business news in context, analysis with attitude

Published on: October 10, 2011

The New York Times this morning reports that Netflix has decided not to go ahead with plans to separate its DVD rental business, which it was going to rename Quikster, from its online streaming business - a plan that had been derided in the media and that resulted in hundreds of thousands of subscription cancellations.

In a prepared statement, Netflix CEO Reed Hastings said, “Consumers value the simplicity Netflix has always offered and we respect that. There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case.”

The separation of the two businesses was seen as being even more offensive because it came right after a 60 percent rate increase, which had already outraged subscribers.

Published on: October 10, 2011

by Kevin Coupe

There is an interesting new battle shaping up between Amazon.com and Barnes & Noble, and at issue is how Superman and his fellow DC Comics superheroes are going to be followed by fans.

For those not in the know, it should be pointed out here that DC Comics - owned by Time Warner - has decided to reboot virtually all of its archetypal superheroes, creating new and updated origin stories for Superman, Batman, The Flash, Green Lantern, and Wonder Woman. In doing so, it decided to take the no-longer-quite-so-radical step of making the new comics available for digital download, as well as a series of graphic novels.

And, so, according to the Los Angeles Times, “DC agreed to give Amazon exclusive digital distribution rights for the books, which include ‘Watchmen’ and graphic novels featuring Batman and Superman, for four months starting with the launch of the Kindle Fire on Nov. 15. The deal gives DC's books, which are being made available digitally for the first time, the advantage of being part of Amazon's huge marketing push for the Kindle Fire.”

Barnes & Noble then decided not to carry even physical copies of 100 graphic novels published by DC, saying that “to sell and promote the physical book in our store showrooms and not have the ebook available for sale would undermine our promise to Barnes & Noble customers to make available any book, anywhere, anytime.”

DC said it was “disappointed” in the Barnes & Noble decision, but is not backing down. As the Times writes, “DC will swallow the sales hit from Barnes & Noble for the four months rather than alter its Amazon agreement, apparently betting that it can make more money online than it would have in the retail giant's stores.”

It is an interesting conflict, from a marketing point of view; the question is to what extent retailers need to differentiate themselves in terms of product lines, and play hardball in terms of the competition. On the one hand, by not carrying the physical graphic novels, it could be argued that Barnes & Noble is even less living up to its promise “to make available any book, anywhere, anytime.” On the other hand, if one of your suppliers is going to give preferential treatment to your competition, that would certainly seem to be Eye-Opening grounds for reassessing the terms of your relationship.

Published on: October 10, 2011

The Boston Globe has what can fairly be called a worshipful piece about Wegmans and its planned opening next Sunday of its first Massachusetts store, in Northborough, describing it as “a food emporium so massive it will instantly be the largest grocery in New England.”

Some excerpts:

Re: Competitive Impact... “The arrival of a Wegmans in Northborough is likely to raise the stakes for every grocery seller in the region. While the company has fewer stores than other supermarket chains, its combination of natural and organic products (like Whole Foods ), bulk merchandise (like BJ’s Wholesale Club), and low prices (like Market Basket) give it an outsized presence in the industry.”

Re: Attitude... “Everyone in the place seems, to a skeptical visitor from Boston, unnaturally happy to be here ... It’s this kind of zeal that has local grocery store operators on edge as the 95-year-old family-owned company prepares for its debut. The 138,000-square-foot store - double the size of an average Stop & Shop - will feature some trademarks from Pittsford (NY): a cheese shop with 300 domestic and imported varieties; a Mediterranean bar with more than 100 offerings like olives and hummus; a make-your-own trail mix bar; and chef-prepared meals for $6. Employees will chop fresh fruit and vegetables in the produce aisles so customers can take home customized stir fries and salads.”

Re: The Wegmans Difference... “‘The number one difference between us and almost everybody else is that we are a family business,’ Danny Wegman says. ‘As companies have gone public, it’s begun to change the feeling in the stores. But at Wegmans, we’ve got 40,000 people who work for us and 20 percent of them are related.’

“To make sure that family feeling is transferred to Northborough, the company is spending $2.9 million on training and dispatching nearly 1,000 employees from other stores to pitch in for a few weeks. And 75 of the 600 permanent workers in Northborough are coming from other Wegmans supermarkets.”

Re: The Buzz... “The buzz keeps building. Nearly 18,000 people have signed up online for the Northborough store’s discount card - close to a preopening record, store officials say - and it already has more than 3,400 Facebook fans.”

Published on: October 10, 2011

The Wall Street Journal reports this morning that “authorities in China's southwestern city of Chongqing ordered Wal-Mart Stores Inc. to temporarily close some stores after accusing it of fraudulently labeling ordinary pork as more-expensive organic pork, in the latest hitch to the company's China ambitions.”

According to the story, “Chongqing officials ordered Wal-Mart to close 10 if its namesake stores and two Wal-Mart-owned Trust Mart stores on Sunday,” and must keep them closed for 15 days.

Walmart has apologized for any discrepancies between labeling and product reality, and offered to compensate offended customers.

Published on: October 10, 2011

The Wall Street Journal reports that the National Labor Relations Board (NLRB) has decided to postpone for two and a half months the imposition of new regulations that will require “employers to post a notice informing workers of their rights to join a union.”

