business news in context, analysis with attitude

Published on: November 28, 2016

by Kevin Coupe

Marketplace, on National Public Radio, had an interesting story the other day about a retailer that is dealing with changing consumer habits by changing the way it charges customers.

At the typical coffee shop, the story notes, people often seem to spend a lot of time reading, chatting, surfing the web and turning the shops into an extension of their offices or homes - while maybe buying one coffee (albeit often an expensive one). This is sort of what Starbucks had in mind when it built an entire chain around the "third place" strategy, though it may not have occurred to the company's leadership that some people would stay for quite so long or spend so little.

In Brooklyn, New York, however, one coffee shop has found a new way. There, the Glass Hour Cafe "feels more like somebody’s living room than a coffee shop. Walking around, you see a couch, some bean bag chairs. What you won’t see at Glass Hour: a kitchen or even a cappuccino machine. You serve yourself from a simple drip coffee pot. The food? A few humble granola bars and chocolates.

"The owners, who opened it in August, call it an anti-café. Instead of shelling out for food and drink, customers pay for the time they spend - 10 cents a minute or $6 an hour. Which means no one will judge you for sitting here all day long."

To be clear, "Glass Hour isn’t profitable yet, so the founders are still waiting to see if there’s a market in America and Brooklyn, land of coffee shops, for their imported idea."

But I think the idea - which seems like it was positively made to be tested in Brooklyn - illustrates a larger notion. Companies cannot and should not always do things the same old way, just because they've always done them that way. in fact, in the current competitive environment, that's probably the best reason to abandon old strategies and tactics. The odds are pretty good that they're simply not up to the task anymore.

A friend of mine, Beau Fraser, co-wrote a book several years ago that focused on this, and the title vividly illustrates the book's premise: "Death To All Sacred Cows: How Successful Business People Put The Old Rules Out To Pasture." (You can find it on Amazon here. I recommend it heartily.)

I have no idea if the Glass Hour will be successful or not, but I do think the counter-intuitive exercise is worth undertaking. For everybody.

It can be an Eye-Opener.

Published on: November 28, 2016

The Washington Post reports on National Retail Federation (NRF) sales figures for the just-passed holiday weekend, saying that "about 154 million shoppers made purchases at stores or on e-commerce sites this holiday weekend ... a bump up from the 151 million people who last year participated in the annual barrage of Black Friday deals."

At the same time, the shift to e-commerce away from bricks-and-mortar stores continues. "This year," the Post writes, "about 108.5 million people shopped online over the holiday season, compared with 103 million last year. Meanwhile, the number of people who shopped in stores fell to 99.1 million from 101 million last year."

However, the Post also notes that "average spending per person was down to $289.19 from $299.60 in 2015," which it said was probably "baked into" retailer expectations. The Post also notes that this trend "could prove a troublesome dynamic for them if ultra-deep discounts end up being needed all season long to get people shopping."

NRF president/CEO Matthew Shay said in a prepared statement that "in fact, over one third of shoppers said 100% of their purchases were on sale."

The Wall Street Journal writes that "the shift highlights the struggle traditional retailers face as they strive to attract foot traffic into their brick-and-mortar locations with deep promotions, friendly staff and exclusive products, while investing billions to become e-commerce experts to fend off Amazon.com Inc. and attract consumers who are more willing to use their mobile phones to snag deals."

Mobile also played a bigger role this year, according to reports. The Wall Street Journal writes that "Amazon said sales from mobile phones on this year’s Black Friday beat last year’s Cyber Monday and Black Friday, and exceeded such sales on Thanksgiving to become one of the biggest mobile shopping days on its site ... Wal-Mart Stores Inc., the world’s largest retailer by revenue, said 60% of Black Friday online orders came through mobile devices, up from 50% last year. According to Adobe, mobile phones accounted for 55% of website traffic on Black Friday, and 36% of sales, up from 33% of sales in 2015 and 26% of sales in 2014."

Today is what is referred to as Cyber Monday, which is when many e-commerce sites launch their most aggressive holiday promotions. "NRF’s survey found that about 122 million people plan to shop on Cyber Monday, up from 121 million last year," the story says.

Published on: November 28, 2016

Bloomberg reports that Visa Inc. has "revised rules for merchants using its new chip technology for debit-card transactions after some retailers claimed the requirements inhibited competition." According to the story, "Merchants won’t be required to ask the cardholder to choose which network processes the debit transaction, Visa said Tuesday in a statement. Stores can also continue to prompt cardholders to enter a personal identification number, or PIN, on in-person transactions."

The story says that "retailers have complained that the fees they’re charged for debit payments have climbed in the aftermath of the US transition to chip-embedded, or EMV, cards. Unlike magnetic-strip cards, whose codes can be copied and stored by hackers for later use, EMV technology generates distinct codes for each transaction."

The changes reflect "'new guidance recently issued from the Federal Reserve and address a Federal Trade Commission inquiry,' Visa said in the statement."

Leslie Sarasin, president/CEO of the Food Marketing Institute (FMI), issued a statement in response to the changes, saying that "FMI is pleased to see Visa change its rules on the confusing EMV debit screens at checkout," but added, "While Visa’s actions to change its rules to comply with the law are a significant step in the right direction, it will take some time for grocers who have the confusing screens to replace them. Therefore, FMI requests that Visa prevent additional exposure to liability while merchants revise their systems to ensure customers have the safest, most secure and most efficient transactions."

Published on: November 28, 2016

The Los Angeles Times reports that Chipotle, still trying to recover from a series of food safety problems that threw its business into turmoil, now is being sued by three consumers who say that it has been making fraudulent nutritional claims.

At issue is a chorizo burrito that Chipotle was advertising in the Los Angeles area has being just 300 calories. According to the story, the men "thought they had entered burrito heaven," but then, having consumed the burritos - which included chorizo, white rice, black beans, tomato salsa and cheese - they felt excessively full and questioned the claim.

The Times writes that "although the lawsuit claims the 300-calorie claim is a lie, it does not provide an alternate calorie count for the burrito." However, "according to the nutrition calculator on Chipotle’s website, a burrito with chorizo, white rice, black beans, tomato salsa and cheese would pack 1,055 calories. A serving of chorizo alone is 300 calories, according to the website.

"The lawsuit contends that 'consumers are lulled into a false belief that the items are healthier than they really are, and thereby encouraging repeat patronage by consumers who are concerned about the nutritional values of the food they eat'."

Chipotle says that it does its best to be transparent, and dismissed the lawsuit as "nothing more than allegations and is proof of nothing.”

Published on: November 28, 2016

Good piece in the Washington Post about two relevant questions that are worth considering when thinking about why Americans don;t consume healthier food.

"The first," the Post writes, "is empirical: Is healthful food more expensive? The second is behavioral: Is cost what stands between people and a better diet?"

While cost is an important factor, it may not be the only factor ... and there are other things that consumers are thinking about - and retailers and suppliers ought to strategize about - when it comes to healthier diets.

You can read it here.

Published on: November 28, 2016

The Wall Street Journal has a story about how some video rental stores continue to buck the streaming video trend, offering options to consumers that they can't get elsewhere.

"Owners and customers of the more than 100 independent and nonprofit video stores still kicking throughout the U.S., often in places with strong locavore food scenes, say the stores offer variety film lovers can’t find elsewhere," the Journal writes. "It might be a deep roster of anime films by Hayao Miyazaki, or one of Dario Argento ’s more obscure grindhouse efforts. They allow a browsing experience impossible online and serve as libraries for movies and TV shows that will likely never transfer to an online format."

Published on: November 28, 2016

• GeekWire reports that Amazon is considering making an $1 billion buyout offer for Souq.com, described as "an 11-year-old e-commerce marketplace based in the Middle East ... An acquisition of Souq.com, with nearly two million products for sale on the marketplace across categories such as books, electronics, toys and home products, would supercharge Amazon’s expansion in the Middle East."

The story says that Souq was originally interested in selling just 30 percent of the company, but that Amazon's preference is for all or nothing all.

Two other points from the GeekWire story: that "Souq is facing new competition from a Saudi Arabia-backed company by the name of Noon, which earlier this month raised $1 billion" and "plans to launch in January with 20 million products," and that a billion dollar purchase of the company "would be one of the largest deals for Amazon, which historically has spurned large acquisitions in favor of organic growth."

Published on: November 28, 2016

• The Seattle Times reports that a federal judge over the weekend ordered pilots at the Air Transport Services Group (ATSG) to go back to work, issuing a temporary restraining order to end a strike that started last Tuesday.

The reason this is important? ATSG, the story notes, "hauls packages for Amazon.com and DHL Worldwide Express," and the strike, had it continued, "threatened to disrupt holiday deliveries." Amazon was leasing the ATSG fleet as a way of coping with expected high volumes during the end-of-year holiday shopping season.

Published on: November 28, 2016

Three notable deaths since MNB took off for the Thanksgiving weekend...

