business news in context, analysis with attitude

Published on: December 4, 2012

by Michael Sansolo

The single most important phrase business people need to learn from 2012 is "epistemic closure." As Kevin explained on MNB recently, epistemic closure is essentially the inability to accept any information that conflicts with what you already know or believe.

It’s a trait that’s deadly in politics, business or even writing a blog (more on that to come) because if we don’t allow ourselves to be challenged - and hopefully improve in the process - we atrophy and die. As an example, let me offer up two very different shopping trips my wife and I made in the past week. One trip was to a company waging an incredibly well publicized competitive battle and the other to a retailer with no challenges.

Motivated by the need for a specific piece of car audio equipment and curiosity on how to fight back against holiday “showrooming,” the window-shopping trend that may be fatal to some bricks-and-mortar retailers, we ventured out to Best Buy. We found a retailer truly fighting back.

Our local Best Buy is clearly on the front lines of the company’s competitive response. The lighting, signage and displays are vastly improved in the store. The front end is better if still a work in progress. Most of all, the associates have clearly gotten the message. If Best Buy has more people like Chris, the bright young man who helped us, the company has a chance. Chris was engaging, knowledgeable, pleasant and managed to sell without being pushy.

Certainly times still are tough at Best Buy, but thanks to the battle with Amazon.com, Best Buy may be better than ever. Competition, we know, can do that.

That contrasts vividly with the local sewing/knitting store frequented by my quilt-creating wife. I’m betting the sewing industry is having tough times (been to a quilting bee lately?) so it’s distressing to see what a terrible shopping experience that industry offers.

The problem is this: sewing machines are an essential part of quilting, yet it’s essentially a non-competitive market. Individual stores are regional sales locales for specific makers and that’s that. When my wife needs a part (as she did) for her Bernina machine, she can’t buy it on line, from Amazon or any place other than this one store.

With no competition, the store reeks of complacency. The displays, lighting and service levels all leave something to be desired. In fact, the highlight of this one store is the cacophony caused when barbells are dropped on the floor of the gym one flight up. The lack of competition certainly ensures a nice level of sales and profits, but (at least at this store) it also creates complacency. I’m betting that within a few years Amazon or another web purveyor will find a way to completely wipe out these mediocre stores.

That is unless the owners can shed their epistemic closure and find a way to do better.

Bloggers like me have to listen too and at times write that dreaded phrase: I was wrong.

Last week I wrote about the business lessons from Grinnell College’s basketball team in the wake of a record-setting scoring output by one player. The point I made was that the Grinnell coach demonstrated the importance of reinventing his team to make it successful on the court and in the stands. A couple of readers sent me notes questioning my point and I was prepared for the argument.

While Grinnell clearly ran up the score, the lesson was about differentiation. In addition, competition requires reaction and I felt Grinnell’s opponent could have countered the effort by slowing down the game and focusing on the designated scorer. Then I did some additional reading and my opinion changed; those readers were right and I was wrong.

Competition may be great, but the Grinnell game against Faith Baptist wasn’t about competition, student athletes or even a clever promotion. It was dishonest and both teams are to blame. Grinnell carefully selected the game as an opportunity for a record setting scoring burst and promoted it and played it as such. What’s worse, it seems Faith Baptist played along by ensuring in advance that the game wouldn’t count against its record and never once altering tactics to slow the scoring orgy.

It only took a little more research to learn that…something I should have done before last week’s column. Now, I still believe in my point that competitors need to constantly find new ways to succeed, but this game truly offered nothing worth copying, much as the sewing store with a monopoly offers nothing.

Instead I’d rather you think of Best Buy, a company under stress that at least is trying to find a new way to win. There’s no guarantee of success, but the effort is what bears watching.


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: December 4, 2012

by Kevin Coupe

The Daily, a two-year-old effort by News Corp. to create a newspaper specifically for the iPad, will be shut down in two weeks, a victim of poor readership and financial losses.

In the announcement by News Corp., it was noted that "The Daily was a bold experiment in digital publishing and an amazing vehicle for innovation. Unfortunately, our experience was that we could not find a large enough audience quickly enough to convince us the business model was sustainable in the long-term. Therefore we will take the very best of what we have learned at The Daily and apply it to all our properties."

The move comes as News Corp. is splitting into two entities. News Corp. will be one business, made up of the company's publishing assets (such as the Wall Street Journal and the New York Post, while Fox Group will hold the company's TV and film businesses (such as the 20th Century Fox film studio and Fox News). Had The Daily remained in business, it would have been part of the publishing side, which would have made its continuing losses far more problematic considering the state of print publishing.

However, the biggest problem with The Daily, IMHO, wasn't that it was ahead of its time. It was that, as a source of news, it was utterly useless, inordinately shallow in a way that made USA Today look like The Economist. It didn't seem to capitalize on tablet technology in a way that would have made it a daily and compelling read.

I read content on my iPad a lot. I love the New York Times application, and the way The New Yorker is formatted for the iPad is brilliant. And you may laugh, but one of the best publishing apps for the iPad is from Entertainment Weekly.

But The Daily never gave me a reason to come back, to make it a habit. It seemed ill-conceived and badly delivered.

As such, it is a business lesson and an Eye-Opener for every company considering technological innovations.

Published on: December 4, 2012

The New York Times reports on how Mattel, faced with a shifting demographic reality that has more fathers than ever doing the Christmas present shopping, is offering a Barbie construction set that it thinks will appeal to dads looking for things to buy their daughters. While the new item is designed to make it easier for a father to shop the dolls aisle, it also reflects another, positive, and broader implication - daughters, rather than being only given dolls and other supposedly girl-centric presents, also are being encouraged to play with toys that can help them develop math and science skills.

Here are two important passages from the story:

"Consumer surveys show that men are increasingly making the buying decisions for families, reflecting the growth in two-income households and those in which the women work and the men stay home. One-fifth of fathers with preschool-age children and working wives said they were the primary caretaker in 2010, according to the latest Census Bureau data. And 37.6 percent of working wives earned more than their husbands in 2011, up from 30.7 percent 10 years earlier."

"The change is having consequences beyond toys. Consumer products have traditionally been marketed to appeal to women, and stores have been designed for women’s sensibilities. Now, some brands and stores are catering directly to male decision-makers. Sears is reorganizing stores to put tools next to work wear, for instance, based on men’s preferences. Procter & Gamble is working on men’s grooming aisles at top retailers, a nod to the fact that women are no longer choosing shampoos or shaving creams for their husbands. With the selling point that it helps girls develop spatial reasoning, the Barbie set, a joint effort of Mattel and the toy company Mega Bloks, is also meant to pique fathers’ interest."

Published on: December 4, 2012

The Seattle Times reports that Amazon Fresh has begin selling and delivering meals prepared and prepped by Seattle-area restaurants that do not themselves have delivery services.

According to the story, "the new 'Seattle Spotlight' delivery program provides previously unheard-of access to restaurant meals and ingredients from signature shops ... dropped off through the same program that provides cat litter and a gallon of milk with a few hours notice ... It's also, in some cases, an interesting blend of takeout and home cooking, ranging from opening a ready-to-heat container of Pike Place Chowder to grilling your own Skillet burger patty and frying your own fries."

Rick Batye, vice president of AmazonFresh, tells the Times that the service gravitates towards innovative and "iconic well-known brands that are associated with quality and are unique in their offering."

Among the Seattle companies working with Amazon Fresh on the "Seattle Spotlight" program are Beecher's Handmade Cheese, Pike Place Fish Market, Top Pot Doughnuts and Daniel's Broiler.

Published on: December 4, 2012

The Minneapolis / St. Paul Business Journal reports that "Cerberus Capital Partners, the private equity firm that had seemed the best bet to buy Supervalu Inc., might narrow its target to Supervalu's Albertson's stores instead."

Part of the problem seems to be that Cerberus is encountering resistance from potential funding sources that question Supervalu's long term worth and viability.

The story says that Supervalu "has been laboring to sell itself since summer. Because of the diversity of its assets, it's had a hard time finding a single buyer. But the Wall Street Journal notes that Supervalu could decide to pass on any buyout deal; it has enough liquidity to go it alone and has drafted a multi-year turnaround plan that it might prefer over selling the company piecemeal.

Published on: December 4, 2012

• Ahold-owned Peapod said yesterday that it has joined the Branded Audience Network being run by OwnerIQ, which is described as enabling "advertisers to target advertising based on the products and brands that consumers either currently own or are considering ... The new partnership with Peapod will transform the browsing behavior of Peapod customers in 22 markets nationwide into ad-targeting opportunities across the web."

Published on: December 4, 2012

...with brief, occasional, italicized and sometimes gratuitous commentary...

• The Centre for Retail Research is out with a report calculating that "retailers in the US are expected to lose $8.9 billion over the holiday season (mid-November through Christmas) as a result of shoplifting, dishonest employees and vendor or distribution losses ... The report found that American retailers could lose $3.8 billion through shoplifting, $4.7 billion through employee theft, and $400 million through vendor and distribution losses."

According to the report, "The losses could represent a four percent increase over the same period last year. The primary contributors to retail crime are employee theft (53 percent) and shoplifting (42 percent)."

• In Minnesota, the Star Tribune reports that "for holiday shoppers, free shipping has gone from perk to priority. Shoppers don't just like it. They increasingly expect it. So, at least for the holidays, online retailers are scaling back minimum purchases and other requirements that have accompanied free shipping offers of the past.

"Nearly a third of online retailers plan to offer free shipping without any conditions at all this holiday season, according to the National Retail Federation ... Indeed, 85 percent of shoppers prefer free shipping without conditions to other promotions, according to MarketLive Inc., an e-commerce services company in Petaluma, Calif."

Totally agree. I've long felt that free shipping - or at least the illusion of free shipping, like that offered by Amazon Prime - is going to be the price of entry for most retailers, simply because that's what customers are going to expect.

• Bloomberg reports that Unilever "will sell more parts of its food business as it focuses on faster-growing personal care products and emerging markets, Chief Executive Officer Paul Polman said." One business currently on the sales block - Skippy peanut butter.

• The Washington Times reports that "a Senate bill requiring online retailers to collect sales tax from customers may be tacked on the National Defense Authorization Act for 2013. Sen. Richard J. Durbin, Illinois Democrat, filed an amendment Friday to include the Marketplace Fairness Act in the spending bill with lawmakers voting as early as next week ... The movement to enforce online sales taxes has gained traction this year with both parties as many state and local governments struggle to fill accounts and traditional retailers seek to level the commercial playing field."

I have no problem with the bill. What I have a problem with is a government institution in which it seems completely normal to add an amendment about online sales taxes to the Defense Authorization Act.

Published on: December 4, 2012

• Unified Grocers announced that Susan M. Klug, formerly President, Southern California Division, of Supervalu-owned Albertsons has been named Senior Vice President and Chief Marketing Officer.

• Unified Grocers also announced that Leon G. Bergmann has been named Senior Vice President, Sales, a new position at Unified. Bergmann comes to Unified from Supervalu, where he was President, Independent Business and was responsible for supporting the growth and success of independent retailers

• The Financial Times reports that Sir Terry Leahy, the retired CEO of Tesco, is becoming the chairman of the British discount chain B&M, following a private equity buyout by Clayton Dubilier & Rice, the equity group that uses Leahy as a senior adviser.

• Family Dollar Stores announced that it has named Tammy L. DeBoer, who has been running the company's private brand efforts, to the position of Senior Vice President - Food.

• Diamond Foods said yesterday that David J. Colo has been appointed to the newly created position of Executive Vice President, Global Operations and Supply Chain. Colo most recently spent seven years with ConAgra Foods in a variety of senior roles including manufacturing, operations and food ingredients general management in the Consumer and Commercial Products Divisions.

