retail news in context, analysis with attitude

Published on: May 19, 2010

by Kate McMahon

Facebook fans have successfully rallied online to bring Betty White to Saturday Night Live and Trader Joe’s to Omaha.

Now, ironically, one group is calling for a mass exodus from the dominant social networking site, defining May 31st as “Quit Facebook Day.” At the same time, their comrades are posting online petitions and demanding changes, or else.

The hot button issue is privacy - with tech pundits, the mainstream media and hordes of bloggers slamming Facebook for compromising users’ personal information.

While the website quitfacebookday.com only shows 5,398 “committed quitters” out of a Facebook universe of more than 425 million users, the blogs are buzzing with discontent. A Facebook page entitled “Millions Against Facebook’s Privacy Policies and Layout Redesign” is urging its 2.27 million members to lodge formal complaints with Congress and the Federal Trade Commission. I just received one news feed from a friend asking me to sign a Facebook privacy petition and another on how to revise my privacy settings.

In the past month, Facebook scrambled to deal with a glitch which allowed private chat conversations to be visible to a user’s friends and other tech gaffes. But it was an intentional move – the introduction of a new Facebook feature called Open Graph – that added fuel to the fire.

In short, Open Graph gives third-party marketers access to members’ names, friends’ lists, interests and hobbies – unless the users manually “opts out” of that feature. For example, if you list Jimmy Buffett (like the Content Guy would) or Taylor Swift (c’est moi) as your favorite musical artist, you may get a personalized pitch about said singer from Pandora, the internet radio service. Welcome, or invasive?

Even with the opt-out option, people are balking, and bailing.

“If you agree that Facebook doesn’t respect you, your personal data, or the future of the web, you may want to join us,” say the founders of Quit Facebook Day.

Members of Congress have joined the fray, and the Electronic Privacy Information Center and 14 other groups have filed a complaint with the FTC. And Google reports that the top online search related to “Facebook account” is – “delete Facebook.”

As with all things related to the internet, changes are occurring at lightning speed. “It’s clear that we keep discovering new boundaries of privacy that are possible to push and just as quickly breached,” said James E. Katz, professor of communications at Rutgers University, told the New York Times.

And the Seattle Post-Intelligencer reports that “a Facebook official said Tuesday the company plans to unveil new simplified privacy options in response to the backlash from some of the social networking giant's members.

"We have heard from our users that our efforts to provide granular control have made things too complex," spokesman Larry Yu wrote in an e-mail. "Of course, we're working on responding to these concerns, but we don't have anything further to announce."

I suspect it won’t take long. After all, Facebook’s founding premise is that it allows people to be responsive and connected; it would be ironic if the company itself were not responsive and connected to member concerns.

So, what is the retailer takeaway on this?

First of all, don’t delude yourself that all this contretemps means the end or even diminution of social media. This is a speed bump, nothing more.

However, the debate reinforces the importance of paying attention to consumer privacy concerns. It isn’t just on social media; it extends to loyalty marketing, where marketers need to be keenly aware of the fact of privacy as an evolving and growing consumer priority.

If you want shopper participation in a loyalty program, or through Facebook, Twitter or an active website, they need to feel secure that it is indeed a two-way, closed relationship, and their personal information and shopping preferences will not be sold or bartered.

And keep it simple. Facebook’s privacy policy is 5,830 words long, dwarfing the verbiage of the U.S. Constitution. (MNB’s privacy policy, by the way, consists of two dozen words: “We promise not to bother you with a lot of junk e-mail, and not to give your name out to anybody or any company.”)

Finally, if you are a Facebook user, check your privacy settings. It can be tedious and time-consuming, but effective. And we should all follow the advice we give our teenagers – remember that once it’s out there, it’s out there.

Comments? Send me an email at kate@morningnewsbeat.com .

Published on: May 19, 2010

USA Today reports on the continuing debate over the safety of bisphenol A (BPA), a compound in many food containers that some believe can have a negative impact on the health of children who consume food or drink from these containers. Now, a new study by the National Workgroup for Safe Markets, a coalition of 19 environmental groups, suggests that 92 percent of food from metal cans is contaminated with BPA and that pregnant women should limit their intake of canned food and drink.

According to the story, “The chemical is used in countless products, from plastic bottles and paper receipts to the linings of metal cans. The National Toxicology Program has
said it has ‘some concern’ that BPA alters development of the brain, behavior and the prostate
gland in children, before and after birth ... Researchers found that BPA levels vary dramatically even between cans of the same product, according to the study ... For example, one can of Del Monte French Style Green Beans had 36 micrograms of BPA per serving, while another can of the same product had 138 micrograms per serving — a level that has been linked to changes in prostate cells and increased aggression in animals.

