business news in context, analysis with attitude

Published on: February 7, 2013

This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy.

I was reading a website called HotelNewsNow.com the other day, and ran across a piece about an old friend of the food retailing business - Jim Donald, the former CEO of Pathmark, Starbucks and Haggen, who is now CEO of the Extended Stay America hotel chain.

It is a really interesting piece about how to reinvigorate a company and a culture ... The story says that "Donald has reenergized the ranks through a tenacious tide of communication that has ranged from emails, 60-second company-wide voicemails, an ambitious strategic plan called 'DANCE,' and culminated with Donald’s still-ongoing, 200,000-mile journey across more than 350 properties of the extended-stay chain’s nearly 700 properties."

So what is DANCE all about?

Well, it is an acronym....

"D" is for delighting guests through property refreshes and enhanced service.
"A" is for activating associates and preventing slack.
"N" is for neutralizing costs through cost-containment measures.
"C" is for caring for the community of both guests and employees
"E" is for expanding revenue.

Now, Extended Stay came with its own set of issues - it had been acquired out of bankruptcy by an investment group, but seemingly was unable to marshal any sort of momentum toward becoming both more efficient and more effective.

That's where Jim Donald came in - and it is critical that his background is as both a merchant as well as someone who understands how and where to find efficiencies in a way that will not only not undercut the creation of a compelling consumer experience, but actually bolster it. And, he's used a proven technique that he's employed in every company he's led - the daily voice mail to employees, designed to encourage them, provide them with a new goal or insight, or inform them about a strategic or tactical priority - to create a direct line of communication and accountability between properties and the home office.

But I have to say that I find the use of the acronym "DANCE" to be ingenious. When you think about dancing, it is a word that summons up two immediate images - action and joy.

When you think about it, those are two essential ingredients for any business that is using front line personnel to interface with shoppers. Action and Joy. And I'm not surprised, having written about Jim Donald over the years, that these are two key factors in what seems to be an amazing turnaround at Extended Stay America.

Action and Joy. Two words we need to think about in all our businesses ... and especially those - and we all know what and where they are - that could use some serious DANCE lessons.

You can read the entire story by clicking here.

That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

Published on: February 7, 2013

A retailer has been chosen by President Barack Obama to be the nation's new Secretary of the Interior.

Sally Jewell, the CEO of REI, the recreational equipment company that generates $2 billion a year in sales, was nominated yesterday by the White House to take over the Interior department, which promotes conservation and is charged with protecting 500 million acres of public land.

Jewell, if confirmed by the Senate, would succeed Ken Salazar, who announced his resignation last month.

"She knows the link between conservation and good jobs," Obama said in making the nomination. "She knows that there's no contradiction between being good stewards of the land and our economic progress, that, in fact, those two things need to go hand and hand."

REI is well-known for its respect and support for environmental causes; in 2009, Jewell won the Rachel Carson Award for Environmental Conservation from the Audubon Society. However, Jewell also is a former oil company (Mobil) executive, as well as a former banker. She joined REI as COO in 2000, and became CEO in 2005.

Published on: February 7, 2013

There are several stories out there addressing the impact of the decision by the US Postal Service (USPS) to end Saturday mail deliveries inAugust 2013. (Post offices will remain open, and mailmen will still deliver packages on Saturdays.) Cutting out Saturday mail delivery will save the USPS an estimated $2 billion a year.

Advertising Age reports that magazine publishers that have depended on Saturday deliveries are trying to figure out their options: "Some weeklies arrive at subscribers' homes during the week already and won't be affected. But others, such as The Week, deliberately try to show up in time for the weekend, when there's more time for reading -- and for shopping trips that might be influenced by ads in the issue.

"The Postal Service's move has been expected, however, so some publishers have already been exploring alternate delivery methods. Bloomberg Businessweek, for example, has been trying out using newspaper carriers in markets including San Francisco, Chicago, Washington and New York. But delivery by newspaper carriers is easier in cities than in suburban areas, where readers don't necessarily want their weekly issues thrown on the lawn."

The publishers of Time, which shows up in mailboxes on Fridays, Saturdays and Mondays, depending on where you live, say they have been anticipating the move and are preparing plans to deal with it.

The Association of Magazine Media, a trade association, released the following statement: "While we have actively participated in conversations around postal reform, and in particular, five-day delivery, we did not expect the USPS would act unilaterally, without Congressional approval, and we await Washington's reaction and more details."

According to the Los Angeles Times, Hallmark Cards said that it "continues to believe a reduction in service will not induce customer loyalty and will negatively impact small towns and small businesses that depend on timely, affordable, reliable mail delivery. This move should only be considered once all other cost-saving options are fully explored and acted upon."

The Times also notes that while a company like Netflix might be expected to object to the move since it depends on its DVDs to arrive in people's mailboxes in a timely fashion, the USPS move may have a silver lining, since "the Postal Service's planned shift to five days of home delivery a week may make Netflix slightly more profitable by lowering the costs of sending out its familiar red envelopes with DVDs. That's because subscribers may end up receiving fewer DVDs for the same monthly price."

Published on: February 7, 2013

Bloomberg reports that Amazon, looking to get application developers to create more programs that can be used on the Kindle Fire tablet computer, plans to introduce virtual currency, dubbed Amazon Coins, that consumers will be able to earn and then use them to buy items on the tablet. Developers will get the standard 70 percent revenue share from purchases made with the coins, which will eventually be available for purchase on Amazon.com.

Developers will continue to get the 70 percent revenue share from purchases made with the coins. After the coin giveaway ends, customers will be able to buy the tokens using Amazon accounts, the company said.

"Amazon Coins is an easy way for Kindle Fire customers to spend money in the Amazon Appstore, offering app and game developers another substantial opportunity to drive traffic, downloads and increase monetization," the company said in an announcement.

Analysts quoted in the story seem to be mixed in their reaction to the move. Some think it could be a good way to light a fire under both app developers and Fire users, while others think that it won't drive growth in any significant way.

Published on: February 7, 2013

Bloomberg reports that the national move toward reusable cloth shopping bags, designed to reduce pollution and waste and create more environmentally friendly communities, may have unintended consequences that are "kind of gross" - the spread of disease by using and reusing the bags without washing them is becoming of greater concern.

Here's everything you need to know about the story:

"Warning of disease may seem like an over-the-top scare tactic, but research suggests there’s more than anecdote behind this industry talking point. In a 2011 study, four researchers examined reusable bags in California and Arizona and found that 51 percent of them contained coliform bacteria. The problem appears to be the habits of the reusers. Seventy-five percent said they keep meat and vegetables in the same bag. When bags were stored in hot car trunks for two hours, the bacteria grew tenfold.

"That study also found, happily, that washing the bags eliminated 99.9 percent of the bacteria. It undercut even that good news, though, by finding that 97 percent of people reported that they never wash their bags."

Published on: February 7, 2013

The New York Times reports this morning that restaurant chains around the country are embracing smaller and lighter servings, a move that is seen a significant in terms of a food culture that has long focused on massive portions.

Here's how the Times frames the story:

"Driven by pressures like consumer demand and looming federal regulations that will require them to post calorie counts on menus, restaurant chains around the country are adding more nutritious choices and shrinking portion sizes.

"The smaller portions, which are not necessarily cheaper, are the first step toward reversing the practice of piling more food on a plate than anyone needs in a single meal, a trend that began nearly three decades ago. Besides making a contribution to customers’ health, restaurant owners are finding that the move is paying off financially ... While the move by restaurants to more nutritional menu offerings is driven by external factors, many operators are finding that cutting calories, sodium, sugar and fat pays off."

In fact, the story notes that the number of restaurants in this country that have vetted lighter menus has increased by 2000 percent over the past few years.

The Times writes that "the Obama administration’s health care act, which was passed in 2010, included a provision requiring restaurants and food establishments with 20 or more locations to post the calorie counts of standard items on their menus. The final regulations are expected soon, with compliance likely to be required by 2014. Some restaurant chains have already begun posting calorie counts."

Published on: February 7, 2013

Salon.com has a piece suggesting that the old saw that "breakfast is the most important meal of the day" may be an oversimplification.