• NACS announced that Paige Anderson, most recently deputy chief of staff and legislative director for Rep. Mary Bono Mack (who lost her bid for re-election from California's 45th Congressional district), has joined the convenience store trade association as its director of government relations.

Published on: December 4, 2012

A reminder, if I may...

I will be in Chicago at the end of the week, attending the Friday performance of "A Klingon Christmas Carol," in which my eldest son has a role, at the Raven Theater. (You can check it out here .)

BTW ... I got an email yesterday from an MNB user who attended the show last weekend; this particular member of the MNB community actually was in the show last year, and he informed me that my son David earned our family "much honor."

Since I'm going to be in Chicago, I thought it might be nice to have one of our little MNB get-togethers before the show. So I'll be at the bar at Bin 36, located at 339 North Dearborn Street, if anyone would like to join me for a glass of wine (not Klingon bloodwine, alas), from 4:30 pm to 6 pm. (I'll have to leave at 6 if I'm going to make the 7:30 pm curtain for "A Klingon Christmas Carol.")

We can raise our glasses and say, "Heghlu'meH QaQ jajvam!"

Published on: December 4, 2012

Chiming in on the email we posted yesterday that was critical of customer service at The Apple Store, one MNB user wrote:

Re: The quality--or lack thereof--of the Apple Store, the thing that frustrates me is that business folks and marketers refuse to acknowledge challenges posed by cultural contexts and social trends, assuming instead that most any problem can be solved through "great" or "effective" leadership.

One of the things that made the Apple Stores begin to head toward a compelling experiences in the earlier days was the tight knit connections between Genius Bar workers and forward-leaning tech consumers. Notice I said "begin" because the early incarnations of the Apple store were as mundane as the pre Jobs II era Macs. But it was this tight correspondence that worked so well. It really meant something to be a Genius Bar worker hanging out in Palo Alto, Seattle, New York or even, say Portland. Now they have Apple stores in Franklin TN, Birmingham and Hunstville Alabama. Common sense would reason that the Apple experience in Franklin TN is simply not what it is going to be in Portland Oregon. Magical experiences are not just built by great leaders with a design focus, they also require folks on the other side of the equation to play along in the game. And if the consumer base isn't into the game, there's little management can do.

If I were in charge, I might follow the path of Wegman's or Trader Joe's, both of which have been very careful to expand only in little baby steps, ensuring that their consumer follows them along. It took Knoxville 30 years to get a Trader Joe's. The Apple Store opened there last year and offers an experience more akin to Radio Shack than a real Apple store.

On behalf of the folks who live in Huntsville, Alabama, I think that they deserve an Apple Store, too. In fact, I think that the whole Apple value proposition is that a great computing - and retail - experience ought to be available to everyone, not just to so-called technology sophisticates in San Francisco, Seattle, Portland, and other cosmopolitan areas. So I would disagree with you - I think the problem isn't where Apple is making the promise, but rather on its inability - in specific cases - to deliver on that promise. Though I grant you that over-expansion could be involved.

BTW...I'm reasonably sure that Huntsville has long been a center for some NASA operations, and continues to be a place where missile defense work takes place. I think those kinds of folks know a little bit about computers and are able to "play the game..."




Regarding the launch of a Redbox-branded film and TV show streaming service that will compete with similar offerings by Amazon and Netflix, MNB user Jay Rivera wrote:

The winner will be Redbox, provided they are able to stream a good deal of the new releases available at their kiosks. Netflix's achilles heel is its content. Outside of television series, classics and documentaries, most of their instant streaming is woefully inadequate.




Yesterday, MNB took note of a New York Daily News report that as the world approaches December 21, 2012 - the date upon which a Mayan prophesy says the Earth as we know it will come to an end - "believers have been reinforcing their post-apocalyptic bunkers, building a cache of survival gear and stocking their pantries full of foods to last them through Armageddon."

I commented:

On the one hand, I admire savvy marketing. I think if there is a cadre of people who believe that the apocalypse is coming tomorrow, it makes a kind of sense to sell them products that will help them survive the worst kind of destruction. Of course, it seems obvious to me that the folks at Wise Food, The Ready Store and Emergency Essentials don't share those fears of a coming apocalypse ... because if they did, they either be saving all this stuff for themselves or giving it away. (What good will money do them after the apocalypse? Haven't they seen the Mad Max movies? Or Waterworld?)

On the other hand, I'm really going to be irritated if the world comes to an end on December 21 ... because that's a Friday, and it is scheduled to be my last day of work on MNB until January 2 (as usually happens this time of year), and I was really looking forward to sleeping late and seeing a bunch of movies during that time. If my plans get screwed up by an apocalypse, I'm not going to be happy.

BTW...won't these people ever stop? In 2011, it was that guy Harold Camping - described as a 90-year-old former civil engineer turned minister turned radio host - was was predicting that the world would end and the Rapture would occur on May 21, and then, when that didn't happen, he said that he misread the Bible, and that it would actually happen on October 21.

Oops.

Y'know what I think? I think people should be enjoying their lives and work and families so much that when the end of the world comes, it catches them by surprise ... because they were focusing so much on living that they didn't think about anything else.

What's the line from The Shawshank Redemption? "I guess it comes down to a simple choice, really. Get busy living or get busy dying."

Some people would rather get busy dying. In the meantime, nothing wrong with trying to sell them stuff...

MNB user Jan Fialkow wrote:

My birthday is Dec. 22. Should I start celebrating immediately?

I would. Why not?

Another MNB user wrote:

To all your readers outside the NE - Couldn’t agree more that a years’ worth of “bunker supplies” is a little crazy.  At the same time having just lived through “SuperStorm Sandy”, all those recommended “Be Prepared” supplies that the OEM teams and the Red Cross suggest you have on hand, and that you wonder if you’ll ever really need, more than make sense today!  We followed their recommendations and we were glad we did as we were without power for a number of days and had to “shelter in place” for the first couple of them.

Got to admit that it was kind of fun seeing how creative you could be the first day or so, after that as the house got colder and colder (despite the fireplace) and you quickly found that gas and food/beverage products (to a lesser degree) were in short supply (as very few stores were open or had much  stock), the fun quickly ended.  All in all ,we were very fortunate and count our blessings that all we lost was power… lesson learned, the “be prepared” guidelines are there for a reason and are well worth following!

From another reader:

Just a couple of thoughts on this piece.
 
I’m not familiar with any of these companies but I have heard of a couple of them. My guess is these companies were not created to capitalize on the Mayan “prophecy” regarding the end of the world, although they may indeed be capitalizing on this opportunity.
 
The LDS church, based in Utah, has long encouraged their members to have a years supply of food and to have a stop-gap supply of water and critical medicines on hand. This isn’t for the “apocalypse”, although it may come in handy should that happen. Instead, it is a part of an overall plan to be prepared  for a job loss, illness, natural disaster or other calamity. Imagine the peace of mind for those on the East Coast during the latest disaster if they were prepared in this way. Granted, depending upon the disaster, these supplies may have been damaged or lost but the idea is to do all you can to prepare yourself for the unknown vs. having to rely 100% on others to take care of you. We’re encouraged to rotate these supplies and I think of it as a large pantry. I don’t buy these ready-made meals but instead, stock up on what we like at case-lot sales at my local grocer. Then, instead of having to run to the store every time I need a can of beans, etc., I simply pull from my food storage and then replace that stock as it gets used. Others may find that the ready-made meals option works best for them.
 
As a member of the LDS Church, I can tell you that we’re not taught to stop living or to live in fear of what may come. Quite the opposite. We’re taught to be happy and to enjoy life. The peace of mind that comes from being prepared for the unknown only adds to that enjoyment.
 
Thanks for listening. Now I’m off……I’m busy living today!

Me, too.

Published on: December 4, 2012

In Monday Night Football, the Washington Redskins and QB Robert Griffin III defeated the New York Giants and QB Eli Manning 17-16, significantly tightening the NFC East race as the NFL season enters the home stretch.