“The report calls on Congress to ban BPA in food and drink containers, noting that companies such as Eden Foods already sell vegetables in BPA-free cans; Muir Glenn also plans to begin packaging tomatoes in BPA-free cans this year. Canada and Denmark restrict the use of BPA in certain children's products, as do five U.S. states, three counties in New York and the city of Chicago, the report says.”

At the same time, however, the Grocery Manufacturers Association (GMA) continues to decry such efforts as baseless, saying that BPA is safe and that there is no replacement for it.

Published on: May 19, 2010

The Financial Times reports that as Walmart deals with a 1.4 percent decrease in same store sales during its first quarter, compared to the same period a year ago, executives are saying that the numbers reflect “soft customer traffic, partially offset by an increase in average ticket.” CEO Mike Duke tells the paper that its US customers “are still concerned about their personal finances and unemployment, as well as higher fuel prices.”

Net sales in Walmart’s US stores increased by 1.1 to $62.3 billion.

Published on: May 19, 2010

The Grand Rapids Press reports that Spartan Stores is primed for growth.

CEO Dennis Eidson tells the paper, “We will be opportunistically seeking growth in the market or outside the state through acquisition.”

In addition, Eidson says that Spartan - which currently operates 96 stores under a variety of banners and serves as wholesaler to 375 stores in Michigan, Indiana and Ohio - will seek smaller-scale growth through the construction or remodeling of stores "where they make sense.”

Published on: May 19, 2010

New York-based, pure-play online grocer FreshDirect.com said yesterday that it is expanding its home delivery service area into Stamford, Connecticut, which it says “provides FreshDirect with a strong presence in Fairfield County where the company recently expanded into Greenwich, Old Greenwich, Cos Cob and Riverside. FreshDirect recently doubled its presence in neighboring Westchester County, NY, where it now serves 21 communities.”

"We are very pleased with the enthusiastic response we've received from our recent launch in the Greenwich market and expansion in Westchester County. We intend to build on that momentum with our arrival now in Stamford," said Rick Braddock, Chief Executive Officer, FreshDirect. "Stamford is one of the Tri-State's most dynamic cities with a vibrant and growing residential and corporate sales population. We are excited to be able to offer our Stamford consumers the freshest food direct from the farm, delivered to our customers' homes at everyday low prices."

Published on: May 19, 2010

In Ohio, the Oxford Press has a story about a fellow named Ben Terrill, a former grocery manager who has created a different kind of online grocery business.

“Seeing elderly customers struggle to shop for groceries and also finding himself strapped for time juggling a job and family life, Terrill said he saw a need for an easier option. Research showed there weren’t a lot of options for ordering fresh groceries - a gallon of milk, for example - for home delivery, so Terrill decided to launch his own online grocery site ... The idea behind his site, gogroceryexpress.com, is to allow customers to pick from private store brand options, which include fresh produce and meat, dairy and household options. Then Terrill or one of his hired drivers picks up the items at the store and delivers them directly to the customer the next day.”

Prices usually reflect a 15 percent markup on those charged in-store, plus a $10 delivery fee.

Published on: May 19, 2010

Bloomberg reports that the online movie download business is about to get a little more crowded, as Best Buy launches its own service this month under the banner “CinemaNow.”

According to the story, “Best Buy is tying Web-delivered entertainment to electronic devices sold in its stores as demand for physical DVDs declines. The service will start with a la carte, on demand purchases and may later become a subscription service like Netflix ... Movie rentals will cost $2.99 to $3.99 as part of the service ... Videos will cost $9.99 to $19.99 for digital purchase.

Published on: May 19, 2010

Bloomberg Business Week reports that two former Penn Traffic executives - Linda Jones, former vice president of nonperishable merchandising, and Leslie Knox, former senior vice president and chief marketing director - have been sentenced to 14 months in prison “for falsely inflating the company's profits in financial reports, gaining thousands of dollars in bonuses for themselves.” They also were ordered to pay $10,000 in fines.

• The United Fresh Produce Association has announced a partnership with Market Intelligence's Fresh Convenience magazine to present the Fresh Convenience Congress, a new educational program for the fresh-cut and value-added commodity sector June 22-24 at London’s Hilton Tower Bridge hotel.

Published on: May 19, 2010

• Starbucks Coffee announced yesterday that it has hired Jeff Hansberry, formerly vice president and general manager at E&J Gallo, to be the new president of its global consumer products group and food service.

Published on: May 19, 2010

MNB had a piece yesterday about continuing efforts to create a sales tax for online purchases that would help financially strapped states close budget gaps.

I commented:

I’ve always been against an online sales tax, in part because I hate the idea of doing anything to hurt a burgeoning industry...and, to be perfectly honest, in part because it will hurt me. (I know that makes me a terrible human being, opposing taxes on selfish grounds, but there it is.)

But now I am conflicted. I hate the idea of more taxes, and so reflexively oppose a new online sales tax. But the states are in trouble, and I’m not sure that it is fair to continue to let online retailers off the hook on this issue.

The real question, I suppose, is what services will have to be eliminated by states if new revenue is not found. My experience is that a lot of people simultaneously want lower taxes and no fewer services ... which is, to say the least, a conundrum.

MNB user Geoff Harper responded:

Happy to hear that you are now conflicted on the issue of online sales tax.  But it appears that you are conflicted because of the fiscal trouble that states find themselves in.  Wrong reason.  I do a fair amount of online shopping, and some of the sites do charge sales tax when shipping to a sales-tax state.  I have never cancelled an order because of this.

I see no reason to coddle the online industry, especially when many sites seem to thrive in spite of “doing the right thing”.  It is time to be fair to the bricks-and-mortar retailer and level the field.

Another MNB user wrote:

The only way a tax would negatively impact the online shopping industry is if it somehow made the Internet less convenient.

MNB user Chuck Burns wrote:

You said "But now I am conflicted. I hate the idea of more taxes, and so reflexively oppose a new online sales tax. But the states are in trouble, and I'm not sure that it is fair to continue to let online retailers off the hook on this issue.''

The problem the states have is not the amount of income they have from various taxes. It is their inability to restrain spending in any meaningful fashion. Except for the states that have already been very successful in driving businesses out all the states could easily survive if they became more efficient, , reduced the number of employees, required the employees they have to actually be productive, reduced wages to something remotely comparable to the private sector and brought overly generous benefit and retirement packages in line with the private sector. I firmly believe that you could increase the revenue of a state by 50% and in three to five years it would be just as broke as it is today. The denizens of the state house would just find more projects and special interests that need to be bought off. Serious, brutal and deep cuts in spending are the only solution. Yes, I am willing to get by with far fewer services.

MNB user Joe Gilman wrote:

I think perhaps we should look to the other side, cutting spending, instead of always looking to take more money out of folks’ pockets.

MNB user Steve Sullivan wrote:

When I shop online, it is to find items that I cannot easily get locally, to avoid the time wasting visits to brick and mortar store (these 60 year old bones don’t enjoy sauntering through the mall anymore) and to find better prices, not to avoid paying sales tax.  I have no problem with the online vendors collecting state sales tax.    With the current state of the state’s economy, we need the help here in North Carolina anywhere they can get it.  Here in Charlotte, we are closing schools and libraries and laying off hundreds of teachers, librarians and other civil employees due to cutbacks at state level which have caused shortfalls at the local level.  If I buy online from an in-state company, tax is collected.  Why shouldn’t an out-of-state company do the same?

HOWEVER…

I would also want to make sure the mechanism is in place for the states to verify that they are receiving the tax collected by out-of-staters, since I assume those sales are not subject to any automatic reporting.  The last thing I want to be doing is padding the pockets of a company with tax dollars not being sent where they are supposed to be going. Would this cause a paperwork nightmare for small companies (or big companies for that matter)?  Would the government bureaucracy necessitated by this outgrow the benefit?  Would this cause online companies to refuse to sell to potential customers in those states demanding that state tax be collected?  Many questions.  Maybe not easy answers.

MNB user Kevin Nolan wrote:

How many of the on-line business actually change sales tax but don’t need to? As an online shopper I’ve been charged sales tax on a number of occasions when I didn’t expect it or didn’t think it should have been required but there it was at the end of my online checkout process!  Is the money going to the state or in their pockets?  I know that sound cynical but how’s a online shopper supposed to know when they should and shouldn’t be charged sales tax ... just something to think about.

Still another MNB user wrote:

The states and government in general are in trouble because they have a spending problem. They don’t have an income problem…They have a spending problem. Giving them more tax dollars just rewards the spending problem.

I think a legitimate case can be made that state spending is out of control in a lot of places...but I continue to believe that there are a lot of folks who say they would take fewer services but who might respond differently if the DMV were only open three days a week, or if educational spending were cut in half (since the quality of local schools usually has an impact on real estate values), or if highways went unpaved and potholes went unfilled.

Now, don’t jump ugly with me. I am not saying there is no waste in state government. Far from it. But I am saying that there can be a certain amount of hypocrisy on this issue - politicians, for example, who normally decry federal spending levels but who seek money for their own states when it serves their political interests.

There is a theory out there that because of a variety of influences - promotions and subsidies, for example - nobody knows what anything really costs when they walk the aisles of a supermarket.

I suspect that the same thing goes for government and public services. We don’t know what it costs to run a public school. We don’t know what it takes to pave a highway. We don’t know what the infrastructure of government actually costs.

And here’s the dirty little secret. They’re all afraid to tell us.

And I mean everybody is afraid to tell us. Because even the folks who like to make the biggest noise about these issues tend to fall into CYA mode when they get into positions of power and influence.

On this issue, my cynicism knows no bounds.