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    Published on: November 24, 2010

    Reed Hastings, the founder and CEO of Netflix, always said that his business was providing entertainment ... and that those ubiquitous red envelopes in which rented DVDs were sent all over the country were just the delivery system of the moment.

    This week, we found out that he really meant it.

    Netflix announced this week that it was raising the prices of its various DVD rental plans, and instituting a new plan - unlimited online access to its library of streaming movies for just $8 a month.

    Hastings said in a press release that the company was simply responding to consumer preferences, but there also is a financial upside as Netflix makes the shift - the savings on paper and postage for those envelopes, not to mention the cost of the individual DVDs, is said to be significant.

    (To be sure, there is competition driving this decision as well. The New York Times noted that “Netflix faces challengers on several fronts online, including, Apple and Google. Hulu, a start-up jointly owned by NBC Universal, the News Corporation and the Walt Disney Company, is also a competitor.)

    There’s an important lesson here for every business. Delivery systems are important, but can change as technology evolves ... and businesses have to be nimble and observant enough to embrace these changes.

    It is content that really matters. That’s true with video. With news. With food. With beverages. Indeed, with most products.

    That’s our Wednesday Eye-Opener.

    - Kevin Coupe
    KC's View:

    Published on: November 24, 2010

    The recent “official” announcement that the recession ended more than a year ago was greeted with a good deal of skepticism, as many people pointed out that most people and businesses were still behaving as if in a recessionary environment. But now comes news that the clouds of a recession-like climate apparently have a silver lining.

    The New York Times this morning reports that “American businesses earned profits at an annual rate of $1.659 trillion in the third quarter, according to a Commerce Department report released Tuesday. That is the highest figure recorded since the government began keeping track over 60 years ago, at least in nominal or noninflation-adjusted terms ... The next-highest annual corporate profits level on record was in the third quarter of 2006, when they were $1.655 trillion.

    “Corporate profits have been doing extremely well for a while. Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history. As a share of gross domestic product, corporate profits also have been increasing, and they now represent 11.2 percent of total output. That is the highest share since the fourth quarter of 2006, when they accounted for 11.7 percent of output.”

    The sobering part, according to the Times: “The current growth rate is far too slow to recover the considerable ground lost during the recession.”
    KC's View:
    For some reason, it is hardly surprising that the recovery has gone better and faster for Wall Street than Main Street. The Times also writes this morning that “two years after the onset of the financial crisis, the stock market is recovering and Wall Street’s moneyed elite are breathing easier again. And this means in some cases they are spending again — at times cautiously, but sometimes with a familiar swagger.

    “It’s true that firms scaled back the corporate excesses, like fancy retreats and private jets, for which they were vilified as a brutal recession gripped the country. Many of those constraints remain in place, like flying commercial on business trips, or more limited private car service for employees.

    “But when it comes to personal indulgences, there are signs that the wallets are beginning to open up. Traders and executives say that jobs seem much more secure. Businesses whose fortunes ebb and flow with the financial markets are thriving again.”

    This means that people are spending more at restaurants and even starting to book rentals in the Hamptons for next summer; the Times also notes that another personal indulgence industry is seeing an upswing - facelifts and plastic surgery. So at least in the rarefied air of Wall Street, things are looking good.

    So here’s the question we all must ask ourselves: How much do we believe in the trickle-down theory? If you believe in it, then doesn’t it make sense to simply keep doing what we’ve been doing, and trust that the recovery will make it to Main Street? And if you don’t believe in it, you have to examine your options.

    One funny thing, in the Timespiece, by the way, was the note that even as things get rosier on Wall Street, there is such a thing as an excess of excess:

    “A Morgan Stanley trader recently tried to hire a dwarf for a bachelor party in Miami, asking the dwarf to meet him at the airport in a ‘Men in Black’ style suit, according to e-mail exchanges. The trader, who wanted to handcuff the dwarf to the bachelor, was recently fired.”

