business news in context, analysis with attitude

Published on: March 4, 2011

by Kevin Coupe

The satirical website The Onion had a terrific piece this week that was, in addition to being very funny, also made a serious point about the ways in which the retailing world has changed.

The story went like this:

Officials at Netflix announced Thursday that the company has finally reached its long-term goal of constructing a chain of easily accessible stores.

"Having actual physical locations was always our ultimate intent, and we are proud to provide our customers with the convenient option of driving to a nearby Netflix store and renting any available movie for just $3.99 per title," said Netflix spokesman Henry Regis, adding that the ease of physically walking through aisles and picking out DVDs will more than make up for the stores' minimized selection of titles.

"We will also be implementing late fees to help ensure films are returned on time—that way no one misses a chance to rent the hottest new releases." Regis confirmed that the new physical locations will be open from 10 a.m. to 8 p.m. and include easy after-hours drop-off boxes.

Now, that’s funny. (I just wish I’d thought of it first, and used it on April 1.)

But the sad fact is that every once in a while there will be a serious report about speculation that Amazon might be interested in acquiring a company like Borders or Barnes & Noble, or might be intent on finding a use for all the Blockbuster sites that are about to come on the market.

Which just goes to show how short-sighted some people are, or how rooted they are in old-world business models that are on their way to obsolescence.

Companies like Netflix and Amazon were founded, and continue to be successful, on the premise they were going to disrupt traditional and vulnerable business models. It’s not like Reed Hastings and Jeff Bezos - the two companies’ founders - were looking to mark time before taking on the trappings and limitations inherent in these old world models.

No, they were looking to blow the old models up.

People rooted in traditional models need to wake up, to open their eyes. The “ultimate intent” of companies like Netflix and Amazon is to move forward, not backward ... and that ends up leaving a lot of traditional thinkers in the dust.

Published on: March 4, 2011

The Los Angeles Times reports that things are not looking good for labor talks taking place in Southern California, rekindling bad memories of the extended strike/lockout that took place there just seven years ago, affecting more than 800 stores for 141 days.

According to the story, “three days before a key labor contract expires, negotiations between a grocery workers union and three of the region's leading supermarket chains are going slowly ... The contract covers about 62,000 grocery workers in Southern California, including those employed by Ralphs, which is owned by Kroger Co.; Safeway Inc., which owns Vons and Pavilions stores; and Albertsons, which is owned by SuperValu Inc. The current contract ends Sunday night.”

Apparently, no proposals have been made by the chains to the United Food and Commercial Workers (UFCW), and no contract extensions have been agreed to by the two sides. UFCW leaders reportedly have been telling members to prepare for the worst, but they also are saying that they do not anticipate going on strike anytime soon.

The Times notes that one of the things that could influence the chains’ behavior is the fact that “industry researchers have shown that, in the wake of the strike, competition increased with new entrants such as Tesco's Fresh & Easy chain and expansion by big-box retailers including Wal-Mart. Some consumers in Southern California altered their shopping patterns. Smaller chains and independents, including Trader Joe's, Food 4 Less and Gelson's enjoyed a boost of business from shoppers looking for deals, grocery analysts said.”

Published on: March 4, 2011

The Chicago Sun Times reports that the newly elected mayor of Chicago, Rahm Emanuel, has applauded the opening by Supervalu-owned Save-A-Lot of five new supermarkets in city neighborhoods that did not have access to decent food stores.

Emanuel said that the lack of access experienced by an estimated 600,000 of the city’s residents is “unconscionable,” and said that once he takes office, he will convene a meeting with all of the city’s supermarket chains and ask them to develop a plan to serve all of Chicago’s neighborhoods.

According to the story, “Emanuel had made increasing access to healthy food a platform of his campaign, pledging to use federal programs to make investing in low-income communities more attractive to food retailers. And he suggested he would pressure retailers looking to open stores in more affluent neighborhoods to consider other parts of the city as well.”

Published on: March 4, 2011

MarketWatch reports that Whole Foods CEO John Mackey told an economics conference this week that the perception of the retailer as expensive “is wrong-headed and counterproductive, as America grapples with high rates of heart disease and other diet-related health issues.”

Mackey said that if people spent more money on better food, they’d actually save money on other things, like health care. “People are historically ignorant of how little people spend on food in the United States,” Mackey said, adding, “It would be a lot easier if the media would stop repeating Whole Paycheck, Whole Paycheck.”

Published on: March 4, 2011

MSNBC reports that the US Department of Labor said this morning that “the nation’s unemployment rate was 8.9 percent in February, down from 9 percent in January and sinking to a nearly two-year low.”

According to the story, “U.S. employers added 192,000 jobs last month, the government reported Friday - the biggest jump since mid-2010 and the latest sign that the nation’s employment picture is set to brighten this year.

“The monthly payrolls gain was above market expectations for 185,000 jobs. Data for December and January was revised to show 58,000 more jobs created than previously estimated. And as in previous months, the private sector accounted for all the job gains in February, with an addition of 222,000 positions, up from 68,000 in January.”

Published on: March 4, 2011

The Seattle Post Intelligencer reports that Amazon.com has been hit with a class action lawsuit charing that it “fraudulently circumvents users' Web-browser privacy settings to collect personal information without permission and share it with other companies.”

