continue during that time.

NAFTA – The Presidents from Canada, Mexico and the United States signed off on the renegotiated North American Free Trade Agreement late last week while all three leaders were attending the G20 summit. The proposal still needs approval by the U.S. Congress (as well as the legislatures in Mexico and Canada) and also faces considerable opposition from some in Canada’s agricultural community. The continued imposition of aluminum and steel tariffs by the United States on both trading partners also hangs over the ongoing discussions.

Key Takeaways

  • Washington state’s new paid leave program, effective Jan. 1, is significant and should be watched closely. The program is an important test of paid leave as a government-sponsored program or “insurance” fund. The monies – paid in part by employers and deducted from employees’ paychecks – are deposited into the state fund to be distributed to employees when they become eligible. If the mechanics of the program work, expect other states to adopt the model. And, perhaps more importantly, a functional program lays the groundwork for a future portable benefits program. 
  • The scheduling issue continues to heat up. What was largely a west coast issue has now migrated east, first to New York City and now to more blue-collar cities like Boston and Philadelphia. Concurrently, major retail brands are deploying technology solutions that undermine many of the industry’s political arguments and at the same time, there is continued disagreement within the industry on what is an acceptable compromise – especially between large companies and independents. With more cities – and states – tackling this in 2019, the industry needs to aggressively work toward palatable solutions.

Podcast

Check out our Working Lunch podcast each week that includes further analysis into these legislative issues, policy, politics and much more. You can find Working Lunch on the Nation’s Restaurant News website, or by clicking here, and when you download the podcast and subscribe on iTunes here.

Legislature Status for Week of 12/3/18

  • The United States Senate is in session this week
  • The United States House is in session this week
  • Five state legislatures are meeting actively this week:
    • MA, MI, NJ, OH & UT

The Regulatory Wrap-Up is presented by Align Public Strategies. Click here to learn how Align can provide your brand with the counsel and insight you need to navigate the policy and political issues impacting retail.

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What to expect in 2019

BY Marianne Wilson

Here are a few ideas on retailers should expect in 2019 and 2020 from Michael Halula, retail-CPG sector general manager, Americas, Teradata.

• Frictionless Experience – Retailers are looking to integrate their physical and digital channels to create a single shopping experience. The challenge is to incorporate a way to integrate their interactions as the customer purchase in the store, buys additional affinity products online, selects ship to home and to track their purchase through fulfillment.

• AI Adoption – One of the most singular requests I get is how a retailer can adopt AI in their business processes ranging from supply chain, fulfillment, in-store stock replenishment, to automated personalized communications through the purchasing process. Walmart, Lowe’s and other retailers are testing robotics in-store to improve shelve replenishment/ stocking to automating the pick and pack processes.

• Last Mile/ Logistics – Every retailer is focused on the full-time process. All companies are investing, partnering or through acquisitions to enhance the cost effectiveness of fulfillment. Retailers are using BOPIS towers/ lockers (Walmart, Amazon), entering into partnerships with other retailers (Amazon & Kohl’s), and making strategic acquisitions (Walmart & Parcel). The emphasis has sparked supply chain initiatives to improve the speed to deliver while reduce the cost of goods sold.

• Acquisitions – Walmart has it in their strategy to continue acquiring other companies to speed (since 2016, the chain has made seven major acquisitions) and other retailers are aggressively exploring more acquisitions as well.

• Investments in Physical Experience – Walmart, Target, Macy’s to name a few are all investing in the store experience. Macy’s [email protected]’s pop-up store concept & their off brand Backstage stores will change the way customer’s shop with Macy’s. Target investing in a complete physical store make over (1,000 stores across the country by the end of 2020) will provide a new, exciting shopping experience.

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Finding Your Most Profitable Customers: Retail’s data ambition

BY Jill Standish

To understand some of the radical ways in which consumer expectations are changing, let’s start with a scenario from the not-so-distant future.

A commuter finds herself admiring the running shoes worn by the person standing next to her on the platform. Asking the wearer’s permission, she takes a photo of the shoes and orders her own pair – knowing they will arrive just in time for her lunchtime run. Next, using the app of the coffee shop next to her office, she orders an espresso that will be ready at the exact moment she walks in. Then she asks a grocery store’s app to recommend the recipe she will feel like cooking later – asking them to deliver the ingredients she needs in time for her return. Finally, moments before her train arrives, she asks her friends’ view on a dress for an upcoming wedding and books a fitting appointment via the store’s chatbots.

All of this takes place in just a few short minutes and, as a scenario, is already a near-reality for millions of people. Simply put, consumers do not buy things like they used to. They want a deep and trusting relationship with brands, they expect to shop across multiple touchpoints and – above all – they have a growing interest in expertly curated, ultra-personal experiences that are sensitive to their habits and preferences.

Indeed, the latest research report from Accenture and the Retail Industry Leaders Association’s (RILA’s) (R)Tech Center for Innovation shows a strong and irreversible consumer desire for personalization. Whether it’s personalized wardrobe suggestions or tailored interior design advice, demand for curated expertise has risen by a third in just two years. What’s more, it’s growing particularly strongly among younger consumers, with around seven in 10 Millennials responding positively to personalized brand experiences.

But what does this mean for retailers today? After all, for each of the practical challenges presented by the above scenario, there are just as many opportunities. Retailers can’t afford to get left behind.

In response, we believe retailers should focus on using AI and analytics to track individual consumer preferences and profitability – thereby becoming “customerkeepers” – while identifying and cultivating the high-lifetime-value customers who drive growth.

The industry of customerkeeping
Once, retailers were “shopkeepers”. Today, they are customerkeepers. In effect, this means embedding a virtuous cycle of engaged employees that sell relevant products and services to happy customers – encouraging them to spend more.

Becoming a customerkeeper is far from straightforward, however. Brands that get it right combine world-class technologies with a deep understanding of consumer behavior (right down to their unarticulated wants and needs), the ability to communicate with warmth and humanity, and data mastery – all in real time.

And yet, thanks to advances in analytics and artificial intelligence (AI), the insight to deliver is now achievable for every retailer. This is the future of retail growth. But the real journey has only just begun.

Some retailers may assume that their internal capabilities are sufficient – yet significant investment and a different approach is needed. To look at AI as the one-stop solution for successful analytics would be misguided, for example. Before organizations can extract and exploit insights, they need to ‘teach’ their system using high-quality data. Low-quality data means the AI system produces distorted, inaccurate results that risk harming the business – instead of helping it. So, retailers have everything to gain from putting their datasets through rigorous vetting and cleansing processes before they’re deployed.

Achieving the data “impossible”
A data-driven mindset and discipline is a significant change for most retailers. But it is simpler and faster than many expect, and there are proven steps for achieving it. Like breaking down and integrating functional silos, acquiring data science and analytical skills, fostering a culture that welcomes change, and measuring what matters: which specific customers buy which specific items, where and how.

To generate maximum value from data, retailers should apply analytics on an enterprise scale, across areas including revenue drivers, marketing costs, fulfillment costs and digital levers for customer behavior. If they don’t, the misalignment between what customers want and what’s available could have detrimental consequences on profit and customer retention. Conversely, the aligned digitally-enabled organization will gain a true picture of how each consumer is behaving and how each product is performing. Then they’ll be in position to learn the right lessons from their data – by focusing not on margin-eroding, mass-market promotions, but on those high-value customers that deliver most of the profit.

Ultimately this is about taking a retailer’s insights and creating new business models centered around specific user needs and shopping styles. In this way, customer insights can be weaved throughout the whole business – with product teams leveraging data-driven creativity to understand their audiences, and marketing promotions grounded in insights about the profitability of individual products and customers.

Conclusion: Enabling the ubiquitous consumer
Like all technology-enabled developments in retail, what we see today is only an inkling of what will rapidly play out over the next few years. Already, we see the rise of “ubiquitous shopping” – consumers that expect to be able to buy anything they want, anytime, anywhere and anyhow. With this in mind, the industry leaders of tomorrow will be those that can identify lingering gaps in the consumer experience and use digital platforms to provide a reliable, satisfactory solution.

In turn, retailers at the beginning of their data journey are coming under greater pressure to catch up. Implementing AI and analytics technologies needs to become a priority. Brands should also strive to provide accurate, near-real-time answers to tough questions – around inventory shortages, new-customer acquisition rates and loss-making customer segments – and develop a credible plan for acting wisely on this information. If they can do so, they will be well-placed to win the loyalty of tomorrow’s consumer.

Jill Standish is senior managing director and head of Accenture’s Retail practice.

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