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Wednesday, August 21, 2019

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Wednesday Eye-Opener: Conscience-Based Marketing


Content Guy’s Note: Just this week, the Business Roundtable released a statement in which its members - CEOs from virtually every major US corporation - argued that shareholder returns cannot and should not be the only metric for a company’s success, and that businesses have broader societal, cultural, environmental and political responsibilities that must come into play. In other words, values can and should mean as much as value. … which has been a premise that we’ve subscribed to for a long time here on MNB.

The timing was ironic, since I was looking forward this week to introducing you to Jennifer Johnson, the CEO of Trestle, a Portland, Oregon-based company, with whom I had a fascinating conversation several weeks ago. Jennifer wowed me with her vision of a company that can make it easier for consumers to buy from companies who operate with our most important ethical values, and can help companies establish their bona fides when it comes to values and matters of conscience - all of which I think will be increasingly important to the construction of sustainable business models going forward.

In other words, she was playing my song … and I’m happy to provide her with a forum here on MNB in which she can talk about Trestle, her startup business.


KC: Let’s start by putting Trestle into context - your basic premise seems to be based on a belief that a large percentage of the consuming public is interested in values in addition to value, and that some percentage of brands believe that it serves their best interests - from both business and altruistic perspectives -  to invest in appropriate values-oriented initiatives. Fair? And how did your due diligence quantify and qualify these interests?

Jennifer Johnson:
This is a great starting point - speaking to the current landscape of how consumers are making decisions or want to be able to make decisions and how brands are conducting their businesses around that. I’ll break it down by what we know about consumers and brands.

Consumers. There is a growing market of concerned consumers who are beginning to ask questions about where/how and by whom/what their products are made.  The first industry to really experience this questioning was the food industry over the last couple decades. Consumers developed a new curiosity about what’s going into their bodies, how it’s impacting their health and their children’s health, and desiring clarity within the supply chain. As a response, we’ve seen movement towards food labeling that includes ingredient information, certification information, and indicators of where the product was produced. Beauty/Skincare and apparel are also beginning to experience that same curious and concerned consumer.

Three quarters of consumers (not just millennials) say they would actually spend more money on ethically and sustainably produced goods and believe companies should be taking actions to improve the environment. Fortunately for us, there has been extensive research around this movement towards preferring products that we as consumers can feel ethically connected to.

But we didn’t just leave it at that. We conducted our own research as well including behavioral studies in addition to surveys to get a better idea about how consumers would actually behave when faced with the concepts of value and values (as you put it) in decision-making.  Our results showed that people SAY they prioritize properties such as price, shipping, return policy, and reviews. However, in the behavioral studies, we found that the majority of people were willing to spend between 10-15% more on a values*-aligned product, were willing to wait longer for it to arrive, but they were not willing to pay for shipping. We found this humorous and are keenly aware of the large market force that has taught us that we “no longer pay for shipping.”

Brands. To start, there are, of course, companies that are maintaining the status quo - that is, singularly focused on using their business as a vehicle for driving value for shareholders.

But more and more we’re seeing companies respond to consumer/media demands by making operational changes that align with ethical preferences. And we’re seeing several trends here:

• Legacy brands are genuinely or pretending to make changes. (We’ll come back to this.)

• Disruptor brands are being started by Founding teams who are passionate about using business as a means to address social issues. 

• There’s indication that brands are very slowly moving towards becoming more transparent.

• Greenwashing is a huge problem. In essence, it is a marketing tactic used by companies to make a consumer believe they are more environmentally-friendly than they actually are. A simple Google image search gives plenty of examples. As companies are learning that consumers care more and more about how their products are made, they’re attempting to market to them ethical practices - and sometimes honestly and sometimes deceivingly so.  The unfortunate result of this is a consumer lack of trust, particularly when ethically-derived claims are made.

Now, as we have studied the disruptor brands - the newer emerging businesses that build their business models around their DNA of addressing a social/environmental issue, we have consistently seen that while some brands speak boldly about their ethical practices (e.g. Solo Eyewear, Patagonia, Tonle), some brands are less inclined to market or communicate about those practices (examples: Warby Parker, Fully, Black Diamond).

