retail news in context, analysis with attitude

Not everybody agreed with my FaceTime commentary yesterday, which talked about China being able to build convention centers and bridges and railways in a fraction of the time that we can, and what the acceleration of innovation means to all businesses.

MNB user Lisa Malmarowski wrote:

This is half the story. How does China do it is the bigger question? At the expense of human and worker rights? No, an escalator shouldn't stay broken for half a year, but that's a different issue to fix and in my opinion is not a good analogy to use.

Seriously, besides sheer population and density advantage, how is China pulling these things off? 

Just because you can, doesn't mean you should, by any means necessary.

No disagreement with that last statement. None at all.

And from another MNB user:

Two points: Before you get all wrapped up in Tom Friedman's new book, you might consider checking out Adam Gopnik's evisceration of it in last week's issue of The New Yorker.

Concerning the speed with which the Tianjin center was built and the bullet train from Beijing: Don't forget the Chinese rail accident last month (or July?) that has been attributed to faulty design and failure to develop proper safety procedures. Maybe ... just maybe, not necessarily ... the Tianjin center went up so quickly because of shortcuts.

I read Gopnik’s piece, and it certainly is an interesting take on the new Friedman book. I can’t respond fully to it, since - as I noted yesterday - I have not yet finished “That Used To Be Us,” but was simply grabbed by one metaphor and wanted to share it. (Though my general feeling is that Friedman is someone who I think makes common sense a lot of the time ... and who is worth paying attention to.)

I’m certainly not suggesting that the US engage in human rights abuses in order to fix escalators ... or build anything else.

However, there has to be another way. The unemployment rate is high, we have pressing infrastructure needs in this country, and it seems to me that there ought to be away to do things faster and better without abusing people. If we’re not willing to work 24 hours a day - not as a rebuke to capitalism and freedom, but as a celebration of capitalism and freedom - then do we really have a sustainable model?

I’m just asking.

MNB user Sue Galati wrote:

Every time I cross the Bronx Whitestone Bridge, I ask myself  “Just how long does it take to fix a bridge??”  I mean it’s been decades…

I cross that bridge constantly. And I think the same thing.

When I’m not worried about it falling down.

Got several emails responding to my comment the other day about a story that said too many kids are drinking whole milk; essentially, I said, there are a lot of other things to worry about before we obsess over this.

MNB user Elizabeth Archerd wrote:

You're right. We have lots of real things to worry about.

Much of the baby-boom grew up on whole milk and did not have a childhood obesity problem. A recent study published, peer-reviewed showed that whole chocolate milk actually helped overweight and obese children. Something unique to milk fat helped their bodies handle fat better overall.

Another big study appears to show no weight benefit from using skim or low fat dairy products.

Real food is not the problem.

On the subject of whether Amazon is a smart place to buy groceries, MNB user Steven Ritchey wrote:

I know when Amazon first started carrying groceries, I looked at their offerings, and decided I could do better at my local grocers and at the Dollar General store.  Pricing to me was not impressive at all and couple that with the fact that I had to wait for shipping, it didn’t work for me at all.  Now I buy from Amazon, I have bought a number of things in a number of categories.  If it were harder for me to get out of the house, or if like you I had elderly people to take care of who didn’t live with me, or had kids in college I could see it being useful.  But, since none of those things fit me, I’ll continued to go to the grocery store every week or so.

I’m not against Amazon, far from it, it’s just that for me, their grocery offerings don’t work for me.

Like I said, the answer to the question depends on your life circumstances. I’m reasonably sure that for the time being, Amazon is comfortable with that.

Regarding the gender discrimination class action lawsuit against Costco that ran into a judicial buzz saw because of the precedent set when the US Supreme Court tossed out a similar suit against Walmart, one MNB user wrote:

I highly suggest a documentary that is currently showing on HBO called “Hot Coffee”. It shows just exactly what is going on in this country in regards to “tort” and “court” reform. The last bastion of equality in this country where “Joe” citizen could take on Corporate America in a fair fight is slowly being removed. The Walmart and Costco examples are two glaring examples of this crisis.

Responding to Michael Sansolo’s column about taking advantage of the current economic malaise to find and exploit competitive advantages, one MNB user wrote:

Sansolo hits anyone running stores right between the eyes! Don’t blink on this one.

As the economy continues to limp along, how many of us are training our employees to unleash them to better serve customers? I’m talking about specific skill training for employees to be an asset for our customers. Knowledgeable employees share information with customers. Knowledgeable customers buy more and are more loyal. If customers would understand the multiple product regimens to improve their skin care (hair care, oral care, etc. pick one), or which products in the prepared foods area of your deli case would complement a salmon fillet, or how to discuss planning for a special occasion (food, flowers, supplies), sales would skyrocket, EVEN IN A DOWN ECONOMY!  And all it takes is a little time to train…..

I know the standard excuses……labor hours, can’t spare people from the store floor, how do I keep this going with new employees, but there are very affordable solutions if you make the commitment to stand out from your competition!

