business news in context, analysis with attitude

Published on: August 24, 2015

by Kevin Coupe

Michael Jordan on Friday was awarded $8.9 million in damages after a high profile jury trial into whether Safeway's now-defunct Dominick's division in Chicago used his likeness without permission in a 2009 ad designed to sell steaks.

The company, the Chicago Tribune writes, "was facing an uphill battle from the outset, say economists, marketing experts and lawyers who followed the trial for insights into how Jordan and his advisers have built his brand into the one of the world's most successful sports marketing machines. Their consensus: The size of the award is not only a warning to corporate America, but also a lesson to other athletes to 'be like Mike' and stay on their guard ... Evidence at the trial showed how Jordan, for more than three decades, refused to sign one-off deals, keeping his endorsement rate sky-high by signing only a small number of long-term contracts with business partners that he expected to ultimately pay him more than $10 million. That strategy was threatened by Dominick's attempt in court to pay a budget price for a one-time use of his name."

That budget price, it should be noted was $126,900 ... a number that was advanced by experts that Safeway hired, but that almost nobody else believed.

The difference between Safeway's number and the jury's number is almost certainly being noted by the folks at Jewel-Osco, which is facing a similar lawsuit brought against it by Jordan, scheduled to go to trial in December.

The irony, of course, is that Safeway and Jewel-Osco both are now owned by Albertsons.

The other irony: Jordan says that "it never was about the money," but rather about zealously protecting his brand equity.

And that's the real business lesson here (other than that you probably shouldn't mess with Jordan) - that it is incumbent on all of us in business to be resolute and aggressive about protecting our brand equity, whatever that happens to be. It is, in the end, our most important differential advantage in the marketplace ... and if we do it right, it should be priceless.

Jordan's brand equity strategy is an Eye-Opener.

By the way ... if you want to watch a movie that essentially is all about brand equity, rent American Gangster. It is nominally about the drug trade in NYC during the time of The French Connection, but there are a lot of critical lessons in there about how to establish and protect brand equity and differential business advantages. (And if you want more such lessons, there is a book entitled "THE BIG PICTURE: Essential Business Lessons from the Movies" that is available on Amazon by clicking here.)

Published on: August 24, 2015

One week after the New York Times published a long and detailed story about the "punishing" conditions endured by many Amazon employees, there continue to be a number of stories and columns assessing the issue and problems and putting them into a broader context.

Among them:

• The Wall Street Journal has a piece by Thomas H. Davenport, a professor at Babson College, in which he suggests that a big part of Amazon's public relations problems is the secrecy with which it chooses to conduct business.

"I have come to the conclusion over many years of working with and studying companies that secrecy is almost always more damaging than helpful to the companies that practice it," Davenport writes. "From a PR sense, it invites criticism; from an innovation sense, it makes a company too self-contained. Particularly when the company is highly successful and threatening to the established order of business (certainly true of Amazon), secrecy makes people suspect all sorts of dastardly behaviors."

While Google is a company as "dominant, aggressive, and ambitious" as Amazon, Davenport writes, it has been more transparent about its activities, and as a result, "I think most observers find the company a lot less threatening than they would otherwise."


• Fast Company has a piece by journalist Joe Lazauskas in which he writes about why the Amazon story in the New York Times got so much attention - generating, apparently, more online comment than any other story the Times ever has run.

"What made the story of Amazon’s alleged psychological abuse of its employees so entrancing to the tech community? Anyone who's worked in the field - or in an office, for that matter - can identify with the story at some level. But I think a bigger reason for all the hubbub is the shared sense that in order to accomplish anything really spectacular, we're supposed to be working as hard as the poor Amazonians supposedly are.

"The tech industry is unmatched in its zeal to glorify those who never leave the office. The 80-hour work week is a staple that comes up in virtually every story about startups. The insinuation is always that if you’re not treating work like a frat boy treats a cooler of free Bud Light - bingeing on it relentlessly - you're failing."

"But here’s the thing," Lazauskas writes. "Bingeing on work to an extreme extent just doesn’t make sense. Research shows that work weeks that run longer than 50 hours are likely counterproductive; you get little more out of an employee who works 70 hours than one who works 50, and the extra stress burns employees out faster and leads to more turnover. In fact, that last point is something Amazon doesn't seem to dispute—it's just a part of the company's model. But that doesn't mean every company needs to adopt it to succeed. Far from it - no workplace is exempt from the laws of exponential decay, which, simply put, means that productivity drops off a cliff if you push people too hard for too long ... This week, everyone wondered what went on at Amazon, and whether to see it as a scandal or something else altogether. But we should really be wondering whether the stories we tell ourselves as an industry do more harm than good."


• Fortune's piece suggests that while Amazon would like to position itself as the essential 21st century technology company - paying people well to "work on world-changing projects," but pushing them "to the breaking point in a survival-of-the-fittest climate where they tend to burn out and leave quickly" - in fact it is the "kind of workplace is based on an old-fashioned business model: that is, one that treats workers as replaceable cogs in the machine."

Fortune argues that there are three problems with this approach. One is that "people around the globe have been seeking greater well-being," with millennials "in particular is likely to pass on 'work-first' company cultures."

Second, "the same transparency trends that give job seekers visibility into companies allow consumers insight into companies. And customers increasingly care about how businesses treat employees and the broader community."

And third, "a growing raft of evidence shows that companies with workplace cultures characterized by high levels of trust in leaders, camaraderie among colleagues and pride on the job beat the competition."

The company that often is identified as one that is built to reflect these values is Google, which "is famous for great perks. But underneath those is a culture defined by in large part by caring relationships - a culture that brings out the best in people."


• The Financial Times makes a similar point: "The lesson from Amazon blows away one of the biggest lies of management. The stakeholder model pretends you can have it all — customers, shareholders and employees can all do well at the same time.
Amazon is a throwback to the old style of capitalism, in which there was a trade-off ... At Amazon, the customer wins — and the employee does not. The company may not have chosen the most morally acceptable trade-off. But it has laid bare this fact of economic life: when some win, others lose."

(The FT writer notes that when he read the original New York Times story, "it was late at night and I was sitting up in bed ordering weird lightbulbs and irregular screws, knowing they would arrive, at a discounted price, before lunch the next day.")


• Meanwhile, the Seattle Times reports that the American Civil Liberties Union (ACLU) has taken out a full-page newspaper ad in the Times offering to provide aid to Amazon employees there who believe they have been unfairly abused or discriminated against in the workplace.

According to the story, "Workers singled out in the ways described in the article might be able to make claims under the Family and Medical Leave Act, the Americans with Disabilities Act and a variety of federal and state laws regarding treatment of workers dealing with family issues.

"The ACLU noted that raising children and caring for sick relatives falls disproportionately on women. The ad pointed out that Amazon’s senior leadership team is exclusively male. And in a recent federal filing, Amazon disclosed that the vast majority of its technical and professional staff are men."

Published on: August 24, 2015

Fortune reports that Target "will test a program that will give customers more detail on delivery timing for items ordered online ... Target will start testing a new program in the fall called 'available to promise' that aims to tell shoppers with more specificity when their item will be delivered to their homes, and improve customer satisfaction.

"As part of the program," the story says, "customers will receive an e-mail notifying him or her when a package is arriving within a narrower window, typically two or three days, potentially offering improved shipping times, but certainly removing some of the uncertainty in online ordering."

CEO Brain Cornell told an investors meeting last week that "we believe this capability will drive further increases in digital conversion rates, which are already improving rapidly, as guests respond to a faster and firmer delivery commitment."

The story notes that "Target saw a 30% rise in digital sales in the second quarter, a decent clip, but below the 40% rate Cornell has set as a goal for the retailer in the coming years ... By the crucial holiday season, Target will be using 450 of its 1,800 stores to help fulfill online orders, up from 140 now. It already has equipped its stores to allow customers to pick up online orders there. All of which connects back to the central premise of the 'available to promise' program."

Published on: August 24, 2015

The Orlando Sentinel reports that Publix is expanding the use of third-party delivery service Shipt, bringing it to the Orlando market on September 5. This follows an initial launch in the Tampa market earlier this month.

The Shipt service - which Publix stresses it is not affiliated with and in which it has no ownership position - "allows customers to pay a $99-a-year membership and get free delivery on orders of more than $35," the story notes, pointing out that "groceries are more expensive through the service, about $5 more on an order of $35, according to Shipt's website."

Shipt has said that while it is working with Publix to start with, it reserves the right to work with other local retailers in the future.

The story goes on: "Shipt is part of the new wave of independent-contractor businesses, following along with Uber, Lyft and Orlando-based Doorstep Delivery. Contractors use their own vehicles and are not employees of the company.

"Shipt says it is recruiting drivers in the Orlando, Kissimmee and Sanford areas."

