business news in context, analysis with attitude

Published on: January 2, 2014

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.by Kevin Coupe

Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy.

First of all, let me wish you a Happy New Year. I trust you had a terrific holiday, and are ready to embark on the year 2014 with energy, focus and panache. That's certainly my goal.

Of course, one of the big business stories of the past week or so has had to do with people and companies that did not have such a great holiday season. I'm referring, of course, to the customers who ordered Christmas presents online and did not get them on time, and the companies that disappointed them.

I think it is fair to say that many of the shoppers who were affected were seriously ticked off, that they felt they'd been lied to by e-railers that had over-promised and under-delivered. The e-railers involved tended to blame the shipping companies; Amazon, for example, said that it got all the orders out of its distribution centers on time, but that companies like UPS dropped the ball.

While both Amazon and Walmart offered free gift cards to customers as compensation for their trouble, I'm not sure it is a good idea to blame the shipping companies. When you make a promise, you are responsible for delivering on it, no matter who is really to blame when the promise is broken. I have a feeling, though, that Jeff Bezos has been on the phone to his R&D department, asking when those delivery drones are going to be ready for deployment. He also may be asking his financial folks if he has enough money in the bank to buy UPS or FedEx, just to make sure this doesn't happen again. (By the way, the answer to that question probably is yes, that he has plenty of money. I'm not actually sure it would be the best way to spend it, though I'd be the last person in the world to offer Jeff Bezos financial advice.) It would be interesting to know if Amazon was able to better avoid delivery problems in places like Seattle, Los Angeles and San Francisco, where it has Amazon Fresh delivery vehicles … and how that might factor into its strategic thinking.)

Companies like UPS and FedEx, of course, really didn't have anyone to blame … except, of course, the customers who came out in record numbers to shop online, take advantage of free and/or express delivery options, and put enormous pressure of their systems. I'm also pretty sure that it isn't a good idea to blame the customer, even implicitly …

The shipping problems immediately before Christmas, of course, have led a lot of analysts and self-styled marketing gurus to question how value offerings might be changed when the holidays roll around this year, how shipping promises might be adjusted, and how somehow companies will endeavor to manage shopper expectations. A lot of this these questions are, of course, tied to profitability and productivity, which is perfectly fair.

Except that, in the long run, I think the questions may be irrelevant.

Let me be clear about this. I go to great pains to emphasize that I'm not a futurist, I'm not a guru, I'm certainly not a consultant, and I would never claim to any sort of specialized expertise. I do think I have some common sense, some experience, and can be a pretty good guesser. (I think there is a line from the old "Columbo" series in which he says that his wife thinks that he's the second smartest guy out there, but that there is an enormous number of guys tied for first. That's me.)

But I think that one of the things that the real winners in the e-commerce segment won't do 11 months from now is try to diminish consumer expectations. Rather, I think that people and companies are going to spend an inordinate amount of time over the coming year trying to figure out how to fix an infrastructure that failed too many people this Christmas. I'm not sure it is going to be easy, or that they'll fix all the problems the first time out. It is entirely possible that they'll increase capacity and it still won't be enough.

This is all a work in progress, and it is hard for companies to gauge what they need when, in fact, we're going where no economy has gone before. So there will be hits and misses, successes and failures, and plenty of opportunities - some will be turned into home runs, and others into strike outs. But the game will continue.

While I don't think it is a good idea for companies - whether retailers or shippers - to blame customers, I can. And I'm not sure that parent who waits until two days before Christmas to order that game that the kid absolutely has to have … well, I'm not sure that this parent has a legitimate complaint. Except that legitimacy is in the eye of the beholder.

From my personal experience, the whole e-commerce experience this past Christmas was pretty flawless. It seemed like there were FedEx, UPS and US Postal Service trucks pretty much everywhere during December, and I was amazed at the times I saw packages delivered - it was at all hours of the day or night, seven days a week.

Not only did we get everything we ordered in plenty of time for Christmas, I was consistently amazed and impressed. On the Monday before Christmas, as I was going through my list and checking it twice, I realized that I'd forgotten to send a book to my oldest friend in the world. We've known each other since 1968, and we find these days that we talk about things like his gall bladder and my knees … and so I'd chosen a book for him with a carpe diem theme. But I'd forgotten to actually order it. So. on Monday morning, I placed the order … and Amazon said that they'd be able to get it to him by the day after Christmas. I wasn't worried about it, because it was my fault.

Go figure. Amazon delivered the book to his house the very next day. And because I'm a Prime member, it didn't cost me anything extra.

That's worth a Wow! And it helps convince me that with all the problems that some companies had this past holiday season, there also was plenty of magic, plenty of amazement, and plenty of customers who had their expectations not just met, but exceeded.

I think that there will continue to be plenty of that in the new year.

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

Published on: January 2, 2014

by Kevin Coupe

Call it the Conflict in Cottleville. And at least in the court of public opinion, the little guys seems to be beating the big guy.

It all started when the Exit 6 Pub & Brewery in Cottleville, Missouri, began selling a beer it called "Frappicino."

This came to the attention of Starbucks, which makes a little beverage called a "Frappucino." One of Starbucks' attorneys sent Exit 6 a very official letter saying that the brewpub needed to cease and desist from selling the beer because it was likely to "cause confusion, mistake or deception among consumers."

Jeff Britton, owner of Exit 6, decided not to roll over … and so he responded with a sarcastic letter - and posted it on Facebook - as well as a $6 check that he said represented his total profit from selling three pints of what he throughout his letter referred to as the "F Word" beer.

An excerpt from the response letter:

"I would like for both [attorney Anessa] Owen Kramer and Mr Bucks to rest assured we meant no deception, confusion, or mistaking in the naming of the beer F Word," Britton wrote. "We never thought that our beer drinking customers would have thought that the alcoholic beverage coming out of the tap would have actually been coffee from one of the many, many, many stores located a few blocks away. I guess that with there being a Starbucks on every corner of every block in every city that some people may think they could get a Starbucks at a local bar. So that was our mistake."

And, Britton wrote: "We also promise to stop production of our 'Starbuck-McDonalds-Coca Cola-Marlboro Honey Lager' for fear of further repercussions." And he insisted that Starbucks apply his $6 check to "the legal fees Ms Owen Kramer received for her efforts in nabbing Exit 6 in our dastardly F Word naming practices."

In interviews, Britton has said that in some ways he does not blame Starbucks for protecting its trademark, and he has changed the name of the beer to "F Word Beer." And almost certainly because of all the publicity, it seems to be selling better than "Frappicino."

Now, I'm sure that Starbucks felt it was necessary to defend its trademark. And with Britton changing the name of the beer, it has achieved its goal.

But now, I think, the company needs to demonstrate a sense of humor. I'd find a way to make sure that CEO Howard Schultz shows up in Cottleville (it is about a half hour west of St. Louis) and buys a round of drinks for the bar. It'd be a nice moment, and would put a human face on a company that, at least over the past week or so, was being solely represented in the media by an attorney.

Published on: January 2, 2014

Good piece in the New York Times Sunday Magazine by Adam Davidson (of Planet Money on NPR) in which he writes about how better-paid employees can help retailers to greater profitability and productivity … as opposed to just being a cost that hurts their bottom lines.

Excerpt:

"The problem results from the way many companies consider their workers. Ikea, for instance, has more than 130,000 global workers. In order to manage all these people, it uses something called work-force-management software, which ensures that there are enough workers — but not too many — to handle the forecasted in-store shopping traffic. (Walmart, which has 16 times as many workers, does, too, as do most larger retailers.) The software typically codes workers as a cost — one of the biggest — and aims to find the most efficient number of employees that can handle expected traffic. A trip to a big-box store reveals this algorithm’s logic in practice. There always seem to be endless aisles of merchandise but no one to answer your questions."

The story goes on:

"Even the most coldhearted, money-hungry capitalists ought to realize that increasing their work force, and paying them and treating them better, will often yield happier customers, more engaged workers and — surprisingly — larger corporate profits. This sounds Pollyannaish, sure, but a study co-authored by Marshall Fisher, a Wharton professor who specializes in retail-management studies, backs it up. For every dollar of increased wages, one retailer that was studied by Fisher brought in $10 more in revenue. For more-understaffed stores in the study, the boost was as high as $28."

You can read the entire piece here.

Published on: January 2, 2014

More bad publicity for Target, which went into the holiday week dealing with a data breach that affected some 40 million credit and debit cards used by customers in its stores during the first three weeks of the end-of-year holiday shopping season.

This week, Target said that some of the gift cards it sold during the holidays were not properly activated, and were essentially unusable by recipients.

The retailer said that people with flawed gift cards - which it estimated was fewer than 0.1 percent of the cards sold during the holidays - could take them to store customer service desks for assistance.

Published on: January 2, 2014

The Conference Board has released its monthly assessment of consumer confidence, concluding that following three months of declines, the index hit 78.1 in December, up from a revised figure of 72 in November.

The Associated Press story notes that consumers appear to be responding to a stronger outlook for both hiring and growth.

Published on: January 2, 2014

CNN reports that the Federal Aviation Administration (FAA) has "selected six research sites to help it test and map out the best way to safely bring unmanned aircraft into the heavily used U.S. airspace. FAA Administrator Michael Heurta said the facilities, strategically located, will work with the agency to develop standardized procedures and regulations -- elements that govern all areas of aviation."

The six sites are: the University of Alaska, the state of Nevada, Griffiss International Airport in Rome, New York, the North Dakota Department of Commerce, Texas A&M University -- Corpus Christi, and Virginia Tech. Virginia Tech's research will also include a collaboration with Rutgers University in New Jersey.