    Who are these people? And is it a little scary that these kinds of people are helping to run the economy?

    Published on: November 24, 2010

    HealthDay News reports on the results of a new Harris Interactive/HealthDay poll saying that “almost one-quarter of young women who are overweight actually perceive themselves as being normal weight, while a sizable minority (16 percent) of women at normal body weight actually fret that they're too fat ... The study found these misperceptions to be often correlated with race: Black and Hispanic women were much more likely to play down their overweight status compared with whites, who were more apt to worry that they weighed too much (even when they didn't).”

    In addition, the survey said, “30 percent of adult Americans in the ‘overweight’ class believed they were actually normal size, while 70 percent of those classified as obese felt they were simply overweight. Among the heaviest group, the morbidly obese, 39 percent considered themselves merely overweight.”

    The story goes on: “Mistaken notions of one's weight status can have implications for behavior, and perhaps health, the researchers noted. For example, women who were overweight but thought they were normal size were less likely to try to lose any excess weight by dieting or other means. On the other hand, women who saw themselves as fatter than they were, were more likely to use diet pills or diuretics, to induce vomiting or to smoke cigarettes, often as ways to control or lessen their weight.”
    KC's View:
    It is extraordinary. We have an obesity problem in America, and yet a sizable portion of the population had periods during the past year when it went hungry. People who are overweight think they have normal weight, people who are obese think they are merely overweight, and some people who are of normal weight think they actually are overweight.

    Published on: November 24, 2010

    There was a terrific little story in the Washington Post the other day about how Ben’s Chili Bowl took an unusual approach in creating for itself an iPhone application - it asked its customers to develop it.

    According to the story, there were no mandates or restrictions: “The free-form contest generated a mix of neat ideas, including the winner's concept to let photos taken by patrons with their iPhones be displayed on a digital screen on the restaurant's wall. But several months after its launch, the app is primarily a fun distraction as customers wait for half-smokes and chili burgers.”

    But it’s just the beginning. The restaurant “is now looking to supplement the app with a Web site that's optimized to be viewed and used on mobile phones (and) hopes customers can use it to scan the menu and submit orders without standing in line.”
    KC's View:
    Here, is seems to me, is the key learning from this story:

    There is no such thing as a finished product.

    There are just steps along the way. Experiments to be conducted. Trials to be run. Mistakes to be made. Opportunities to be explored.

    The thing about figuring out what the end game is, is that there is no end game.

    I’ve long argued that retail stores should not have prototype stores, because such creations tend to tell a concrete story and suggest that development is complete; there should instead be laboratory stores, where research and development (R&D) into new ways to surprise and delight (S&D) the customer is an ongoing and organic process.

    That’s certainly the case when it comes to creating mobile applications or web sites.

    Published on: November 24, 2010

    An unusual snowstorm in Seattle this week snarled traffic, slowed the commute, and also stymied delivery efforts by Amazon Fresh, the Seattle Times writes.

    “The online grocery venture of Seattle-based posted a message on its website Monday saying it no longer would take new orders before Thanksgiving because of dicey driving conditions and coming cold weather,” the Times reports. “As for old orders not yet delivered, Amazon said it would work to reschedule them for the afternoons, ‘during the warmest part of the day’.”
    KC's View:

    Published on: November 24, 2010

    C-store giant 7-Eleven has announced that it is broadening its private brand wine selection, introducing a new label - Cherrywood Cellars - a mid-tier-priced wine ($7.99 - $8.99 per bottle) that is available in three varietals - chardonnay, cabernet sauvignon and merlot.

    Cherrywood Cellars, according to the company, is designed to appeal to millennials, and is positioned between its Yosemite Road label, priced at an entry-level $3.99 per bottle, and Sonoma Crest, a premium wine comparable to a $15 bottle, but value-priced at $9.99.
    KC's View:

    Published on: November 24, 2010

    • The Associated Press reports that CVS Caremark has agreed to pay a fine of almost $269,000 to the state of Connecticut, settling “allegations that the chain's drug stores improperly disposed of photo processing and pharmaceutical wastewater.” The company said in a statement that “it has agreed to implement new procedures for the handling of waste, and properly train employees in those new procedures. The company will also audit its stores to ensure compliance.”
    KC's View:

    Published on: November 24, 2010

    Dow Jones reports that the Reckitt Benckiser Group PLC, the manufacturer of Airwick air fresheners and Clearasil acne cream, has hired former Tesco and Unilever executive Liz Doherty as its new chief financial officer.
    KC's View:

    Published on: November 24, 2010

    ...will return next week.
    KC's View:

    Published on: November 24, 2010

    This is Thanksgiving weekend here in the US, which is the best holiday of the year because it brings families together without the pressure of presents and expectations. There’s just food and football and fellowship - all good things.

    In keeping with tradition, MNB will be on hiatus for a four-day weekend. The archives, of course, are always open...and we’ll be back Monday, November 30.

    Have a great weekend...and a wonderful holiday.

    KC's View:

    Published on: November 24, 2010

    Just a few notes as we go into the holiday weekend...

    For the first time in several years, the National Retail Federation (NRF) annual convention in New York won’t be taking place at the same time as the Food Marketing Institute (FMI) Midwinter Executive Conference ... which means I get to attend both.

    But I’m curious. It has been years since I’ve been to NRF, and I’m wondering how many MNB readers might be planning to attend the convention in New York between January 9-11 ... in part because I’m thinking it might be fun to throw together one of those casual beer and wine events that we’ve done from time to time around the country.

    So if you’re planning to attend NRF in January, just shoot me an email. It’ll help me figure out what’s might be possible in terms of a get-together.

    Apparently, all you really need is love. And access to iTunes.

    Apple says that since it started selling Beatles music downloads about a week ago, more than two million individual Beatles songs and 450,000 albums have bee sold.

    The best-selling album, to date: “Abbey Road.”

    The best-selling song: “Here Comes The Sun.”

    What is extraordinary about this is the extent to which the Beatles still speak to young people four decades after they last recorded an original song together. I know my kids love the Beatles, and there is little doubt in my mind that their kids will love the Beatles.

    So here is the question I would ask. Is there a single current young artist - in any genre - who you think will still have his or her music being played and adored in 40 years time?

    Unstoppable is a pretty good movie. It has solid performances from Denzel Washington and Chris Pine, playing railroad employees intent on stopping a runaway train that is loaded with toxic chemicals. The direction, by Tony Scott, is much like the train - fast moving, never going off the rails, and generating plenty of suspense. If Unstoppable has a problem, it is that it doesn’t offer much in the way of surprise; everybody in the movie is concerned about what;’s going to happen when the runaway train hits a particularly sharp curve, but the movie doesn’t throw the audience any curves.

    It’s a pretty good movie. Could’ve been better, but certainly worth seeing if you can’t get into the Harry Potter flick.

    My wine of the week - the Parallele 45 Cotes du Rhone 2007 from the vineyards of Paul Jaboulet Aine in France. When Mrs. Content Guy and I were drinking it, it reminded us of wines we enjoyed with our friends Anne and Fiach at their house in France, and isn’t that what great wine is about? Sure, it’s about the beverage...but it’s really about the experience, the people with whom we share it, and the memories it creates.

    May I take this moment to thank all of you who wrote in over the past week to congratulate me on nine years of MNB, and the beginning of our 10th year. I was genuinely moved by all the email, especially the notes that told me how important the site is to you. MNB “is as much a part of my AM routine as coffee,” one MNB user wrote.

    That’s music to my ears. But I couldn’t do it without you.

    Thank you.

    Here’s hoping you have good memories - not to mention good food and wine - this weekend.

    Have a great one. I’ll see you Monday.

    KC's View: