business news in context, analysis with attitude

Published on: November 14, 2012

by Kevin Coupe

What do the Central Intelligence Agency, Waffle House, Lockheed Martin, Best Buy, Restoration Hardware, and Hewlett Packard have in common?

All, according to various reports, have been run by men who have had romantic relationships with people who worked for them in some capacity. And in almost every case, the men have lost their jobs as a result. (Joe W. Rogers Jr., of Waffle House, remains in his job. For now.)

Now, not all these cases are created equal. As I wrote when Gary Friedman of Restoration Hardware was fired, the woman in question was single, Friedman had been divorced for years, and there were no charges of sexual harassment, no allegations that Friedman did anything improper, immoral or illegal. Nobody was married, nobody was cheating. There might have been a question of judgement, but I'm not sure it rose to the level of being a firing offense.

And in the matter of David Petraeus, military hero and director of the CIA, the mistress was not an employee. She was his biographer.

But let's be clear here.

It seems to me that every senior executive needs to understand that we don't live in a "Mad Men" world anymore. These guys can't be messing around with female employees, can't even be flirtatious, can't be sending salacious emails, and should not be doing anything that calls their judgement into question. Because beyond the obvious moral issues, their actions will see the light of day. Their emails will be publicized. Their character will be assailed. Their careers will be derailed. And it may take years to find redemption. (Just ask Bill Clinton, who kept his job but lost much respect, though he is viewed far more sympathetically these days.)

I happen to believe what Woody Allen, who certainly can himself be accused of making questionable romantic decisions, once said: "The heart wants what the heart wants." Sometimes, however, it is not the heart that drives these decisions. Or the brain. (Think lower.)

I am so tired of reading stories about people who have reached the highest levels of influence who seem to not understand these basic facts of 21st century life.

In some ways, I feel bad for some of them. In the case of Petraeus, it is a shame that the country has lost his service, and that a man who seemed to carry himself with enormous dignity now finds himself caricatured in tabloid headlines and parodied by late night comics.

I am reminded of the wonderful quote from the Irish writer Brendan Behan, who once said that "the big difference between sex for money and sex for free is that sex for money usually costs a lot less."

This kind of sex is costing these people a lot. It is costing their companies a lot. It is costing their families a lot.

These executives have to learn to use their heads, and keep it in their pants.

Published on: November 14, 2012

The Sacramento Bee reports that embattled Raley's has finally achieved a measure of labor peace, coming to a contract agreement with the United Food and Commercial Workers (UFCW) that effectively ends a 10-day strike against the company.

According to the story, both sides got part of what they wanted - Raley's got wage concessions, and the union fought back an attempt by the retailer to restructure its health plan and "eliminate coverage for Medicare-eligible retirees." Specifics of the contract agreement have not been disclosed, and it still needs to be ratified by unionized Raley's employees.

However, as the story points out, what is unknown at this point is whether Raley's achieved enough savings to make it competitive in the long term with the non-union retailers invading its markets, such as Walmart, WinCo, Costco, and Tesco's Fresh & Easy neighborhood Markets.

Published on: November 14, 2012

Reuters has a piece suggesting that Amazon may face heightened holiday shopping challenges this year, as companies that include Walmart, Target and Toys R Us focus on "competing more aggressively on price and offering speedier delivery through spruced-up websites and stores that double as distribution warehouses.

"The onslaught comes as Amazon's price advantage over physical retailers is being whittled down. The company began collecting more sales taxes this year, in Texas, Pennsylvania and California, probably raising prices unless Amazon swallows the increase."

The story goes on:

"To be sure, these rival efforts may only dent Amazon's online holiday preeminence. The company has cost advantages over physical stores and it sells off inventory quicker. This is a crucial edge in the retail business, because unsold inventory is effectively stagnant money that could be used to generate more revenue and profit elsewhere.

"Amazon's Prime shipping service is a magnet that will draw in holiday shoppers again this year. The company is spending heavily on new fulfillment centers nearer to big urban centers, speeding up delivery times to make the service more attractive.

"But 2012 could turn out to be the year when retailers slow Amazon down."

Published on: November 14, 2012

MarketWatch reports that Walmart has officially launched "a service that will deliver tasting samples of new foods to subscribers' homes. The company launched Goodies Co., which for $7 a month, including tax and shipping, will deliver gift boxes filled with five to eight food samples ranging from healthy and organic to artisan and ethnic."

The concept has been in a beta test with some 3,000 customers for several months.

"The new Goodies Co. box, created by @WalmartLabs, underscores Wal-Mart's commitment to e-commerce and its use of social innovations to create new offerings for consumers," the company said in a statement.

Published on: November 14, 2012

There is a terrific column in the New York Times that ought to be read by every retailing and manufacturing executive under the impression that their industry or company is not vulnerable to the profound changes that can be wrought by demographic, technological and cultural pressures.

The piece has to do with the publishing business, and uses as its jumping off point the recent announcement of a merger between Random House and Penguin, a move made in the hope that they will be better able to compete with Amazon. The author, Adam Davidson, starts off with this wry observation: "When you see a merger between two giants in a declining industry, it can look like the financial version of a couple having a baby to save a marriage." And it moves from there to drawing parallels to events that occurred more than a century ago ... pointing out how Amazon's current approach may ultimately be its creative undoing.

You can read the entire piece here.

Published on: November 14, 2012

• All Things Digital reports that Visa's V.me service, described as "similar to eBay’s PayPal and other e-wallet services under development by MasterCard and American Express," is now being marketed to consumers, with Visa saying that it will make checking out online or via a mobile device "easier because customers will only have to enter a username and password, which automatically populates dozens of fields, including credit card numbers and shipping addresses."

Over the past year, Visa "has signed up 23 online retailers, including Blue Nile, Buy.com, MovieTickets.com, 1-800-Flowers.com, Cooking.com and CozyBoots.com. And agreements have been secured with 50 of the top issuers and banks, including BB&T, CSCU, BBVA, U.S. Bank, dozens of credit unions and more."

• All Things Digital also reports that "Starbucks is now accepting Square’s mobile payment application at about 7,000 of its stores, as part of a wide-ranging agreement between the two companies ... Starbucks customers already tend to be early adopters of mobile payments, using the Seattle coffee merchant’s apps more than two million times each week across both iOS and Android."

The story goes on: "There are a few differences between the two experiences. The Starbucks-branded app card requires users to load a prepaid card that is stored on the phone. In contrast, the Square app allows users to pay using a debit or credit card. The Starbucks app also allows consumers to earn reward, but the Square app will not. Either way, a barcode is displayed on the smartphone screen and is scanned by a reader at the register. The Square Wallet is more multipurpose, given that it can be used to pay at other participating restaurants or merchants."

Published on: November 14, 2012

• Advertising Age reports that Walmart has fired four employees at one of its Kentucky stores after a video went viral on the Internet showing them throwing and dropping boxes that contained new iPads, and saying on-camera that this was an illustration of why one should not buy an iPad from Walmart.

The irony is that the video was taken and posted by the Walmart employees themselves.

"We've seen the video of several night-shift associates destroying merchandise in the back of one our stores in August," a Walmart spokesman is quoted as saying. "As anyone can imagine, it made us wince. And we're also embarrassed. The associates involved no longer work for Walmart." So far, Walmart says is has not gotten an iPads returned to the store in question.

As Ad Age notes, "The Walmart iPad video joins a growing list of incidents where employees of major national chains record themselves behaving badly, post the work on social-media sites and get fired for it. That includes, just within the past four months, a Burger King employee standing in bins of shredded lettuce and a Taco Bell employee purportedly urinating on an order of nachos." And lets not forget the Domino's Pizza employees who picked their noses and then put the pickings on pizzas that were being served to customers.

Published on: November 14, 2012

SymphonyIRI is out with its newest Times & Trends Report, "Reversal of Fortune: National Brands Pick up Gains on Private Label," which explores the ongoing battle between private and national brands.

Some excerpts:

• "Penetration continues to be a key influencer of private label share. Penetration has slid across a majority of CPG channels during the past two years, with the exception of the club channel, which has seen private label penetration increase more than one point since 2010, to just under 43 percent. Penetration gains are also helping to support growth at the category level, including categories such as internal analgesics and refrigerated salad/coleslaw, where private label share has historically been above average."

• "Private label sales are quite concentrated. At present, the top one-third of private label buyers account for nearly two-thirds of all private label sales. And, while overall private label penetration is nearly universal, private label penetration is below 25 percent across three-quarters of CPG categories."