The FAA announcement comes just a month after Amazon founder/CEO Jeff Bezos revealed that the company is investing in technology that, if proven and approved, could allow drones to deliver packages of five pounds or less within 30 minutes throughout the country.

Published on: January 2, 2014

Bloomberg had a report the other day saying that "US companies, forbidden to give money directly to political action committees, are taking advantage of controversial federal rules allowing them to ask employees to do it for them in exchange for matching charitable donations … The practice was approved by the Federal Election Commission in the late 1980s and has become commonplace at a time when companies face increasing scrutiny over their political donations."

The story goes on to say that "employees receive no tax deduction for the donations, as they do by giving to a charity directly. When soliciting employee contributions to PACs in exchange for charitable donations, companies typically say they want to increase voluntary participation in the political process and support pro-business candidates. Many companies offer a one-for-one match and donate the money to a charity of the employee’s choosing."

Among the companies cited in the report are Walmart and Coca-Cola.

In the case of Walmart, the retailer "offers a two-for-one match, and the contribution must go to the Associates in Critical Need Trust, or ACNT, a charity the company started in 2001 to help its own store workers facing financial distress. Wal-Mart gave the ACNT about $3.6 million in double-matching funds in the year that ended January 31, according to an audit of the charity’s financial filings."

Bloomberg quotes former FEC chairman Scott Thomas as saying that "the exchange flouts the spirit of campaign-finance laws, which forbid companies from reimbursing for donations, including through a bonus or 'other form of direct or indirect compensation'."

Published on: January 2, 2014

The New York Times had a piece before Christmas that, if you haven't read it, you should.

It is about how eBay, rather than just being an online auction house, has been "developing technology partnerships with big retailers like Home Depot, Macy’s, Toys 'R' Us and Target and expanding eBay’s online marketplace to include reliable, returnable goods at fixed prices … eBay has made 34 acquisitions over the last five years, most of them to provide the company and its retail partners with enhanced technology. EBay can help with the back end of websites, create interactive storefronts in real-world locations, streamline the electronic-payment process or help monitor inventory in real time."

Part of this effort is tied into eBay's ownership of PayPal, which it believes will allow the company to create a digital wallet that will facilitate the whole vision. And, the story makes clear, eBay is hardly the only company pursuing the strategy … there also is a little company called Walmart that is investing significant time and money into its @WalmartLabs initiative in Silicon Valley.

And, of course, all these moves and investments are tied into finding ways to compete with the Amazon juggernaut.

Check it out here.

Published on: January 2, 2014

The Associated Press reports that McDonald's Corp. has shut down its internal McResource website, which garnered the company a lot of bad publicity when it was quoted in the media - both mainstream and social - as providing unrealistic financial advice to minimum wage employees (such as how much to tip your nanny).

McDonald's said that the site was run by an outside company and that, "between links to irrelevant or outdated information, along with outside groups taking elements out of context, this created unwarranted scrutiny and inappropriate commentary."

Published on: January 2, 2014

USA Today reports that Netflix is testing " a $6.99 per month plan that lets people watch on only one screen at a time. The company's basic streaming service currently costs $7.99 a month and lets customers watch on two screens at the same time.

"The new offer, which was posted on the company's website, is part of a broader set of test subscriptions for new customers based on how many screens they use to access the service. The company is also testing a $9.99 subscription for viewing Netflix on as many as three screens simultaneously and it has had an $11.99 four-stream plan available for a while."

Published on: January 2, 2014

• Reuters reports that Walmart "has recalled donkey meat sold at some outlets in China after tests showed the product contained the DNA of other animals, the U.S. company said." While the company said it will reimburse customers who bought the tainted donkey meat, the story suggests that "the scandal could dent Wal-Mart's reputation for quality in China's $1 trillion food and grocery market where it plans to open 110 new stores in the next few years."

Published on: January 2, 2014

• Here are some e-commerce numbers for you…

The Los Angeles Times reports that "Amazon.com sold almost 37 million items on Cyber Monday, a pace of 426 a second to be exact … The company also said that it shipped items to customers in 185 countries during the holidays. Additionally, Amazon said 50% of its customers used mobile devices to do their holiday shopping."

Amazon also said that "overall holiday season sales were its best ever," according to the Times.

The company press releases also quoted CEO/founder Jeff Bezos as saying that "Amazon Prime membership continues to grow, and we now have tens of millions of members worldwide."

Published on: January 2, 2014

• The Chicago Tribune reports that Jewel-Osco plans to close the four Dominick's stores it acquired from Safeway on January 12, and then will reopen them under its own banner on January 16.

Most of the 72 Dominick's stores closed last weekend. There are 11 units that have been acquired by Roundy's for conversion to the Mariano's format; those stores will be closed for a 30-45 days as the rehab takes place.

According to the story, "A number of grocery chains are in negotiations to buy some or all of the 57 unsold Dominick’s locations, according to sources. Among those stores, only the north suburban Bannockburn location remains open, getting a reprieve until Jan. 25 per its lease agreement, according to a Safeway spokeswoman."

Meanwhile, the Chicago Sun Times reports that "Whole Foods has mailed fliers offering former Dominick’s shoppers $15 off a $50 purchase, along with a sympathy note and a list of affordable items that defy the upscale retailer’s 'Whole Paycheck' nickname … Shoppers may use their direct-mail coupon or give up their Dominick’s loyalty card, which Whole Foods will recycle, to get the savings. The offer expires Feb. 15."


• CBS News reports that beginning yesterday, "the city of Los Angeles is now the largest in the U.S. to ban single-use plastic bags at major grocery stores … Shoppers will now have to choose between bringing their own reusable bags or buying paper bags that cost 10 cents apiece.

"Similar laws are already on the books in other Southland cities, including Glendale, Pasadena, and Santa Monica."


• Aldi has announced that it plans to open an average of 130 stores a year in the US, up from the 80 that it traditionally has opened annually in recent years, with an eye toward opening 650 new stores in the next five years. The investment to hit these goals is expected to be in the $3 billion range.

Aldi currently has close to 1,300 stores across 32 states.


• The Los Angeles Times reports that Arden Group, which owns Gelson's Markets, plans to sell the chain to investment firm TPG for $394 million.

According to the story, "TPG said in a statement it plans to expand the 17-store chain, which has struggled in Southern California's highly competitive supermarket arena. Gelson's closed a store in Pasadena this year and one in Northridge last year, but opened one in Long Beach. A new location in La Canada will open next year."

Arden said last July that it was looking into a possible sale of Gelson's.


• Reuters reports that "India's foreign investment regulator has approved a $110 million investment plan by Tesco, formally paving the way for the British retailer to venture into Asia's third-largest economy … Tesco this month took the initial steps to becoming the first foreign company to set up a chain of supermarkets in India's $500 billion retail sector after announcing it had applied to buy a 50 percent stake in Tata Group's Trent Hypermarket."


• The Wall Street Journal reports that Mondelez International will sell a controlling interest in its SnackWell brand to the private equity firm Brynwood Partners. Terms of the deal were not disclosed.

Published on: January 2, 2014

I always think that the new year offers the opportunity to restart the "Your Views" clock … we had emails about an enormous number of issues last year, but I think it is good to start fresh.

But I did think that it was worthwhile to post an email from reader Christopher Gibbons that references something I wrote at the end of last month…

I found your comment on finding it “almost hard to read an actual hard cover book” slightly shocking and somewhat dismaying - not sure why exactly.

Maybe the idea that a well-read, well-educated person such as yourself (and someone that also just happens to be an author) could find physical books anything but enthralling is a bit sad.

My mother loved books more than anything else in the world. She read voraciously, usually a book a day - sometimes two.

She died before the advent of e-readers and would not have looked on them with much affection (“Piffle!” she likely would have said.)

My daughter is an avid reader and loves the tactile feel of holding a book and turning its pages. E-books do not offer the same experience to her. She is all of 23 though and her preferences may change.

I read mostly newspapers and some books, with a lot of content now coming electronically over my computer screen.

There is good in both formats, I believe, and different folks will have different preferences.

I think we all can agree that anything that gets people to read more is a good thing.

But the idea that someone who grew up on books, as I know you must have, could ever find it hard to re-connect with the media form that helped shape who they are?

Yes, I would find that a bit sad.

Here's hoping it’s just a temporary phase.

My point was that in many ways, I've grown to almost prefer e-books to the paper-and-ink variety. Not always, but often.

But I would suggest that a book is not the format. The book is the words and the sentences and the ideas. Format actually is sort of irrelevant, IMHO.

You're right that different people will have different opinions. But one opinion does not have any sort of moral superiority over the other. There is nothing "sad" about preferring an e-book instead of a traditional book. What would be sad is not reading at all.

And this is an important business realization.

It seems to me that businesses have to know the difference between content and delivery systems … and understand that it is having differentiated content/product that is critically important.

Published on: January 2, 2014

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see Main Street through a constantly evolving technological, demographic, competitive and cultural prism.  These issues all combine to create an environment in which traditional thinking, fundamental execution, and just-good-enough strategies and tactics likely will pave a path to irrelevance;  Coupe lays out a road map for the future that focuses on differential advantages and disruptive mindsets, using real-world examples that can be adopted and executed by enterprising and innovative leaders.

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Constantly updated to reflect the news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed by Coupe’s 30+ years of writing and reporting about the best in the business, "Good Is Not Good When Better Is Expected" will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.

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