Needless to say, we also continue to get email about the Netflix debacle. MNB user Kristy Chadbourne wrote:

When I got the email from Mr. Hastings, I promptly went to the Netflix website and cancelled my membership.  They have increased pricing dramatically and now you've got to go to TWO websites and manage your account?  Don't think so.  I don't recall getting a survey in the mail, so seems to me they didn't care what their customers thought of this change.  Just an email AFTER the fact.  Bye Netflix....

From another MNB user:

When I opened and began reading Hasting's email early in the morning, I quickly checked the calendar for a moment thinking it was suddenly the beginning of April. Unbelievable.

MNB user Jim DeJohn wrote:

It was fun reading "your views" this morning regarding the Netflix fiasco.  In fact, I had cancelled my DVD part subscription when the price hike was announced.  When I received the email from Reed on Monday morning - I actually deleted it as I thought that a group like anonymous must have hacked his account and wrote such an absurd email...nope...I was was reed.

From another MNB user:

After reading this article, the only way this split really makes sense is that Netflix will spin off the DVD rental business and let it die a slow death. Well, maybe not that slow...2 - 5 years.

MNB user Brad Morris wrote:

I had to chime in. I canceled my Netflix account this morning. My reasoning was simple. The final straw was the separation of the two services, DVD and streaming.

While it is great to be able to stream a TV show or movie, I like to consume entertainment on the high-end. That means Blue-Ray. My kids, on the other hand, are all about the now. Streaming was perfect for them. With one service, all of our needs were met. There was one website and one ID and password to remember. If a movie that the kids wanted wasn’t available for streaming, it could easily be added to the DVD-by-mail queue.  If I got stuck in an airport I could always stream the occasional title to my iPad. Netflix offered the best possible complete solution until the world exists where everything is available in the highest definition and sound-quality, anywhere at any time.

The first mistake was charging too much more in too bold a manner. Had Netflix slowly increased prices to come in-line with costs/margins, most of us wouldn’t have noticed or minded. Prices go up…that is what they do. New contracts are negotiated with studios, postage is higher, we get it. It was the abrupt and too public nature of the increases that focused everyone’s wrath. I was willing to pay more. It was more in the way they did it.

The separation of the two services into separate businesses is just plain stupid. Let’s see… my customers have more choices than they have ever had and every day I have a new competitor pushing at my business model… I think it is time to make it harder and more complicated for my customers to do business with me at the same time that I am charging them more money…

To add insult to injury, when I canceled my subscription there was no way to explain why I was doing it to Netflix. They gave me a laundry list of reasons I could choose from, none of which matched my reasons. There was no mention of the price increase, nor of the pending business separation. I couldn’t even write a comment, had I wanted to.

Another MNB user chimed in:

I find it interesting that usually we are criticizing companies for not reacting to the changing consumer landscape forcing themselves into irrelevancy.  But now, in the case of Netflix, we are criticizing the changes they are making to ensure relevancy at least into the near future.  Mail order DVD’s is probably the next big business to implode, as streaming continues to grow rapidly.  It appears that Netflix is re-positioning themselves to handle this transition.  They have the data.  I’m sure it showed how their customers behaved.  How many received mail order only, how many used streaming only, and how many used both and to what percentage.  I’m sure the data shows the real direction that the consumer is moving, and it appears to me that Netflix is making a pre-emptive strike to follow the consumer.   I’m sure the consumers that use both are unhappy that they have to use two websites.  But how many people is that really in relation to the entire customer base of Netflix?

That’s the data we don’t have, and they haven’t shared.  As a longtime customer of Netflix, at first I was shocked at the price increase.. however, when I looked at how my behavior had changed over the past 5 years from predominantly DVD’s and no streaming, to almost only streaming and getting about 1 DVD a month on a good month, they saved me $2.00 a month by allowing me to move to a streaming only plan.  They forced me to make a decision I should have made on my own.   There are probably other advantages at work for Netflix that none of us know, relating to negotiations to improve their library.    Maybe the message hasn’t been delivered correctly, but it certainly seems that Netflix is doing exactly what we criticize so many other companies for not doing.  Can you say Blockbuster? Borders?  I was sad to see their brick n mortar stores go away, but listening to me telling them to keep them open, would have helped sink the ship even faster.

All fair points. Which is why I felt it was necessary to run the piece the other day that, if it did not exactly defend the Netflix decision, at least created a rationale for it - that all companies are vulnerable to disruptive influences, and that perhaps Netflix was trying to disrupt its own business before someone else came along to do it.

In many ways, it may work out that this is a classic case of the strategy being right and the tactics being all wrong. We’ll see.

MNB user David Bernstein wrote:

The whole thing makes me think of the first Iron Man movie, when Jim Cramer from "Mad Money" rips on Tony Stark's sudden new direction for his company: "It's a weapons company that doesn't...make...weapons!"  Netflix has become synonymous with DVD's by mail, but now it's a DVD rental company that doesn''s!

Anybody who reads MNB knows that I’m a sucker for a good movie reference. But...

To be fair, Netflix CEO Reed Hastings used to go out of his way to say that the company was not a DVD rental company, but rather an entertainment provider, and that he always figured that streaming would replace DVDs. That’s not the problem. At issue is how he has handled it.

To be continued...
KC's View: