business news in context, analysis with attitude

Published on: February 23, 2011

by Kevin Coupe

It is a testament to the power of the internet - and the power of social networking - that there was a story in the Los Angeles Times the other day that an Egyptian man, overcome with joy that the government there has been overthrown, has given an unusual name to his newly born baby girl.

“Facebook.”

No kidding.

According to the Times, “Al-Ahram, an Egyptian newspaper, first reported that Gamal Ibrahim, a man in his 20s, chose to name his first daughter Facebook as a way to honor the role the website played in Egypt's undergoing revolution.”

The story goes on: “A translation of the Al-Ahram report provided by the website TechCrunch said: ‘The girl's family, friends and neighbors in the Ibrahimya region gathered around the new born to express their continuing support for the revolution that started on Facebook. 'Facebook' received many gifts from the youth who were overjoyed by her arrival and the new name."

It is not hyperbole. Facebook and other social networking sites are, quite literally, changing the world.

If they can bring down a government, they can change forever the way in which businesses are run, the ways in which businesses are accountable to their customers, shareholders and employees, and the extent to which businesses can and must be transparent.

If you don’t believe, just ask Gamal Ibrahim, who has seen the future in his daughter’s face, dreamed about the freedoms she wants her to enjoy, and given her a name that he think represents both freedom and the future.

And that’s our Wednesday Eye-Opener.

Published on: February 23, 2011

by Michael Sansolo

Chances are that if you ever heard of Kenneth Olsen, it is for a reason he always disputed. Olsen is one of those people quoted for having said something that in retrospect looks completely ridiculous.

I’m sure you’ve heard this list. There’s the US Patent Commissioner who in 1899 said, “Everything that can be invented has been invented.” A few decades later, a movie executive questioned why anyone would want to “hear actors talk.” He thought the “talkies” wouldn’t work.

In 1977, Ken Olsen said “There is no reason for any individual to have a computer in their home.” He later insisted the line was taken out of context, but his record doesn’t defend that very well. Olsen, you see, was an industry pioneer in computing. He co-founded and ran the Digital Equipment Corp., which well into the 1980s (after his quote about home computers) was still the second largest computer maker behind IBM.

I’m willing to bet that we don’t have a single member of the MorningNewsBeat community who is reading today’s edition on a DEC machine. (If I’m wrong, trust me on this. You need an upgrade. ) It’s been more than 12 years since DEC was bought by Compaq, which itself was then bought by Hewlett-Packard. But mergers are not the reason for today’s column.

The reason is that Olsen died earlier this month and his obituary is a stark reminder on the importance of staying relevant and looking ahead. Because truth be told, Ken Olsen was an amazing man. He started his career in electronics in World War II by maintaining navigation, sonar and radar systems. After the war he went to MIT and in 1957 had the foresight to launch DEC, a company whose data processor became the building block for the world of computers.

Olsen’s company was a pioneer in the use of networking technologies and provided the tools that later innovators like Bill Gates would use to build the company we know as Microsoft. At its peak, DEC employed more than 100,000 people and produced revenues of $14 billion. Olsen himself was named “America’s most successful entrepreneur” by Fortune magazine in 1986.

But then there was his famous quote. Yes, it might well have been used out of context, but the reality is that a man who was so far ahead on computer development, never really did gain his footing on personal computers. His company was ahead - way ahead - in computer-to computer communication, but never did master the world of the Internet. DEC provided the foundation for minicomputers, yet never captured that market either. If Olsen and his team had done so in any of these cases, I have to believe at least some of us would still have a DEC device somewhere.

But we don’t.

Baseball pitcher Satchel Paige famously said, “don’t look back. Something might be gaining on you.” Had he been talking about business, he might have added that looking back rarely prepares anyone for the future. Looking back reminds us of past triumphs and past glory and Olsen certainly had plenty. But had he looked forward, lots more of us would have remembered him and his company very differently.

Which way are you looking?


Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Published on: February 23, 2011

by Kate McMahon

Amid all the internet hoopla about Groupon.com and its controversial Super Bowl TV ads – Trivializing Tibet! Belittling Endangered Giant Whales! – lies a cautionary tale for independent businesses about the dangers of deep discounting.

And that would be the demise of the Yo! Philly cheese steak shop in Alameda, CA.

Yo, what, you ask?

While even a solitary monk in Tibet has likely heard about the Super Bowl ad debacle and the ensuing mea culpa from Groupon, the demise of Yo! Philly is a local story, reported on the hyper-local website AlamedaPatch.com.

Owner Tom Stanley said he hoped the Groupon coupon would help rejuvenate his cheese steak shop, which opened in September 2009. Instead, he told Patch, “it put the nail in the coffin.” Getting $1.50 for a $10 sandwich will do just that.

For those who are unfamiliar with the nation’s No. 1 online daily deals site, here’s how it works. Groupon offers a daily coupon for each of its 160 North American markets – and if enough subscribers click “buy” then the coupon activates.

For subscribers the lure is the bargain – “$30 worth of Thai food for $15” or “A $100 spa service half-price.” What’s not to like about that? For businesses, Groupon means inexpensive marketing to a burgeoning new internet-savvy, deal-seeking audience. When it works, it’s great. The entry price is simple – offer a deal, Groupon handles all of the transactions, provides logistics and marketing support and keeps half of the revenue.

Which is precisely how Groupon has become the hottest, hippest and fastest growing site on the internet – attaining a whopping $1.5 billion value in only 18 months, according to the New York Times.

The Groupon site includes testimonials from businesses raving about an influx of new business and success due to the coupons. But elsewhere online are the tales of Yo! Philly and other businesses which experienced the pitfalls of offering a drastic discount to a bargain-hungry customer.

Tom Stanley conceded his mistake was failing to set a cap on the number of coupons he would offer. He told Patch that Groupon never told him about the cap option, but it has always been available and Groupon is now encouraging participants to set a maximum limit.

Stanley thought he would sell 100 to 200 coupons, yet 900 were sold and 800 used. Customers paid $5 for $10 worth of product, but he only got $2.50 per sale from Groupon, which after tax was worth closer to $1.50 per coupon. And each cheese steak cost him $5 in supplies alone.

Should Tom Stanley have paid closer attention to the fine print? Absolutely. Would his business have foundered had he not tried the Groupon coupon? Quite possibly. Is there an inherent risk in trading revenue for new business? Yes.

All of which a small business should consider before signing on with Groupon or group-buying competitors such as LivingSocial.com, BuyWithMe, CrowdSavings.com and more.

The Patch story included blog posts from other disgruntled Groupon businesses, including one who wrote “I’ve had to raise prices to cover the massive hit we got … yikes.”

The jury is still out for Mona’s Table in Alameda. Owner Mona Personius empathized with Stanley. “I also have high end products and the 1/4 of the purchase price doesn't break even. I think I have made some new customers but also some very unhappy ones - yelp - I'm having growing pains. Hopefully this doesn't sink me.”

Happily for Mona the next two blog posts were from enthusiastic Groupon customers urging her to hang in there.

Comments? Send me an email at kate@mnb.grocerywebsite.com .

Published on: February 23, 2011

Walmart said yesterday that it plans to open its first “Express” stores - a food-focused format smaller than 30,000 square feet - sometime during the second quarter, though it did not say precisely when and where.

However, the company did say that development plans for the format are ahead of schedule.

Published on: February 23, 2011

Rochester, New York-based Wegmans Food Markets announced yesterday that it is freezing the prices on 40 “products that families buy most” through the end of 2011, saying that “at a time when commodity and fuel costs are rising dramatically,” it wanted to “help customers and employees manage their grocery costs.”

According to the announcement, “The 40 products include such items as orange juice, canned coffee, cereal, bananas, red peppers, pasta and sauce, chicken, ground beef, salmon, tilapia, tuna, frozen pizza, frozen vegetables, and deli ham and turkey. Because some of these items come in different varieties or sizes (different kinds of pasta sauce or frozen vegetables for example), the actual number of items covered by the price pledge is about 200 SKUs, or stock keeping units.”

Almost all of the affected products - which will boast a red and yellow label proclaiming that it has a “consistent low price good through 2011” - are Wegmans own-brand items.

“We can be more aggressive with pricing for our own brand because we have better access to information on the factors that determine costs,” said Jo Natale, Wegmans’ director of media relations.  “These products are already the best value in their respective category, and for that reason, they are also usually the top-selling brand in a category.”

On Sunday, February 27, Wegmans’ print ad will include the following statement:
 
“At Wegmans, we’re very concerned that rising food prices will cause budget difficulties for many of our customers.  All of our efforts will be toward keeping our prices low and our quality and service high.
 
“With that, we commit that the 40 products in this ad will not change price through the end of 2011.   That’s what we mean by consistent low prices.  We hope this helps you and your family in planning your weekly food budget.
 
“And, we will do our best to keep price increases on other products to a minimum.  As always, we are committed to keeping low prices on the items most important to families.”

Published on: February 23, 2011

After a number of years in which consumers implemented a variety of money saving measures - including the use of coupons, making of lists, buying in bulk and switching to private label items - supermarket shoppers increased their net spending during the past 12 months for the first time in three years. However, the annual “Power of Meat” study, conducted by 210 Analytics and commissioned jointly by the American Meat Institute (AMI) and the Food Marketing Institute (FMI), also suggests that “while some shoppers still spent less on groceries than they did a year ago, the share of shoppers who have made changes to their meat and poultry purchases as a result of the economy  declined for the second year in a row, down from 51 percent in 2009 to 36 percent today.”

The biggest findings, according to Anne-Marie Roerink, who presented the results of the study to the AMI/FMI Meat Conference in Dallas yesterday, are that among shoppers who are looking to save on overall food spending, a growing share is trying to spend less by buying less (49%), instead of applying so-called money-saving measures.

Importantly, average weekly spending among shoppers who are trying to save by limiting their purchases is $13 less than the average population ($83 versus $96).

And, when asked what the meat retailing industry can do to improve the meat department to encourage meat purchases, 40% of shoppers said nothing would influence them to buy more. This is up from 20% in 2007 – in other words double the share – challenging retailers and manufacturers in their marketing and merchandising every step of the way.

One thing, however, hasn’t changed: the meat department continues to be a key differentiator for full-service supermarkets. Supermarkets maintained their market share as respondents’ primary store for meat and poultry purchases at 68 percent. When taking a look at shoppers who identify their primary store as a supermarket, the vast majority, 88 percent, also purchase meat there.

Other excerpts from the study:

• While home-cooked meals made a strong comeback, shoppers don’t necessarily know how to cook meat and poultry. Less than half consider themselves very knowledgeable in areas such as cooking meat, poultry and seafood, and significant numbers admit room for improvement on things like picking sides that match the meat’s flavor profile, pairing the right wine with the meal, marinating and spicing meat and poultry, and even the USDA beef grading system.”

• “When it comes to healthy eating, respondents said they were most likely to cut back on portion sizes or second helpings, followed by choosing foods that are lower in sodium than their regular counterparts. A majority said they are not willing to give up meat regularly compared to those who have implemented ‘meatless Mondays’ (26 percent versus 18 percent).

• “Healthy eating strategies relative to protein consumption differ widely by gender, age, income and other factors. Women are much more likely to limit their meat and poultry consumption, for example.”

Published on: February 23, 2011

The Conference Board is out with its monthly Consumer Confidence Index, saying that it currently is at 70.4, up from 64.8 in January. The February number is a three-year high, and the Conference Board says this reflects greater short-term optimism about the economy in general and employment prospects in particular.

However, it isn’t all good news.

"Since November there has been a gradual improvement in the consumer mood, but it's not happy days are here again," Chris Christopher, an economist with IHS Global Insight, tells the Associated Press. "Household net worth is still about $10 trillion below its peak, and with what's going on in the housing market now, it doesn't look like that's going to improve anytime soon."

Other notes from the AP story:

• “The Conference Board ... found that the number of families planning to buy a home in the next six months fell to 4.4 percent in February from 5.2 percent in January. While consumer confidence is rising, continued troubles in the housing market and other lingering effects of the recession are keeping the index well below the 90-plus readings that signal a stable economy.”

“As consumers' mindset improves, spending continues to go up. Retail sales rose 0.3 percent in January after rising 6.6 percent in 2010 over the prior year. During the 2010 holiday shopping season, sales increased at the fastest rate in six years, although spending growth slowed in January as a rash of severe winter storms across the nation kept people out of stores.”

Published on: February 23, 2011

The Wall Street Journal reports that “a growing number of retailers have a problem that Borders Group and Circuit City didn't survive long enough to solve: Their products are available for much less on Amazon.com ... While the likes of Wal-Mart and OfficeMax have struggled to increase revenues recently, Amazon has thrived, with sales rising 40% in 2010 to $34 billion. For the first time, annual sales of media products like books and DVDs accounted for less than half of total revenue.

“That may mean Amazon is winning market share in a broader range of categories, with shoppers taking advantage of lower prices on products from jump rope to Ray Ban Wayfarers. A recent study by Matt Nemer of Wells Fargo compared prices on a diverse basket of products and found Wal-Mart is 19% more expensive than Amazon. That assumes online shoppers don't pay sales taxes and shipping is free. The price gap is about half as wide if customers pay standard shipping.”

According to the story, Amazon’s advantage is increased when you consider three things:

• Internet-savvy young people are likely to become even more dedicated Amazon shoppers as they age and have greater access to disposable income.

• Amazon has been doing the e-shopping thing for more than 15 years, far longer than virtually any of its nominal competitors.

• Because it doesn’t have to worry about walls, Amazon is able to stock more products than its brick-and-mortar brethren.

Published on: February 23, 2011

The Dallas Morning News reports that 7-Eleven management “is launching ‘signature’ food items that it hopes will keep consumers hungry for more ... 7-Eleven Inc. hopes to grow food sales by 10 percent this year - more than double the typical 3 percent to 4 percent.”

“During the economic downturn, we’ve found that by offering programs like two-for-$2 slices of pizza … and offering consumers price value on some really good food, it was an opportunity to attract some [new] customers,” Paul Pierce, 7-Eleven’s vice president of quick service and fresh food, tells the paper, adding, ““We are looking at every food item that we sell today … from a muffin to our breakfast sandwiches to chicken wings to the burrito on the roller grill, every single item. That food needs to be better than what you expect in a convenience store. We want our food to be better than restaurant quality.”

Published on: February 23, 2011

• The Northern Nevada Business Weekly reports that “Walmart appears to be looking once again for Reno-area locations to develop Walmart Neighborhood Market stores ... The company apparently is looking to develop four or five of the Neighborhood Market stores in the Reno area.”

According to the story, “Walmart was looking closely at Reno locations for the Neighborhood Market concept as long ago as 2005, when the stores were rumored to be open by 2007. But those plans were put on the back burner as the company rethought its real estate strategy and worked its way through the worst days of the recession.”

Published on: February 23, 2011

• Long Island-based King Kullen Grocery Co. announced that it has adopted the NuVal Nutritional Scoring System in all 45 of its locations.

King Kullen is the first supermarket chain in the New York metropolitan area to partner with NuVal, which rates products on a proprietary scale from 1 to 100, it the healthiest products receiving the highest scores.

Published on: February 23, 2011

• Reports out of Ireland say that Simon Burke, who took over as chairman of Superquinn when he led a team of investors to acquire the chain from Feargal Quinn in 2005, has stepped down from the company. He is to be succeeded by Kieran Ryan, a shareholder in Select Retail Holdings, which bought Superquinn.

The story implies that Burke’s departure may have been because of a full plate: “Burke has held a number of executive and non-executive roles in Britain and Ireland. A trained accountant and expert in corporate finance, he is a former senior executive at Virgin and Hamleys. He was appointed chairman of Mitchells Butler, the London-listed restaurant and pub chain, earlier this month. Mr Burke, who is a trustee of the National Gallery in London, was also appointed as non-executive director of the BBC executive board in January this year.”

Published on: February 23, 2011

Yesterday’s Eye-Opener concerned a Wall Street Journal story about the sorry state of American males between the ages of 20 and 30, suggesting that many of them are in a pre-adulthood period that is sort of like adolescence, but older - they’re putting off marriage and family, they’re enjoying their relative lack of responsibility to a greater extent than previous generations, and they often have unreasonable expectations for their careers that don’t match up to their abilities and/or experiences.

Particularly chagrined about this kind of limbo state, according to the Journal, are American females between the ages of 20 and 30, who tend to be more focused, more mature, more willing to take on the responsibilities of marriage, family and career ... and more willing to do so on their own if they can’t find a man who measures up to their expectations.

Got a number of emails on this subject.

One MNB user wrote:

To each his own, I guess, but as for male pre-adults wondering "what the problem is, anyway," I am willing to bet that they will soon find out. The people that I know who have made their personal freedom and happiness their priority find that the quest is a constant challenge that never is truly conquered. True happiness and contentment comes from loving and caring for others. My best memories and biggest laughs are those that were shared with my wife and children.

MNB user Ron Rash wrote:

First, we need to call the males of this demographic what they are... boys, and not young men. I do not begrudge them the existence they seem to cherish, but it is difficult to muster affinity of any degree.

And another MNB user wrote:

David Sher, CEO of Switzerland-based fertility company Elite IVF recently said “if you provide the sperm, we can basically FedEx you a baby”.  This was spoken addressing the desires of gay men having kids, but your eye-opener suggests Elite IVF could make their quota focusing on women as their target market.

One thing you might consider is that we are all expecting to live a lot longer. Thus, are people delaying or lengthening each of the human emotional phases?  A lot of parents I know think “this is about everybody else’s spawn – not mine”.

I also pondered this same effect on women…why do you feel this seems to be just a male thing?  Middle + High School kids are sexting; their lives are rich with porn. Ever listen to a conversation between 16 year old girls?

Being a trusted advisor, generous (we'll figure out HOW to pay for college, you kids just go ahead and apply to the best!) and a digitally savvy, modern parent is what we all are. Or, think we are. We want the approval of our kids. Making them have summer or weekend jobs where they might clean floors, toilets or manure from barns could – well – turn our kids against us.

Is it any wonder why it’s tough to be a (grown) man!

I’m not sure I’ve ever worried much about wanting the approval of my kids. It is possible that wanting but rarely getting parental approval cured me of that particular concern.

Reading these and other emails about the Journal story, and having 24 hours to reflect, makes me think that perhaps the story was a little harsh. I still think it is an eye-opener, since this is yet another demographic group that needs to be considered when making marketing plans; but I also think that maybe we’re judging this group according to standards that may not be universal.

Do they want fulfillment out of their careers, and not just “jobs,” earlier than we did? Sure. But what’s wrong with that? We may have done them no favors by giving them trophies just for showing up, and by indulging their whims whenever we could ... but the broader message and desire, that work should be about personal fulfillment and not just about revenue generation, isn’t such a bad approach to life. Maybe the pendulum has swung a little far, but that is, after all, what pendulums do.

I got married when I was 28 years old. Frankly, I probably was too young. Now, I got lucky - I married one of the world’s great women, and we’re going on 28 years together. But I’m not sure I would have scored very high on anyone’s emotional maturity test at that age. So if young men want to delay, and get married and have families later, that may not be such a bad thing. it isn’t like they are saying they never want to be in a committed relationship, and that such a relationship won’t bring them happiness. They just want to wait until they ready.

And I actually sort of disagree with the notion that personal freedom and happiness are challenges that are never truly conquered, and therefore not as worthy of pursuit as other things. I believe fervently that personal autonomy and happiness are absolutely worth pursuing ... and that different people can find them in different ways, and should not necessarily subscribe to my definitions or expectations, or anyone else’s.

Some foods need to marinate longer than others to be ready for cooking.