According to the story, “The suit says Amazon tricks Microsoft's Internet Explorer into thinking the e-retail site is ‘more privacy-protective than it actually is,’ and uses a clever work-around to collect users' personal information even if they have set their browser to block it. The plaintiffs allege Amazon knowingly and fraudulently set up its website to spoof IE, and purposefully misleads customers in its privacy policy published online.”

The suit has been launched by Amazon customers who say that after making purchases on the site, they have been bombarded by emails from companies with which they never have done business, and they say they have tracked the emails back to Amazon.

The Post Intelligencer notes that “as a class-action lawsuit, the case represents anyone who has used Internet Explorer versions 6, 7 or 8 -- with high privacy settings -- to visit Amazon.com and purchase products there. The plaintiffs are asking for a jury trial, injunctive relief and monetary damages, which could be spread among millions of consumers.”

Published on: March 4, 2011

Bloomberg Business Week reports that in a conference call with analysts this week, Costco CFO Richard Galanti explained the retailer’s approach to margins and keeping prices as low as possible in a time of food price inflation.

“When you look at -- I'm making these exact numbers up -- but if you look at a 15-pack of muffins or something ... we sell a heck of a lot of those to restaurants and businesses and convenience stores.,” Galanti said. “And I don't know the price of the top of my head right now, but if it was at $5.49 or $4.99 or whatever the (price) was, you tend to hold off and realize a lower margin for several weeks or a few months and then finally bring it up to that next level of 30 or 50 cents extra and you get back to your regular margin in that stuff. That is not a competitive issue, other than we want to protect the prices to the members that are buying these items. We feel that overall our margins have been quite good, and we continue to do that kind of stuff.”

Published on: March 4, 2011

• Bloomberg reports that Ahold USA said this week that it “is scaling back spending to enable it to cut prices and use other promotions to win shoppers in the U.S., where the company gets most of its revenue. The company said today it would continue to reduce costs and that 2011 would remain challenging for the food-retail industry.”’

• The Associated Press reports that Target Corp. has agreed to settle a lawsuit charging that it illegally disposed of hazardous waste in California by writing a $22.5 million check. In addition to the fine, the settlement “puts Target under tight scrutiny to ensure that it properly disposes waste at its nearly 300 stores in California.”

• The New York Times reports that Family Dollar Stores has rejected a $7 billion takeover bid from Trian Group, saying that “a sale isn’t in the best interests of the company.” However, the Times reports, some analysts believe that the company could still be in play.

• Casey’s General Stores announced that it has signed a definitive purchase agreement to acquire five convenience stores in the Springfield, Missouri, market from QuikTrip Corporation. Terms of the deal were not disclosed.

Published on: March 4, 2011

...will return.

Published on: March 4, 2011

This week, I spent a few days on business at one of the nicest resorts I’ve ever visited - Suncadia, in Cle Elum, Washington, about 70 miles east of Seattle. It is nestled in the Cascades, and is absolutely gorgeous - and one of the nicest things about it is that about two miles from the resort is a place called Swiftwater Cellars, a spectacular working winery that sources grapes from a number of vineyards around the state, and makes some extraordinary wines, as well as featuring an extraordinary restaurant with some delicious food.

My favorites of the wines I tasted was the 2007 Proprietary Red, which is a terrific blend of Cabernet Sauvignon, Cabernet Franc, Merlot, Petite Verdot and Syrah, and the 2007 No. 9 Red, which is a blend of Cabernet Franc and Merlot.

Right now, these wines are only available at the winery and via mail order, but I recommend you check them out at www.swiftwatercellars.com.




I gather, from all the news coverage, that the wedding next month of England’s Prince William and Kate Middleton is sort of a big deal over there.

But I must confess that I have no idea why we’re making a big fuss about it here on these shores. They look like nice enough kids and I wish them luck, but I cannot help but think that all this attention is precisely the thing that contributed to the death of his mother - this unhealthy focus on celebrity, and the desire to know every little thing about people who are perceived as special or exalted.

I just don’t get it.

But then again, I have trouble understanding how the various broadcast and cable networks could spend so much time this week paying attention to Charlie Sheen, putting what appears to be a fairly dramatic meltdown on very public view.




Say what you will about Toyota - and the car company certainly has come in for its share of justifiable criticism over the past year or so - but my estimation of the company has gone up in recent weeks.

Twice in the past eight days I have been driving rented Corollas and found myself in the middle of an unexpected blizzard - once driving from Chicago to Milwaukee, and then from Seattle through the Cascade mountain range. And both times, while I watched trucks, buses and SUVs pull to the sides of the road, my Corolla kept plugging along, never lost traction, and I made it safely to my destination.

Which is saying something.




I don’t drink Jim Beam, mostly because I don’t drink much of the hard stuff. But there is a commercial for Jim Beam called “Parallels,” featuring Willem Dafoe, that is as good as any commercial in recent memory. (You can check it out on YouTube.) It is evocative and thoughtful, beautifully produced, and more like a mini-move than an ad for bourbon. And yet, everything about it supports the brand message - that life is full of choices, that we are defined by our choices, and that safe choices are rarely the most rewarding ones. Check it out.




My wine of the week: I heartily recommend the 2009 “Layers,” a beautifully blended white wine from Peter Lehmann Wines of Adelaide, Australia. It is made up of Semillon, Chardonnay, Pinot Gris, Muscat and Gewürtztraminer.



That’s it for this week. Have a great weekend...and I’ll see you Monday.

Slainte!