business news in context, analysis with attitude

Published on: November 7, 2013

This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Hi, Kevin Coupe here, and this is FaceTime with the Content Guy.

I'm traveling this week, and right now am in Austin, Texas. And yes, I went out this morning and had breakfast tacos … we had a story about their popularity a few weeks ago, and I know how to take advantage of an opportunity.

So I strolled over to a little place called the Slake Cafe, and tried two kinds - one with brisket, eggs, jalapeños and smoked gouda, and one called the "green eggs and ham." which actually had scrambled eggs topped with fresh spinach. And let me tell you, we don't get food like that back in Connecticut. Once again, it reminds me of one of the reasons I love my job.

The thing I briefly wanted to talk about this morning was the email I received in response to the story we had recently about Southwest Airlines floating the idea that it might change a long-held policy and begin charging for baggage. Some people thought it would violate a basic core value that Southwest traditionally has made a big deal … some thought that it didn't really matter because they liked or didn't like Southwest for other reasons, and some used the story as an excuse to dump on the airline industry in general.

I don't blame them for that, but I did think the big lesson from so many of the emails that we've received was that people who have preferred flyer relationships with specific airlines rarely seem to complain about the experience … because they get better treatment. Everybody seems to complain about United, but because I became a million mile flyer on United years ago, they tend to treat me pretty well. So I don't complain. They don't often give me reason to. Sometimes, but not often.

It is the same thing I've talked about so often here on MNB - how much better an experience can be if the consumer is treated like a regular. It's the best feeling in the world - whether you are in a bar or restaurant, on an airline, or in a retail store. Most of us want to be treated like Norm on "Cheers" …

And that I think ought to be the goal of every business. As much as possible, treat your customers - especially your best customers - like they are regulars. Because if you treat them that way, they're more likely to be that way.

Case in point. I have to be in Seattle in a few days, and while there I will make sure that I find the time to go to Etta's … because that's where Morgan runs the bar, and I know he'll pour me a great red wine, serve me some fantastic crab cakes, engage in good conversation, and make me feel like I'm a regular in a neighborhood bar that is only about 3,000 miles from my home, but a lot closer to my heart.

That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

Published on: November 7, 2013

by Kevin Coupe

Variety reports that Dish Network, which bought Blockbuster in 2011 for about $234 million, has decided to close the chain's 300 stores, as well as its DVD-by-mail business, by early next year.

At its height, Blockbuster had more than 9,000 stores. When Dish bought the company, it said it hoped to be able to turn it into a legitimate competitor to Netflix, which contributed to Blockbuster's demise with its DVD by mail offering, which has evolved into a dynamic streaming business that both generated exclusive content and a subscriber base that is larger than HBO's.

Some 2800 people will lose their jobs with the closures. However, Variety notes that "in an unusual move, stores that operate as licensed franchises will be able to remain open and operate under the Blockbuster name."

Joseph P. Clayton, Dish president and CEO, says that the company hopes to be able to leverage the Blockbuster name in digital offerings down the road.

Assuming, of course, that the Blockbuster name has any brand equity left … which is dubious, since the owners of Blockbuster seem to have spent much of the past few years doing its best to ignore the video content consumption trends that seemed pretty apparent to companies like Netflix, Apple and Amazon.

The Blockbuster case is a classic case of a company that practiced epistemic closure, looking at the world and seeing it as they wanted it to be, rather than as it was.

There's a great Jeff Bezos line that sums up what happened to Blockbuster. Asked about whether Amazon was destroying the book business, he said, no, it was the future that destroyed the book business.

The same could be said of the video business, and of Blockbuster, a company that owned the marketplace and then pretty much gave it away.

There but for the grace of God…

Published on: November 7, 2013

Amazon announced yesterday that it has created a new promotional program that will offer booksellers the opportunity to make money by selling Kindle tablets.

According to the announcement, "Booksellers can receive 10% of the price of Kindle books purchased from the devices they sell. The first order is worry-free for retailers—Amazon will buy back the inventory for up to six months after the first order, no questions and no penalties." The commission deal will last for two years; after that, the bookstores won't receive any revenue from e-book sales.

"Great retailers—large or small—strive to offer customers what they want—and many customers want to read both digital and print books," Amazon tells Slate. "As a chunk of the reading population moves to digital, we’ve heard from booksellers that they were looking for a way to sell e-books from their store and make money while doing so. This enables them to earn 10 percent of the revenue."

The program is being called "Amazon Source."

Published on: November 7, 2013

Walmart may not always have the lowest prices, but for a time yesterday, its website certainly did - at least on a number of items, as a computer glitch priced kayaks for $11, computer monitors for $9, cribs for $28 and treadmills for $21.

When the pricing errors came to the attention of the company, it shut down the site for maintenance … and later in the day, cancelled all the orders, informing customers that they would be reimbursed for their purchases and given a $10 gift card for their trouble.

Walmart did not say how many orders were cancelled.

Not all the items on the site were deeply discounted. Bloomberg notes that "a can of Lysol had sold for more than $100 and Kool-Aid packets were selling for more than $70." But there likely weren't a lot of orders placed for those items.

Published on: November 7, 2013

The Chicago Tribune reports that Instacart, the grocery shopping service, has added Mariano's to the list of stores from which local consumers can place orders, adding the 12-store chain to a list that includes Whole Foods, Dominick's, and Costco.

The Instacart model, which was tested in San Francisco and recently expanded to Chicago, uses personal shoppers to go to the stores on its list, pick up items ordered by its customers, and then deliver the orders to their homes or workplaces. Delivery fees range from $3.99 to $14.99, depending on timing and size.

The story says that "Instacart said that it added Mariano's at the request of local customers and that more stores are coming before the end of the year."

Published on: November 7, 2013

Pamela G. Bailey, president and CEO of the Grocery Manufacturers Association (GMA), issued the following statement today in response to the defeat of a ballot initiative in Washington State that would have mandated the labeling of genetically modified ingredients in food:

"We are pleased that the voters of Washington State rejected I-522 by a significant margin. I-522 was a complex and costly proposal that would have misled consumers, raised the price of groceries for Washington families and done nothing to improve food safety.
"The food and beverage industry is committed to providing consumers with a wide array of safe and affordable food and beverage choices.  Genetically modified food ingredients (GMOs) are safe, good for the environment, reduce the cost of food and help feed a growing global population of seven billion.
"Because a 50-state patchwork of GMO labeling laws would be confusing and costly to consumers, GMA will advocate for a federal solution that will protect consumers by ensuring that the FDA, America's leading food safety authority, sets national standards for the safety and labeling of products made with GMO ingredients. Our country’s labeling laws have been and should continue to be based on health, safety and nutritional content.
"We will continue to oppose individual state efforts to impose mandatory labeling of products made with GMO technology, as well as advocate for the safe and effective use of this important technology to increase the food supply while lowering cost. And we will continue to engage in an informative dialogue with our consumers on the safety, prevalence and benefits of that technology."

Published on: November 7, 2013

• Looking to generate more traffic and, presumably, more membership fees, Walmart has launched a Groupon promotion for its Sam's Club chain - $45 for a membership that normally would cost $85.14 (a 47 percent discount), plus a $20 gift card, and vouchers for "rotisserie chicken and apple pie, scalloped potatoes, and $200 in savings offers."


• The Los Angeles Times reports that a Walmart store in Paramount, California, was the location for a small labor protest yesterday as roughly 100 people gathered there to call for higher wages; included in the group were 20 employees who were on strike from Walmart stores in the region, as well as other California employees who were on their day off.

According to the story, "the event was planned by several labor groups, including Our Walmart and the Los Angeles Alliance for a New Economy. Organizers called it a precursor to the holidays and accused Wal-Mart of paying low wages and manipulating workers’ schedules in retaliation for labor activism."

Published on: November 7, 2013

Kantar Retail is out with its annual PoweRanking of "how trading partners view each other in the most important areas of the manufacturer-retailer relationship," and for the first time, Amazon has been ranked by manufacturers as being in the top 10.

The top 10 retailers, as ranked by manufacturers, are, in order:

Walmart (number one for the 17th straight year), Target, Kroger, Costco, Publix, Wegmans, HEB, Amazon, Safeway, and Walgreen.

The business fundamentals on which retailers were ranked included "best retailer with which to do business," "best category management/buying teams," "most innovative merchandising approach," "best supply chain leadership," and "best practice category management." The rankings also integrated manufacturer opinions about which retailers had the clearest and most sustainable strategies, and who does the best job of branding their stores.

The top 10 manufacturers, as ranked by retailers:

Procter & Gamble, Unilever, General Mills, Kraft Foods Group, PepsiCo, Nestle, Kellogg, Coca-Cola, ConAgra, and Kimberly Clark.

The business fundamentals on which manufacturers were ranked included having the "best customer/sales teams," the "most innovative marketing approach," "most helpful consumer/shopper insights," "best supply chain leadership," and "best shopper marketing programs." Strategic issues considered included being the "most important consumer brands to retailers," and having the "best combination of growth and profitability."

The entire PoweRanking report can be seen and downloaded here.

Published on: November 7, 2013

• The Fairfax News in Virginia reports that a new study by Consumers Checkbook says that "compared to average prices at Giant and Safeway stores in the region, prices are 20% lower at Walmart Supercenter stores, 19% lower at SuperTarget, 15% at Food Lion, 14% at Target and 13% at Wegmans."

The story says that "Wegmans ranked highest in overall quality with the vast majority of Wegmans consumers — 93% — rating it 'superior' vs. 34% of Safeway shoppers and 39% of Giant shoppers … Area price leaders also got relatively low marks for quality with just 27% of Walmart shoppers rating it “superior,” 23% of Food Lion shoppers and 21% of Target shoppers."


• The Associated Press reports that St. Louis-based Schnucks "is now branching into health care, opening its first Schnucks Infusion Solutions facility to treat acute and chronic conditions."

Infusion therapy, the story says, "involves injecting medicine through a needle or catheter. It treats conditions ranging from infectious diseases to immune deficiencies to cancer … infusion centers are profitable because they administer expensive treatments," and are "attractive to consumers and insurance companies because they provide outpatient care in a cost-effective way."


• The Idaho Statesman reports that WinCo Foods will open two new stores today, one in Coeur d'Alene, Idaho, and the other in Norco, California.

"The company plans to open its first two Texas stores in Fort Worth and McKinney in early 2014," the story says.


• The Associated Press reports that Nestle has sold its weight management business Jenny Craig in North America, Australia, New Zealand, and the Pacific Islands, to North Castle Partners, a U.S. private equity firm that specializes in companies that promote health, wellness and active living.

Published on: November 7, 2013

Yesterday, MNB took note of a CNN report that Sears Holdings-owned Kmart is getting blowback from consumers annoyed by the retailer's decision to stay open for 41 straight hours beginning at 6 am on Thanksgiving morning, a decision that the company said it made to provide customers with maximum flexibility and opportunity to shop. However, at least some customers say that Kmart is showing a level of heartlessness, greed and even "moral bankruptcy" by adopting a policy that prevents employees from having Thanksgiving dinner with their families.

Kmart has responded by saying that it will use seasonal employees and volunteers wherever possible, and that the move will allow workers to make extra money.

My comment:

I totally get why some consumers are ticked off by this. I agree that some things ought to be sacrosanct, and I'm bothered by all the Thanksgiving store openings. That said, let's be fair - Amazon and every other e-tailer will be open all day on Thanksgiving, and bricks-and-mortar retailers are under pressure to be open, or be closed (permanently). So I may be disturbed, but I understand.

From one reader:

This is why I enjoy reading your column, you offer insight beyond my emotional response to Kmart  staying open over Thanksgiving.

MNB user Katy Love wrote:

Not everyone will be overeating at the same ritualistic time. I know I'm not the only person who could care less that it is "Thanksgiving". I'm sure that if a company chooses to be open during times others aren't, they have people smart enough to figure out how to compensate the employees that help them make this happen. I roll my eyes at the large amount of people who just give one day to "Thanks".

From MNB reader Jerry Lauro:

In response to the article on K-Mart opening Thanksgiving morning starting the beginnings of their 41 hours straight of access to shoppers, the craziness and desperation of trying to acquire every consumer dollar is getting absurd. Did anyone ever take a step back and look at how retail functioned just as profitably back in the 70’s and early 80’s when stores were only respectfully open Monday –Saturday leaving Sunday for rest and family. I recall as a kid the local town deli’s and convenient stores outside of the gas stations only retail being open. Everyone seemed to get by and function for the day. Some states like New Jersey have Blue laws where some retail is closed on Sunday. Yes, change is one thing in life that is guaranteed but would closing all retail on Sunday totally diminish profits / volume that essentially would be captured between Monday – Saturday? We are all time starved and the aspiration for convenience and immediate satisfaction is driving a lot of our behaviors today. As a society and business, have we forgotten what holds us together, our nucleus? Maybe one of the contributing factors to the diminishing family along with all of the psychological developments around kids is contributed to the influence of 7 days a week brick and mortar openings.

MNB user Brian Blank wrote:

Allow me to lead off with a comment which I acknowledge will sound like pure snark, but which I  truly mean in all sincerity:  I would absolutely love to know how many of the people who are proclaiming to boycott Kmart over their plans to open on Thanksgiving Day have actually set foot in a Kmart store in the past 10, even 20, years?  It’s really easy to “boycott” a retailer you don’t shop at.  Do we have an Amish boycott of Microsoft to look forward to?

From another reader:

Maybe I am just old school, but I will purchase my holiday gifts as I always do and with the shortened timeframe.  I just will start early or find a way to fit more in during the existing time frame. I spent most of my career in retailing and have watched corporate greed erode the values of our country. When I started working in the grocery business in the 60's stores in our market were not open on Sundays, only open until 9:00 Wednesday through Friday and 6:00 all other days. People seemed to be able to find a time to buy their food. Stores were closed on Labor Day, Memorial Day, Independence Day, Christmas, you get the picture. But amazingly, they still bought all the groceries they needed. Our family was able to spend time together during the Holidays.  Now many holidays exist as major "SALES" events. Where does it end?

MNB reader Richard Boyd wrote:

I remember driving to see grandma and grandpa on pick a Sunday and most stores and gas stations were closed – this was back in the sixties when I sat in the back seat. Everything has changed and Kmart is really trying hard to be relevant to the consumers again.

I completely understand the traditional feeling toward Thanksgiving, and actually share the sense it. But the thing is, Amazon and its online brethren will be open all day on Thanksgiving … and traditional retailers have to compete with that. I feel their pain.




MNB reported yesterday that a Washington State ballot initiative that would have mandated the labeling of GMOs in food products there appears to have failed, with anti-GMO labeling votes accounting for 54.8 percent of the tally, compared to 45.1 percent of voters who supported the initiative.

The battle over the GMO labeling initiative was an extraordinarily expensive one, with $30 million spent in total - $22 million by anti-labeling forces that included the food and biotech industries, and close to $8 million by proponents of labeling laws.

My comment:

While the final vote count may not be in, I won't be hugely surprised if the ballot initiative fails. That's usually what happens when a ton of money gets thrown at an issue, which is exactly what happened here. Anti-labeling forces, supported by corporate dollars that simply could not afford to let this pass, got together and proved that in electoral politics, money often wins. And until lawsuit threats forced the Grocery Manufacturers Association (GMA) to reveal where the money was coming from, these corporate interests preferred to operate in the shadows, because that's where the anti-transparency forces thrive.

I continue to believe, however, that these folks are on the wrong side of history. The calls for greater transparency will continue, and I think that defeats like these will only serve to energize the people who believe that labeling is information, not condemnation, and that information is better for consumers, not worse.

For the moment, I am more concerned about the continued impact of big money on political discourse than I am about GMO transparency. It is a bigger, much more insidious problem.

One MNB reader wrote:

Then you're against allowing companies the right to tell voters their side of the story.  All the money in the world won't make a difference if their argument doesn't make sense.  Obviously, it does.

Kevin…like your MNB, been reading it for a while…first time I’ve responded to an article….

Why, why when an initiative you or others in the media favor gets beat at the polls, does it have to be because of “corporate dollars” against….can’t it just be that 54.8% of the people voting don’t like GMO labeling….suggesting that the opinion of the majority of the electorate is only based on who spent the most money telling them how to vote is, in my opinion, not accurate….the majority of voters decide how they vote based on the information provided by both sides of an issue with a healthy dose of “here’s what I think”….I’ve been a state level lobbyist for 30 years and not as naïve as this note might read….in my opinion the electorate is way smarter and more home grown thoughtful than most issue prognosticators think.

I'm sorry, but you can't tell me that when $22 million is spent to defeat a ballot initiative, much of it generated by companies from outside the state, compared to less than $8 million in spending on the other side (very little of it from outside the state), it does not have an impact on citizen opinion.

That's not to say that people don't start with a point of view … but unless I'm mistaken, there was an enormous swing in public opinion, according to polls, as money poured into the state.

I think that money corrupts politics and public discourse. On both sides. And, to be honest, if we don't do something about it, we'll only have the best democracy that money can buy, which won't be worth very much in the end.

One MNB user chimed in:

You often write about companies not being on the right side of history with regards to transparency. Perhaps the executives at these companies care more about their next bonus being on the right side of a very large number.

Not every executive. But many, I suspect.

MNB reader Scott Rickhoff wrote:

In my opinion, GMO hysteria is the next Global Warming hoax bandwagon.

You're absolutely right. Not sure if you've heard, but there also are a bunch of scientists going around saying that tobacco causes cancer.

When will all the hysteria stop?