According to the story, the delay is designed to allow businesses more time to figure out whether they are affected by the law or not. Some have said that the regulations are confusingly written because they exempt certain small businesses without defining that term sufficiently.

The Journal notes that “several business groups including the U.S. Chamber of Commerce have sued to block the rule, alleging it oversteps the NLRB's authority. The NLRB has said it is acting within its rights and noted the poster also informed employees about their right not to unionize.”

The new rules were scheduled to take effect on November 14, 2011, but now have been delayed to January 31, 2012.

Published on: October 10, 2011

The Tampa Bay Tribune has a story about Winn-Dixie’s initiative to transform its stores into shopping experiences that will rival the likes of Publix and Whole Foods - an effort that requires changing how people perceive the once bankrupt chain.

Here’s how the paper frames the story:

“Changing that impression means breaking out the checkbook. One of Florida's relatively small grocery chains, Winn-Dixie is spending more than $100 million on renovating stores into ‘Transformational’ models to rival a Whole Foods or Fresh Market in terms of style and polish. Plus, the company, now out of bankruptcy, is investing in new store technology and giving discount gas deals to frequent shoppers.

“Investors say that project represents the best hope Winn-Dixie has for surviving in a hypercompetitive Southeastern market.

“It's no idle question, either. Publix, Sweetbay and Walmart are all polishing their stores to more modern, luxurious style, and focusing more on higher-tier foods. Nearly every week, Winn-Dixie ranks as the most expensive store in the Tribune's Market Basket index of 30 common products, and Winn-Dixie stock has lost half its value since August to less than $6 per share.”

However, initial results from the first transformed stores have been encouraging, and company officials tell the Tribune that they now expect as much as 60 percent of the fleet to be renovated.

Published on: October 10, 2011

USA Today reports that Starbucks CEO Howard Schultz’s effort to get American corporations to stop making political donations to either party until the US Congress and White House show the ability to compromise, make progress and demonstrate political courage has been endorsed by 150 CEOs.

“I want to suspend contributions because I don't believe that writing a check ... is what we should be doing,” Schultz told CNN. "Instead, I want to send this powerful signal to Washington that I and other like-minded CEOs, now 150 of us, are dissatisfied with the status quo. And we are begging you to understand that we need solutions to significant problems."

Published on: October 10, 2011

The Los Angeles Times reports that the new marketing campaign by Domino’s in support of what it is calling “artisan pizza” suggests that the word “artisan” doesn’t mean what it used to (“meticulously hand-crafted product”).

According to the story, “Wendy's has its Artisan Egg Sandwich, Ralphs markets offers Private Selection Artisan Breads and Starbucks sells Artisan Breakfast Sandwiches.

“The term, from the Italian ‘artigiano,’ was coined as far back as the 16th century to refer to a skilled craftsman who carved or otherwise hand-tooled an item.

“More recently, foodies have used it to describe a bread, cheese, chocolate or other cozy item made in an old-fashioned, hands-on manner.”

But now, the story suggests, “artisan” has become just another marketing term that loses currency every time it is misused or overused.

Published on: October 10, 2011

• Internet Retailer reports that Walgreen has introduced a new service that sends text reminders to customers’ mobile phones reminding them that they have a prescription scheduled to be refilled, and then again when the refill is ready for pickup.

The program builds on an existing program that texts customers when submitted prescriptions are ready for pickup ... a program, Walgreen says, that is “routinely” used by more than two million of its customers.

Published on: October 10, 2011

• Consumers Union, the policy and advocacy division of Consumer Reports, has endorsed the passage of AB1319, the Toxin-Free Infants and Toddlers Act, which protects California's children from baby bottles and sippy cups containing the dangerous chemical Bisphenol-A (BPA), which some studies have shown can be harmful to their development.

Governor Jerry Brown signed AB1319 last week.

• Hain Celestial Group reportedly has acquired Europe’s Best, a Canadian brand of frozen fruit and vegetables, from Smucker Foods. Terms of the deal were not disclosed.

Published on: October 10, 2011

Oakland Raiders owner and general manager Al Davis, who while seen as being stubborn and intransigent also is perceived as having had a lasting legacy in how professional football is played and watched in this country, passed away over the weekend. He was 82.

Published on: October 10, 2011

...will return.

Published on: October 10, 2011

In Week Five of National Football League action...

Philadelphia 24
Buffalo 31

New Orleans 30
Carolina 27

Oakland 25
Houston 20

Kansas City 28
Indianapolis 24

Cincinnati 30
Jacksonville 20

Arizona 10
Minnesota 34

Seattle 36
NY Giants 25

Tennessee 17
Pittsburgh 38

Tampa Bay 3
San Francisco 48

San Diego 29
Denver 24

NY Jets 21
New England 30

Green Bay 25
Atlanta 14




And ... the Major League Baseball postseason continues, with the Milwaukee Brewers and the St. Louis Cardinals advancing to the National League Championship Series with, respectively, defeats of the Arizona Diamondbacks and the Philadelphia Phillies on Friday night.

Over the weekend, the Texas Rangers beat the Detroit Tigers 3-2 in the first of the best-of-seven American League Championship Series.

And, the Brewers beat the Cardinals 9-6 in the first game of the National League Championship Series.