Brands we have spent time understanding have expressed frustrations around: not being able to communicate the ethical practices they do due to distrust in the consumer mindset, claims made by competitors that do not accurately represent their actual practices, and a genuine uncertainty about how to connect with the values of consumers. 

They don’t have a perfect solution. But, they certainly do wish they could use their real ethical-based practices to connect better with consumers.

KC: As easily as you can - since I’m not all that smart - can you describe the technology that you are employing in developing the Trestle network?

JJ:
The myTrestle Button is an add on for your Chrome Browser (and soon be available for Firefox and Opera). With it installed, when you land on the website of a company that we have analyzed, it will pop up a notification showing you how compatible a company is for you and the values you’d be supporting if you buy from them. It also works when you land on a company’s product on Amazon and other marketplaces.

Because we believe that everyone has a unique value profile - meaning we all have different definitions of what is ethical and most important to us, the compatibility score is personalized to each person. As you add the myTrestle Button, you’ll tell it what values are most important to you, and from them on, the myTrestle Score you’ll see is according to your personalized preferences. A myTrestle score that you see for a company may be different than the score a friend sees when looking at the same company.

KC: What are the basic issues that you are evaluating in terms of social responsibility and values?  How are you doing and certifying the research? Are there additional categories that you’d like to include as times goes on?  (Like women-owned and operated businesses, for example?)

JJ:
Fortunately for us, there are organizations whose sole purpose is to evaluate the claims and operations of a company - watchdog organizations, certification boards, auditing boards. We aggregate that data, along with reports and policies provided by the company, to prove a full picture about how a company operates. 

Right now, we have data available on how companies operate across the following values - environment, fair labor, locally made, social impact, cruelty free, natural, and transparency.

We chose these values specifically to start out because, for the most part, they are the ones that both consumers and brands are talking about. They’re the hot topics right now. However, we recognize that it doesn’t cover the breadth nor the depth of how humans think and operate. We intend to address both over time, according to what the market demands. We anticipate adding additional values people care about as well as further define and the ones we already quantify.

We are currently collecting data on factors such as women-owned business (shows up in Social Impact), diversity, treatment/benefits of workers, and will be deploying that in more depth as we continue to add features to our tools.

KC: Explain your business model - you are developing a for-profit business here.  How do you make money?

JJ:
Yes, we are a for-profit business! A driving factor for our hypothesis is that for-profit companies can have a solid bottom line, change systems, address social issues, and operate with transparency and a higher set of ethics. So we intend to operate exactly the same.

As of today, we are providing free tools and are not yet collecting revenue. We are hyper-focused on first creating a product that provides consumers exceptional value in an effort to find a solid product/market fit and grow our user-base.

The key challenge to monetizing this kind of information is being able to provide value to brands, yet keep the data pure, transparent, accurate, fresh, and unadulterated. We plan on creating a subscription style membership where interested parties like brands, institutions, researchers, and individuals can have access to additional reports and features. As well as a membership option for brands who will be able to link their individual SKUs to their brand’s data. Ultimately, we anticipate this to be a marketing platform for brands who are operating with higher ethical standards so that they can use their values as a competitive advantage and find consumers interested in not only finding great products, but also who would rather support brands who are doing more.

KC: When a business works with you, how do you avoid being co-opted and putting out information that may not be accurate?  And how do you persuade people that you the requisite levels of third-party objectivity? (I know you are working hard not to assign labels like “good” and “bad,” but it does seem to me that there are implications of judgements being made here.)

JJ:
As we stated earlier, greenwashing is a serious problem as it confuses consumers and misrepresents operations. One of the benefits we see Trestle providing is combating greenwashing by providing source documentation that demonstrates claims.  Primarily we use reports and documents provided by third-party validators/auditors that are not incentivized to misrepresent brand operations.

However, where there is not sufficient information provided by third-party, we include claims made by a company that are relevant and specific such that, if proven false, would breach misleading advertising laws. We always source back to the document/claim made so consumers have a direct pathway to see where we got information with absolute transparency.  Because we are not an auditing board, we only collect information that is made public. For example, if a brand e-mails us and shares insider information about policies or practices that are not made public, we do not include them until they are made public. Transparency to consumers is key.

Because we haven’t determined an ethical standard that we weigh companies against but instead determine a compatibility score between a company and a consumer, we do not have inherent incentive to increase ratings for brands. If anything, we create incentive for brands to be more transparent so that their practices mean more and weigh better for consumers.

KC: Why are you choosing the apparel business as your first point of entry?  At one point do you think that you’ll be looking into the food business?

JJ:
Apparel is one of the industries we are launching with.

We actually started by analyzing 50 companies from the outdoor industry. We started here because there are industry leaders in sustainability, labor practices, and social impact AND consumers who are concerned with outdoor activities, particularly those we know in the Pacific Northwest, highly value these practices - especially environmental sustainability- as consumers. It seemed like a natural fit.

However, as of January this year, we began analyzing companies people care about most. So for the past 8 months, we have been analyzing based on request or suggestion. In fact, one of the major features of both our technologies is the ability for people to request analysis of a brand they’re curious about.

So the makeup of our analysis has followed market trends and demands and we will continue to operate that way.

The industries of food and skincare - that is anything that goes in/on the body where ingredients are huge factors for consumers, which require a high degree of scientific knowledge as it relates to reactions/health are massive beasts of their own.  There is a lot of work being done in standardizing data in company operations (e.g. environmental impact, treatment of humans, etc) and this is where we’re really focusing the majority of our efforts. As industries standardize certifications such as organic or ingredient lists and effects of those ingredients, we will be able to move into them.

KC: You’ve just launched.  What’s your ramp-up timeline?

JJ:
We HAVE launched. And we couldn’t be more impressed with the market response. Over the next 6 months, our major focus will be on…

• Tweaking and adding features to the myTrestle Button to provide more value to consumers that’s meaningful in their decision-making around what brands they want to support with their dollars.

• Sharpening our analysis and quantification process by engaging Subject Matter Experts in the value areas we collect.

• Adding more companies to our database (many are self-selecting in).

• Connecting with Influencers, Bloggers, Podcasters, Authors, and Media to share the story of Trestle and the myTrestle Button.

This is just the beginning and we have a lot more story to write.

Another note from the Content Guy: If one accepts the premise that socially conscious, values-oriented, purpose-driven companies will have a differential advantage in the marketplace with a percentage of customers, then the notion of a website that can evaluate claims and create a level of transparency about them seems like it is a natural. We talk a lot here about what retail will look like tomorrow, and this is certainly one vision.

To learn more about Trestle, click here. Play with it. And you can reach Jennifer Johnson to provide feedback or ask questions at jennifer@mytrestle.com .

Unilever Looks To Build More Purpose-Driven Brands

Bloomberg Businessweek has a story about how Unilever - selling brands that its former CEO, Paul Polman, affiliated with a variety of social causes - is continuing that approach, with current CEO Alan Jope “raising the volume on the message.”

The brands include everything from Dove soap to Hellmann’s mayonnaise to Ben & Jerry’s ice cream, and Jope reportedly “has ordered executives to assign a clear, specific mission to each. ‘We are committed to all our brands having a purpose - we will give them time to identify what this is and how they can take meaningful action,’ he says.”

In fact, Jope says, “If a brand can’t find its purpose, we may sell it.”

Bloomberg writes that “the new CEO says that aligning each brand with a specific concern, rather than a wider abstraction of purpose at the parent company, will reinforce credibility. The 28 brands Unilever counts as ‘purposeful’ contributed almost two-thirds of revenue and drove 75% of sales growth in the first half of 2019.”

KC's View: Sort of ironic that this story pops at the same time as we have our interview with Trestle’s Jennifer Johnson, and the same week as the Business Roundtable declares that corporations have to embrace responsibilities beyond just shareholder returns.

The Bloomberg story makes the point that this is a broadening trend: “Shoppers are turning increasingly to products with images that extend beyond generating shareholder value, and shareholders are asking companies to consider their wider raison d’être.”

And, it says, “Brand consultant Kantar expects purposeful brands to grow at twice the rate of those without any higher-order societal aim.”

Sounds like good business to me.

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From GMDC's Retail Tomorrow...

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McDonald’s Opens An Only-To-Go Format

Business Insider reports that McDonald’s has opened a restaurant in London that only serves food-to-go - there are no tables or seats for patrons. There also aren’t any people to take orders, with those jobs totally taken by electronic touchscreens, and the menu is also basic, offering only things like Big Macs, fries, and Chicken McNuggets.

The stripped-down format may be just the first in a chain of takeout-only stores planned by McDonald’s.

The Business Insider story says that “as technology becomes more integrated into our everyday lives, businesses are having to rapidly adapt to consumer demand for speed and efficiency,” and suggests that this new McDonald’s is an example of one adaptation.

KC's View: My first thought was that it was sort of amazing that this is the first of its kind for McDonald’s. (In fact, there are airport McDonald’s that are all take-out … but I guess that’s a little different.)

I think it makes a lot of sense to open stores that isolate specific offerings in places where it makes sense. More retailers should try it.

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Walmart Sues Tesla Over Solar Panel Fires

The New York Times reports that Walmart is suing Tesla, charging that at least seven rooftop fires at its stores were caused by solar panels installed by Tesla.

According to the story, “The complaint asserted that Tesla engaged in ‘widespread, systemic negligence’ and ‘failed to abide by prudent industry practices in installing, operating and maintaining its solar systems.’ It said the panels were installed on the roofs of more than 200 of the 5,000 Walmart locations in the United States.”

The Times writes that “the panels were installed by Tesla’s solar business, which was absorbed when the electric-car maker acquired SolarCity in 2016. The Walmart complaint asserted that the company ‘adopted an ill-considered business model that required it to install solar panel systems haphazardly and as quickly as possible in order to turn a profit’.”

KC's View: Who knew that Tesla made and installed solar panels? But I guess that this is sort of the point of the suit - that it was a business afterthought, which meant that it didn’t have the kind of quality control that one might’ve expected.

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CMO Shane Sampson Stepping Down At Albertsons

Albertsons announced yesterday that “Shane Sampson, Executive Vice President and Chief Marketing & Merchandising Officer, has decided to leave the company at the end of its second fiscal quarter on September 7, 2019.  The company has launched a search for a successor.”

No reason was given for Sampson’s decision. He has been an Albertsons executive, working at various banners, since 1983, with brief departures to work for three years each at Walmart-owned Sam’s Club and Ahold-owned Giant Food.

“Shane has been instrumental in building the Albertsons Companies we know today – both at a division level and nationally,” said Vivek Sankaran, Albertsons’ president/CEO. “Since 2013, he has helped our team turn around operations in addition to building a robust merchandising and marketing function to help support our 2,200+ locations. He launched our e-commerce business in key markets and strengthened it in areas where it had operated since 2002, and accelerated the growth of our Own Brands business by envisioning a faster, smarter way to connect with customer needs.  He has been a champion for omnichannel growth both internally and with our supplier community.”

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Meat Beef Plays Out In Free Speech Arena

BuzzFeed has a story about how the battle between beef producers - who “are fed up with plant-based products invading the meat aisle” - and plant-based meat producers - who argue for the broadest possible interpretation of what “meat” is - may end up being decided on free speech grounds.

“Ranchers are offended by the rise of meat made from plants, as well as the promise of clean meat grown directly from cells,” the story says. “That’s why they are pushing bills designed to outlaw the use of the word ‘meat’ and related terms on the labels of plant-based and cell-based meat.

“One such law was passed in Missouri last year. This statute makes it a crime to market veggie burgers using the words ‘veggie burgers.’ Now Arkansas and several other states have passed similar label censorship laws where people can literally go to jail for selling a veggie burger under that name.”

While “defenders of these laws claim they are trying to protect consumers from ‘confusion,’” the story says, “organizations are challenging these laws because they violate the First Amendment.” Their position is that “consumers rely on the free flow of information to make informed decisions in the marketplace and in the public square. That’s why the Constitution requires the government to clear a high bar when it seeks to engage in censorship.”

KC's View: Just speaking for myself, I have to say that I’ve never been confused about whether a veggie burger contained meat. Didn’t really need a law to clarify it.

My belief is always in transparent, specific labeling. If it attempts to confuse the shopper or obfuscate a product’s source, that’s a bad thing.

E-conomy Beat

Vox has a story about why Amazon is in the home security business, writing that “Amazon found the one part of your online shopping journey it doesn’t control - what happens between placing a package on your doorstep and you taking the package inside - and decided to buy the video doorbell security company Ring to help regulate that unknown … The smart doorbell lets people remotely see, hear, and talk to whoever is at their door. It also records porch thefts that users can post footage of on Ring’s social media app, Neighbors, or share with increasingly involved police departments.”

The story says that “Ring saves Amazon money by deterring package theft. It also advertises itself - and by extension becomes more effective - through its use of fear-based social media … The smart doorbell company widens Amazon’s smart home footprint — specifically in the fast-growing smart home security segment — and it shares a joint mission with Amazon of ‘connecting more neighbors globally and making our security devices and systems more affordable and accessible.’ And putting more Ring devices on more front doors also protects Amazon’s e-commerce business.”

KC's View: We just recently installed a a Ring, and I have to admit that I love it. Not just that I’m now notified whenever anyone comes anywhere near our front door, but also because we’re notified whenever neighbors with the same technology have a security problem. For example, we found out when someone a half-mile away had video of kids trying to break into his car. Not only did we see the video, but so did the local police … and he was able to use the tech to tell the kids to get away from his car.

This strikes me as so useful that we’re going to get one for the garage.

FastNewsBeat

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

• The Baltimore Business Journal reports that Aldi is renovating 13 Baltimore-area stores to the tune of $18 million, with the focus on offering “new ‘On the Go’ food, wider aisles and discount meat and fish.” One of the new stores, in East Baltimore, “is now about 12,000 square feet, with an expansion from four to five aisles. A new produce section greets shoppers as they enter the store, and a new ‘On the Go’ area introduces items Aldi has never carried before, like Red Bull and Kombucha. New refrigerators are more energy efficient, and will be stocked with new products and rotating ‘Aldi savers,’ like salmon or buffalo meat.”

These renovations, the story says, are “part of a $1.9 billion national push to renovate 1,300 Aldi stores by the end of 2020.”

It all sounded good, and then the story said that Aldi also is expanding its relationship with Instacart for delivery purposes. It is like bad money after good.

Executive Suite

• The Minneapolis/St. Paul Business Journal reports that General Mills CFO Don Mulligan is retiring next June, and will be succeeded by the company’s current Controller, Kofi Bruce.

The story also says that General Mills is “changing leadership of its pet food business,” with Blue Buffalo president and co-founder Billy Bishop “moving to an advisory role at the beginning of 2020, while Bethany Quam takes over as president … Quam comes to the position from her current role as president of General Mills' Europe and Australia branch, and she will be succeeded by Dana McNabb, currently president of the company’s US cereal business.

Changing Lanes, From Tradition To Disruption: A Retail Tomorrow Podcast

In this, the second of two podcasts recorded on the exhibit floor at the United Fresh Produce Association show in Chicago and produced by GMDC, we look at how companies go outside their traditional lanes to explore new consumer connections and marketing advantages as they seek fresh (in every sense of that word) levels of relevance and resonance to the shopper. Our guests are two executives from the world of retail who operate in completely different geographic areas but who, as the retail world goes through a series of revolutions, seem to have more in common every day.

They are:

• Greg Corrigan, senior director of produce and floral at Raley’s, where he’s worked for two decades; Greg also is the current chairman of United Fresh.

• Tony Stallone, the “produce guru” at Ahold Delhaize-owned Peapod, where he brings a lifetime of experience in the produce business to one of the first and arguably most sustainable e-commerce business models.

The host: Kevin Coupe, MorningNewsBeat’s “Content Guy.”

You can listen to the podcast here, or on iTunes and GooglePlay.

This edition of the Retail Tomorrow podcast is sponsored by Hillphoenix, shaping the future of retail through technology and design innovation.

Pictured, left to right: Kevin Coupe, Greg Corrigan, Tony Stallone






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Industry Drumbeat

HOW TO BE A RETAIL PIRATE: Authentic, Relevant, Resonant, Rapid, Revolutionary (ARRRR!)

A NEW PRESENTATION BY KEVIN COUPE

Steve Jobs once said, “Better to be a pirate than join the navy.” In today’s cutthroat retail environment, that attitude needs to be at the core of every business’s strategic, tactical and operational approach - challenging the status quo, doing the unexpected, creating customer-centric business initiatives and then disrupting them internally … appealing to people’s hearts and heads and aspirations … acting with piratical verve and always moving forward. In this brand new, lighthearted, illuminating and uniquely pertinent presentation, filled with examples and anecdotes and lessons, MorningNewsBeat’s Kevin Coupe brings a passion for storytelling and a unique perspective on business that will entertain and energize audiences.’’