• "Average savings offered by private label CPG options varies considerably, but, on average, is in the double-digit range across more than three-quarters of the largest CPG categories. Despite the measurable discount offered by many private label CPG products, the last two years have witnessed a growing average private label price per volume and a declining private label price gap versus the category as a whole."

Published on: November 14, 2012

...with brief, occasional, italicized and sometimes gratuitous commentary...

• The New York Times reports this morning that "as the nation’s largest banks stay stingy with credit and a growing portion of the population has no bank at all, major retailers are stepping into the void. Customers can now withdraw cash at an A.T.M. with a prepaid card from Walmart, take out a loan at Home Depot for a kitchen renovation or kick-start a new venture with a small-business loan from Sam’s Club. This year, Walmart even started to test selling a life insurance policy.

"Consumer advocates are torn about the growth of this shadow banking industry. Financial products are making it into the hands of people who otherwise might not qualify for them, but these products are not always subject to the same regulations as bank products are. And to turn a profit, retailers generally have to charge more to people with poor credit or none at all."

Good piece...and you can and should read the whole thing here.

• The Food Marketing Institute (FMI), Grocery Manufacturers Association (GMA) and National Grocers Association (NGA) have released guidelines designed to promote model practices in the “end-to-end” digital coupon process and reduce the incidence of coupon fraud.

Produced by the Joint Industry Coupon Committee (JICC), Voluntary Guidelines for Digital Coupons, is said to share "model digital coupon practices in order to ensure a positive experience for consumers, proper settlement for retailers and effective and well-controlled promotions for manufacturers ... The Guidelines highlight the key distinctions between digital and paper coupons, including the presence of barcode data, distribution methods, consumer acquisition and presentment, purchase validation and offer set-up at point of sale."

• Bloomberg BusinessWeek reports that "Hostess Brands Inc., the maker of Wonder bread and Twinkies, began permanently closing plants after it couldn’t get enough members of its striking bakery workers’ union to cross the picket lines to keep them open." The company said that it is closing bakeries in Seattle, St. Louis and Cincinnati.

The strike began on November 9, and the company, which is already in bankruptcy, said it is just "days away" from shutting down completely.

• The Courier Times reports that A&P is closing down three Super Fresh stores in New Jersey, saying that the stores were underperforming.

• Bloomberg reports that Macy's is coming under pressure - via an online petition signed by close to a half-million people - to stop doing business with Donald Trump.

The retailer uses Trump in its advertisements, and also sells men's suits that bear the Trump name. (The story notes that "on Macy's website Tuesday, $650 Trump suits were on sale for $249.99; $69.50 dress shirt for $46.99.")

The petition, according to the story, "picked up steam over the weekend after Trump, a real-estate developer, repeatedly called for a revolution after Obama's re-election last week."

"I question the legitimacy and accuracy of the website and the number of signatures claimed to have joined this petition," Michael Cohen, a spokesman for Trump, tells Bloomberg in an email.

Of course Trump questions the legitimacy of the petition. He questions the legitimacy of anything that does not serve his ego or affirm his opinion.

I have no idea whether this petition will have impact on Macy's; it is interesting to watch this kind of groundswell about someone like Trump, who just licenses his name for the suits and does some commercials.

To me, it is much ado about nothing. People should just let Trump keep talking, because every time he opens his mouth he diminishes his brand a little more. At some point, there will be nothing left but a bunch of big buildings with his name on them.

Trump is a perfect example of the notion that having money does not guarantee good taste or good sense. Of course, we don't really know how much money Trump has ... he may be more illusionist than anything else.

• The Boston Globe reports that a federal appeals court as awarded Starbucks employees in Massachusetts $14 million, ruling that "the coffee giant violated state laws that prohibit supervisors from getting a cut of pooled tips."

Starbucks said it will respect the court's ruling.

Published on: November 14, 2012

• Tom O'Boyle, the executive vice president of Merchandising, Marketing & Supply Chain at the Great Atlantic & Pacific Tea Co. (A&P), reportedly has left the company. One source told MNB that the departure was "abrupt," though the company is not giving a reason for O'Doyle's leaving.

O'Boyle's role will be filled for the time being by existing staff.

Published on: November 14, 2012

Regarding what some perceive as a decline in customer service at the Apple Store, MNB user Brian Blank wrote:

To steal an old line, nobody goes to the Apple Store anymore, because it’s too crowded.

It’s been a while (knock on wood) since I’ve required the services of an Apple Genius for any of our numerous products, but I can attest that if you go to the store at a peak time…there will be a ton of people ahead of you.  No different than any other brick and mortar retailer/service provider.  If you take your car to the dealer for service/repairs, they won’t let you jump ahead of all the people who made appointments, just because you drove a long way to get there - they’ll just do their best to work you in when they can.
 
Anyone can make a Genius Bar appointment before they set off to the store.  Appointment scheduling can be done from Apple’s website, as well as from the Apple Store app on iPhone and iPad. 
 
And no, I don’t work for Apple.
 



On another subject, MNB user Ken Pentheny wrote:

In response to Mike Sansolo’s article on customer service when buying a car, note that Yoda was very old and probably remembered the day when sales people were actually taught to deliver superior customer service all the time.  Too bad we have progressed so far ahead that sales organizations no longer think that job 1 is to service the customer.

And MNB user Jenny Keehan quoted Yoda, suggesting that it ought to be a mantra for all companies trying to deliver superior customer service:

“Do, or do not. There is no try.”




We had a story yesterday about how Denmark has repealed its fat tax.

MNB user Jeff Foster wrote:

It's refreshing to see a country pay attention to see if a law they passed is doing the job it was intended.  And then to eliminate it.  In this country it seems that if a law isn't getting the desired result that was intended the search goes on for another law or regulation to be added that will achieve the desired result.  The new laws and regulations just keep piling on.

Another reader wrote:

The part I found interesting about this article was the last paragraph that read, “The Times reports that regardless of the impact on obesity rates, the fat tax "raised $216 million in new revenue. To offset the loss of that money, the Legislature plans a small increase in income taxes and the elimination of some deductions."”

Proponents of these kinds of taxes should think about this. What will happen as new products are developed or behaviors are changed and demand shifts away from the items these taxes target? Once you establish a revenue stream, recipients of that revenue add it to their budgets and become dependent on it. If it goes away or declines they have to find new sources of revenue, just like the Danish government is doing.

Another reader agreed:

Does anyone see a problem with this line? The Danish government created a new tax which was supposed to help prevent health issues. The tax failed to be effective, but hey, it generated $216 million dollars that we didn’t have before. Well, we just can’t do without money we never had before, so let’s forget about the health issue and increase income tax on people to keep the cash flowing in…. WHAT?!?

So let’s say I was the kind of person that wasn’t buying  or buying very little of the food that was subjected to the “fat tax”. Now you the government are telling me I have to absorb the full brunt of the tax burden with increases to my income tax and loss of deductions? Really?

Was the Danish government ever really interested in public health? It sounds like they were more interested in creative ways to take people’s money. And when they couldn’t justify it with results, they just decide to reach right into the public’s pocket and take what they wanted all along. It sounds to me like their government is addicted to money.

In my opinion, all $216 million that was generated from the failed tax policy should be returned to the public immediately with a letter of sincere apology and no new taxes should be generated to replace revenue that wasn’t there before the tax was created. You didn’t have that money before, you shouldn’t need it now.

I get what you are saying here, but...

The presumption you are making is that there is no good or necessary need for that tax money.

I'm perfectly happy to accept the premise that the Danish government - like most governments - was more interested in revenue than the public health when it levied this tax.

But I'm unwilling to simply accept your assumption that the money wasn't needed. I simply don't know. But I do know that sometimes taxes are need to pay for things like education, infrastructure, and defense.

I'm not saying that this was the case here. It could be that the Danish government is exploiting its workers.

But let's not assume anything.

By the way, the story yesterday said that the Danish government was repealing the tax because "it it had little impact on obesity rates because people would just go to Sweden and Germany to buy affected products."

In my commentary, I wrote, in part:

I suspect that this had more to do with public criticism and revenue lost to those damn Swedes and Germans, as opposed to the impact on obesity rates ... mostly because I'm not sure a year is a long enough time in which to make that judgement.

Which led one MNB user to write:

What's with the hate speech about the Swedes (and Germans)?

Not your usual demeanor....just saying.

Really? Hate speech?

I was just kidding around...