Published on: August 24, 2015

Fortune has a long profile of Whole Foods founder John Mackey, who says that in an organization and industry, "You need dissonance, and you need someone who is challenging things. Otherwise you get stuck."

"The same term would certainly apply to Whole Foods itself right now," Fortune writes. "The company is in a period of dissonance, one that makes the attacks on its Responsibly Grown program seem like small organic purple potatoes. First came accusations, in June, that its stores overcharged customers in New York City—which prompted investor lawsuits as well. Then, in August, comedian John Oliver spent three minutes on HBO’s Last Week Tonight mocking Whole Foods for selling bottled water laced with asparagus stalks … for $5.99. The company said it was a mistake, but the episode gave yet more currency to the notion that the chain dubbed 'Whole Paycheck' was out of touch."

There is a difference, the story suggests, between being a dissonant influence and being out of touch ... and current events suggest that Mackey's philosophy of "Conscious Capitalism" could be severely tested.

Fascinating piece ... and you can read it here.

Published on: August 24, 2015

Over the weekend, the Washington Post did comparison shopping at Amazon, Walmart's online site, and Jet, ordering the same three branded items in identical package sizes, placing the orders within less than 30 minutes of each other.

The reporter notes that "the order included two household staples: A bottle of ibuprofen and a package of AAA batteries. But I also wanted to see how the retailers would do with something that wasn't exactly an everyday item, so I included a Spalding Tip-In basketball in each order ... Of course, this is just one order, and thus a limited snapshot. But it nevertheless provides some insight into these online retailers' strengths and weaknesses."

The conclusion:

"It appears that Amazon remains the one to beat when it comes to speed ... Wal-Mart was a bit slower but reliable. Both have easy-to-use Web sites and vast enough merchandise that you can usually easily find what you're looking for.

"Jet still seems to be experiencing growing pains, but its victory on price means it should not be counted out. Even if shoppers aren't pinching their pennies as they were during the recession, they remain deeply conscious of whether they're getting a good deal. If Jet can regularly make people feel like they're getting the best price, it may yet earn a loyal following, buying time to work out its kinks."

You can read the entire play-by-play here.

Published on: August 24, 2015

Crain's Chicago Business has a story about how "a growing number of chefs and restaurants around Chicago are rolling out pastas, breads, sausages and sauces of all types to sell. But where there's opportunity to boost revenue and name recognition, there's risk."

"Although chefs have a built-in advantage here—after all, they've spent months, if not years, developing and perfecting recipes in their restaurants—producing them for a retail customer and in large volume is a different animal," Crain's writes.

"First they must have a tastier chip, a tangier sauce, a superior sausage to others in the market. Then they've got to find a commercial-scale producer to make, package and distribute it, which often involves months of trial and error. From there, they must get it on store shelves at a price consumers are willing to pay. And they must do all of it at the same quality as what comes out of a restaurant's kitchen. Any misstep in the process could be fatal."

An example of how it can work well is Rick Bayless' Frontera salsas, which have been around for 16 years; an example of how it can fail is Wolfgang Puck's frozen pizzas, which "once were in virtually every high-end grocer. Now they have disappeared from the market."

Published on: August 24, 2015

• The Arkansas Democrat Gazette reports that Walmart plans to cut back on its opening plans for Neighborhood Market format stores by as much as 20 percent, arguing that it needs to focus more on quality than quantity.

"We have a better understanding of what customers value most, from the choice of location, to the size of the box, to the product offerings," Wal-Mart U.S. CEO Greg Foran said last week. "Based on these learnings, we've decided not to pursue a number of potential locations, as they would not provide the type of quality experience customers expect from a Neighborhood Market. We are thoughtfully evaluating every decision and use of company resources as we go through the back half of the year. But we are confident in the direction we are headed."

However, the story quotes Edward Jones retail analyst Brian Yarbrough as saying that "I think there's an argument to be made that Neighborhood Markets are cannibalizing supercenters ... I think they were nervous about some of the markets they were getting into, how it could affect other stores and they're wanting to take a look at how to grow long-term. Can you afford to have one format performing so well at the expense of another?"


• Fortune reports that Walmart CEO Doug McMillon announced via his personal Instagram account on Friday that the company and its charitable foundation will donate $25 million to support global disaster response efforts. The donation was keyed to the upcoming 10th anniversary of Hurricane Katrina, which devastated the New Orleans area. At the time, Walmart was on the front lines of the private sector response to the natural disaster.

Beyond the the donation, Fortune writes, "McMillon’s decision to use Instagram to announce the philanthropic gift reflects his growing closeness to the social media company, which is owned by Facebook. Last September, Instagram co-founder Kevin Systrom joined Walmart’s board, and McMillon began posting photos to his personal Instagram account in June."

Published on: August 24, 2015

• The Financial Times reports that analysts believe that Amazon Fresh "is gearing up to launch in Britain, possibly as early as this year.

"Amazon will not confirm whether Fresh will be crossing the Atlantic. But the prospect is striking fear into the hearts of British grocers, which are already engaged in a vicious price war." The story notes that "Amazon’s willingness to tolerate wafer thin margins could make it a dangerous competitor."


• Amazon has responded to a lawsuit brought against it by Angie's List by suggesting that its methods of developing a competitive product - Amazon Local - "are customary in the home services 'deals' industry and wholly appropriate."

The Indianapolis Business Journal reports that when Angie's List filed the suit, it charged that "two dozen Amazon employees who Angie’s List charges signed up as members ... violated the terms of their membership agreements, which restrict use of the information to personal purchases." Those employees, the suit says, used information gleaned from their Angie's List experience to make Amazon's offering more competitive and compelling.

In fact, Amazon has countered the charges by asking that Angie's List be compelled to provide computer records detailing the extent to which it has used information gathered on the Amazon Local site to structure more competitive deals on its site.

Published on: August 24, 2015

• The Wall Street Journal reports that fast feeder Chipotle plans a 4,000-employee hiring binge on September 9 that will grow its workforce by almost seven percent, "seeking to counter a tightening market for restaurant labor by dangling the possibility that high-performing recruits could someday earn six-figure salaries and stock in the burrito chain."

It is, the Journal writes, "one of the starkest examples yet of restaurant chains stepping up recruitment efforts as the industry struggles to attract and retain employees. A stronger economy, rising demand for restaurant meals and a string of minimum-wage increases imposed by cities and states have shrunk the pool of available workers."

Published on: August 24, 2015

• Kings Food Markets announced three promotions last week.

Arthur Goncalves, its Director of Seafood Sales and Merchandising has been promoted to Vice President, Produce and Floral; Scott Zoeller, Vice President of Deli Sales and Merchandising, has been promoted to Vice President of Deli, Meat and Seafood; and Rick Michener, Director of In-Store Prepared Foods and Chef Operations, has been promoted to Director of Seafood Sales and Merchandising.


• The Wall Street Journal reports that Smithfield Foods has named Kenneth Sullivan, the company's CFO, to be the company's COO, a newly created position.

At the same time, the company hired Glenn Nunziata, a partner at Ernst & Young, to succeed Sullivan as CFO.

Published on: August 24, 2015

I wrote last week that it is hard to imagine that Amazon could ever be broken up for antitrust reasons, as is being suggested by a group of authors upset with the power that the e-tailer has in the publishing business. But MNB user Leo Martineau responded:

Nobody ever thought that Bell Telephone could be broken up but we witnessed the birth of the baby Bells, so anything is possible.




Responding to last week's piece about Netflix pressured to provide the same family leave benefits to warehouse workers as it is offering office and tech employees, one MNB user wrote:

I was trained many years ago as it related to HR- “that you cannot do for one what you cannot do for all”.  Certainly compensation and incentives may vary with experience and expertise, but as in this case you are destined to alienate a segment of the workforce when you designate a privileged class.




On another subject, one MNB reader wrote:

I saw your article regarding your son’s work requiring him to be on-call.

When I was in college (1986-1990) I worked my junior and senior year at a women’s clothing store called Fashion Gal.  I worked mostly nights and weekends—probably 20 hours a week total.  We would have usually 1-3 days where we would be on call and have to call in an hour before the on call shift.  I hated it as it was impossible to make any other plans for the evening until you called in at 5pm to see if you needed to be there at 6pm.  I’m surprised this practice still exists.

On a completely different, and selfish note, I noticed you referenced your son getting into sports broadcasting.  My son is 14 and obsessed with the NFL.  He thinks he wants to be a sports broadcaster someday.  Any words of wisdom such as classes to focus on, jobs/internships to go after when he’s older, degrees to pursue, extracurricular activities?  Any feedback would be very appreciated!

I have three words of wisdom:

Internships. Internships. Internships.

Make sure your kid goes to a college where the communications department has an aggressive approach to internships with local media outlets, including a post-graduation placement program. It is the single most important thing he can do ... and it is an area that many colleges are incredibly lax about. (This doesn't just go for sports broadcasting, by the way ... it goes for every field of endeavor.)

From another reader, about the same on-call practice:

I have a great job at nowhere near a minimum wage, so I am lucky, but fair is fair.  Knowing about that labor practice also puts that company on my “Cold Day in Hell” list.  And any other I so hear about.  Well, put, Kevin, just cause you can, doesn’t mean you should.  What happened to social responsibility?   Did they selectively define that?  I googled just to see what kind of social hype American Eagle has about their homage paid to social responsibility. They devote a lot of lip service to community and the like in their AEO Better World.

AEO, that better world and your contribution to it starts at home, folks.  Take note or wither.

From another reader:

I don’t understand having employees “be on call” in retail (for emergency services, sure, but not retail).  In a former life, I spent 15 years working in fast food.  I never worked anywhere that required being on call.  What was required was that management pay attention to trends, times, and business patterns.  You wrote a schedule based on your best estimate of how many employees you would need for certain days and times of day.  You forecasted.

Was your forecast 100% accurate?  Heck no.  If you scheduled too many people and business was a bit slower than expected, you usually had a volunteer or two who were willing to leave early.  Or, you’d have them do some extra cleaning – do a detailed clean on the restrooms for example.  If you didn’t have enough people, the manager would have to come out of the office and work the front line with everyone else.  Everyone would have to hustle just a bit faster.  On rare occasion, you’d get on the phone and see if an off-duty employee was available to come in and help.  But they weren’t sitting at home waiting for a phone call.

So, how well does American Eagle know their customers and their shopping patterns?  Is it possible that today’s consumers are that unpredictable?  Or is “on call” just an easy way to write a schedule?

Lazy management, I think, is the culprit.

And from yet another reader:

I had heard about the practice of employees being on call without any sort of compensation for doing so.  No surprise that when you treat your employees like dirt they are going to return the favor by not showing up consistently - thus the need for on call back ups.  I worked similar retail jobs while I was in college and if I was unexpectedly called in, I most likely would have been boozed up.  That would have solved that problem quickly.




On another subject, from another reader:

I laugh when I see the non-GMO seal on olive oil and blueberries since neither have ever been GMO.  It’s an interesting ethical issue.  We don’t want to  make people think that GMOs are unsafe, and yet consumers are confused and assume that the seedless watermelon or the purple carrot must be GMO (they are not!)  Perhaps we should take a cue from nutrition claims.  Over twenty years ago regulators were concerned about proliferating “Fat Free” claims on foods that never had fat.  Think of a “fat free” sticker on a branded banana.  Instead, the brand can say something like:  “This banana, like all bananas, is a fat free food”.  Clunky, but gets the message across and would reduce the tendency for marketers to plaster “non-GMO” on foods that could not possibly be GMO.

MNB reader Ken Wagar chimed in:

Probably no way around it today but it is giving in to often non science based paranoia. Gluten Free, GMO free, Fat Free, Sugar free, No artificial ingredients, soy free, tree nut free, peanut free, dairy free, soy free, pesticide free, low sodium, no added sugar, natural, organic, free range, gestation pens not used, eggs from cage free buildings, no listeria as far as we know, cook to internal temp of 165, no artificial colors or flavors…….soon the label will have no space for anything else. That's a lot to put on a label for an apple or a banana and a million other items.

I hope they leave an aisle or section in the store for "food that tastes great."

And another:

One of the watch-outs in labeling requirements from past experience is the tendency for companies to simply label items in a way that ensures they are covered from a legal standpoint.  As a result, the consumer often does not have better information.  For example, it is likely that companies will label GMO products with something like “May Contain GMOs” just to be sure they are always in compliance.  The companies will do this to legally cover themselves when it is impossible to prevent with 100% assurance that no GMOs reach the processed products.  To do it any other way will open them up to massive lawsuits should something go wrong sometime in the future.  In labeling requirements, unintended consequences tend to be the rule.

And another:

Strangely enough (or maybe not) products labeled No GMOs that do not have a GMO counterpart could get the FDA to act. As you point out “gluten-free” claims appear on items that do not inherently have gluten such as vegetables. Those “gluten free” labels should also in smaller print have a statement that says something like no tomatoes contain gluten. I could see the FDA saying you can label No GMO’s but if no carrots are genetically modified than you also must state that no GMO carrots exist.