Here’s what Lori Stillman, Executive Vice President - Analytics, Insights and Intelligence, Advantage Solutions, has to say about a recent appearance:

"Kevin joined us as a moderator and facilitator for a two-day client executive event we hosted. His role in the success of the event went far beyond his time presenting and sharing his great wisdom and content. From the moment our planning process began and we selected Kevin as a key part of our program, he dove in and worked with our team to review session topics, ideate on programming and help ensure our overall event delivered on the goals we had established. His quick wit, deep industry knowledge and ability to synthesize conversations into key take-aways enabled us to hit a home run!”

And, from Joe Jurich, CTO of DUMAC Business Systems:

”Kevin recently participated in and spoke at our Annual User Conference.  Our group consisted of independent retailers, wholesalers, and software vendors – a pretty broad group to challenge in a single talk.  While his energy, humor, and movie analogies kept the audience engaged, his ability to challenge them to think differently about how they go to market is what really captured them!  Based on dinner conversations afterward, he appeared to have left everyone thinking of at least one new approach to their strategy!”

To book Kevin for your upcoming event, click here , or call him at 203-253-0291.


Now back to regularly scheduled editorial...

Your Views: Of Genghis Khan & Cooperstown

As always, lightly edited for clarity…

Regarding Target’s new grocery private label, one MNB reader wrote:

Kevin, I am not seeing much intelligent about this recent PL move by Target. I go into Target Stores to perform price and out-of-stock checks but can't remember the last time I personally bought anything for myself. They become increasingly irrelevant with each passing day. They are in the "big middle of retail" and don't stand out for very much. They don't win on price nor service.  You mention the food department example; I see tons of out of date perishable product because of a lack of foot traffic and relevance.

It's easy to get seduced by Target cycling bad comparative quarters and think they are doing well. They tend to focus on P&G brands (who has an advantage unlike any other national brand at Target) for foot traffic but they need a bigger presence with other national brands to demonstrate that price matters.  If an economic downturn is indeed coming, Target is likely to suffer more than others.  Red Card shoppers won't be enough when that time comes.

They are a favorite of most branded marketers and selling teams in CPG.  Everyone wants them to win.  "Reshuffling the private label deck chairs on the Target titanic" doesn't feel like a foot traffic centered, demand-creating strategy.

I hope I'm wrong. But, this PL strategy feels like more of same, just a chance to paint an onion red and call it an apple.




MNB reader Ben Ball had a thought about Michael Sansolo’s column this week about an unexpected AAA experience:

To the best of my recollection, I have never commented on one of Michael’s pieces before. But this simple and sincere admission of the inherent bias we all hold is a real gem. Harvard (I think) did an obscure study about a decade ago that received practically no publicity. But what it showed is that essentially 100% of the sample, selected for their own declarations of independent thinking, held significant social and political bias that they wouldn’t admit, even after being shown their individual results in the study.

Kudos to Michael for sharing his own vulnerabilities, and for reminding the rest of us that our only feeble defense against our own paradigms and bias is to know that we have them.

Signed, an acknowledged Luddite who’s own children remind him often that he leans to the left – of Genghis Khan.

 


We had a story about how as many as 20 states may be banding together to investigate major tech companies such as Amazon, Apple, Facebook and Google, prompting one MNB reader to write:

Why wouldn't Walmart also be on this list?

They are very much a tech company now, even though they act as though they are very much above the fray…




Finally, regarding our story about how the New York Yankees and the Chicago White Sox will play a game next season on the Field of Dreams in Iowa, MNB reader Alyson Kretser wrote:

It wasn’t too long ago that 2 MLB teams would play at Doubleday field in Cooperstown. That used to be a fun weekend. Many of the games I saw coincided with Father’s Day. If my memory serves me correctly it became too much of a hassle to schedule around so now they play a Hall of Fame Classic game on Memorial Day weekend. I hope that the Field of Dreams games don’t become a ‘hassle’ to schedule, but I fear the novelty may wear off and the hometown who is invested in this will be sadly disappointed. That being said, when you figure out how to get your tickets, will you let me know? LOL!

PWS 59