• Fidel Castro, the former president of Cuba who helped to overthrow a dictator there only to become one himself, turning Cuba into a Socialist state while oppressing his people and suppressing all dissent, passed away late Friday night. He was 90.

• Florence Henderson, who gained national fame and enduring affection that transcended generations as the mother on "The Brady Bunch" TV series, passed away on Thanksgiving day from heart failure. She was 82.

• Ron Glass, who became best known to one generation of viewers as one of the detectives in the "Barney Miller" TV series, and then became part of the cult TV series "Firefly" ensemble, as Derrial Book, a shepherd and spiritual advisor, passed away on Friday. The cause was respiratory failure. He was 71.

Published on: November 28, 2016

Got the following email from MNB reader David Fischer:

You've written a number of stories about Target's grocery efforts, here's an observation that I made this last weekend.

On Thanksgiving Eve, I went to Fred Meyer to do some last minute grocery shopping. The store was packed with people as you would expect on the busiest grocery shopping day of the year.

Afterwards I went to Target to pick up some personal items. I like going to Target for those items since they have a better selection and lower prices than Fred Meyer. I wandered over to the grocery section, which was nearly empty. I looked around and realized that you could buy anything you needed for a thanksgiving meal at Target. So it got me thinking, why are so few people buying their food at Target?

Here's the revelation I had. Target's problem isn't so much selection, rather it's perception. Yes, their produce selection needs help. And they don't carry much in the way of meat but they have enough for most people. Not having a deli or bakery probably isn't a deal killer. The problem is that they shove the department to the far end of the store. Out of sight, out of mind. It sends a message that grocery is an afterthought at Target.

So imagine if you were to walk into Target and the first thing you see is the food department with a nice produce section to entice you. By flipping apparel and food, Target might just be able to turnaround the department. Hiring the most brilliant grocery merchant will probably have little impact when visually food seems irrelevant at Target. It's at least worth a test.




Last week, MNB took note of a New York Times report that federal judge Amos L. Mazzant III of the Eastern District of Texas has ruled that the Obama administration's Department of Labor "exceeded its authority" when it expanded "by millions the number of workers who would be eligible for time-and-a-half overtime pay," raising the salary limit to salary limit below which workers automatically qualified for overtime pay to $47,476 from $23,660. Mazzant issued a nationwide temporary injunction preventing implementation of the rule, and the Times writes that it seems likely that he will strike down the rule permanently once he has considered the case on its merits."

I commented, in part:

I'm not sure what the number should be, but it does occur to me that the previous $23,660 ceiling is just three grand higher than the national poverty level for a three-person household. My point being that $23,660 doesn't go very far these days, and that when people have to work overtime for that sort of salary without any extra pay, it doesn't seem very fair, and certainly creates an environment in which employers can exploit employees. As to whether the Labor Department should be making such changes ... well, I guess this a decision up to the courts.

One MNB user responded:

I agree that it is unbelievably unfair that workers are expected to work overtime for such little compensation.  I’ve read many articles on this and have another take on the many companies that have come forward to say that their labor costs will go up for a combined millions of workers:  You have a business model that requires and exploits employees to work overtime without compensation.  This is morally wrong and I hope the law is changed.  How could this be legal?

The answer, I think, is that one man's exploitation is another man's end-of-year bonus for keeping labor costs down.




Got the following email from MNB reader Michael Eardley:

My wife and I went to see Arrival after your review, what an awesome movie! Still attempting to think it all out and I am sure I will be watching it again numerous times in the future.

Outstanding direction and filming!

Reminded me of the theme running thru a number of Kurt Vonnegut’s books years ago (you and I were both In Catholic grade/high school). He wrote about the visitors to the earth who described humans way of looking at time as “looking at life thru a pipe” only seeing one piece of life instead of looking it in totality. He was such a great writer/author.

I'd forgotten that line from "Slaughterhouse-Five." You're right. It is a good one. And I fear that too many of us these days are looking at the world through a pipe, seeing only what we want to see, assuming that the opinions with which we agree are the only legitimate opinions out there.

This is how cultures die.

Published on: November 28, 2016

In Week Twelve of the National Football League...

Vikings 13
Lions 16

Washington 26
Cowboys 31

Steelers 28
Colts 7

Rams 21
Saints 49

Titans 27
Bears 21

Cardinals 19
Falcons 38

NY Giants 27
Browns 13

Chargers 21
Texans 13

Jaguars 21
Bills 28

Bengals 14
Ravens 19

49ers 24
Dolphins 31

Seahawks 5
Buccaneers 14

Patriots 22
Jets 17

Panthers 32
Raiders 35

Chiefs 30
Broncos 27