Here's the essence: "The institution of breakfast is rarely challenged. It ranks somewhere between sleep and oxygen in reputed health benefit, and supposedly supplies irreplaceable energy to get you going, primes your metabolic system, keeps your muscles healthy, feeds your brain, and generally prepares you for the day to come. But ... recent studies suggest that at the very least, the benefits of breakfast are not so simple."

The story goes on: "On Jan. 18, Nutrition Journal presented a study that suggests people will eat the same size meals at lunch and dinner regardless of how much they ate for breakfast. This challenges the conventional wisdom that if you skip breakfast, you’ll gorge later to make up for it."

Another study, from the British Journal of Nutrition, has "published a paper that suggests exercise before breakfast burns 20 percent more body fat than the same workout after breakfast. The study also determined that people who exercise before breakfast do not consume additional calories or experience increased appetite during the day."

Published on: February 7, 2013

CVS Caremark said yesterday that it is acquiring Drogaria Onofre, described as Brazil's eighth largest drugstore chain by volume and 18th largest by store count (44).

Terms of the deal were not disclosed. It is the first acquisition outside the US for the company.

CVS Caremark will have a 100 percent ownership in the Brazilian chain, though Reuters reports that "Onofre's stores will continue to be managed locally by two brothers currently running the chain."

Published on: February 7, 2013

• National Public Radio has a story about a new study saying that combining alcohol with a diet soda - like rum and a diet cola - actually "will leave you drunker than if you'd mixed the liquor with a sugary, caloric mixer ... Why? Turns out that sugar slows down the absorption of alcohol from the stomach to the bloodstream."

Published on: February 7, 2013

On MNB's Facebook page, responding to a series of pieces about the importance of engaging with consumers via social media, reader W. Patrick McSweeney wrote:

Nice piece ... about how a woman got the attention of Victoria's Secret to create a bra for breast cancer survivors. I'm surprised they hadn't thought of this before, but glad the company is taking the idea seriously -- especially as we prepare for the 26.2 with Donna The National Marathon to Fight Breast Cancer.

And another reader chimed in:

I think Coke and Victoria Secret are smart to listen to consumers and be part of the conversation.

I continue to be really impressed by the savvy reaction of the Victoria's Secret people when it comes to acknowledging and embracing the attempts by its customers to influence product development.

Go figure. It may be that Victoria's Secret's two most important assets are its ears.




Continuing comments on the subject of JC Penney's travails from an MNB user:

What a shock!  JC Penney went to EDLP pricing and sales volumes are down.

I doubt this is a surprise to Johnson, after all (as you pointed out) JCP was not exactly a thriving enterprise before he took over.  His company would have had to attract an unachievable number of new customers to overcome the discount pricing in the first year.

I certainly do not know their overall discount to EDLP, but I do know that their Arizona bluejeans are down 38% from regular retail price, as I have purchased those jeans both pre and post EDLP pricing.  That's a lot of margin to make up with increased volume even if their promotional pricing in the pre days reduced the difference 20% or so.

The bigger issue may be quality.  The jeans in the pre days were close to Levi quality, and the EDLP jeans are a far cry from that quality.  Given a quality difference, the discount pricing basically ends up a bait and switch tactic used by other department stores for years... some were even taken to court over it.

Given their position in the market, it seems to me it would take much longer than a year to rebuild.  Going back to some promotional discounting mixed with EDLP pricing just seems more confusing than ever.

I think Johnson knows he is not comparing Apples to Penneys, and I think he should stay the course, but he should keep an eye to consistent quality... whatever that level may be that attracts customers.




Responding to last Thursday's FaceTime about how Netflix is changing the world, which referenced the current issue of GQ, MNB user Mark Raddant wrote:

Thanks for that thought of the day—and also the excuse to buy that issue of GQ.  (It may never be too early to contemplate the merits of the 100 most beautiful women of the century...)

This article also plays into TV networks’ increasing bids for sporting events—since they are the ONLY form of entertainment which is severely diminished by watching after the fact, to the point where we are willing to indulge the commercials.

It's called exploiting one's differential advantage. And it is an excellent point - sports and news end up being not only the ultimate reality TV, but the only kind that require immediate, in the moment viewing.

Retailers, if they are to succeed, have to find their own versions of news and sports.




The other day, writing about the convergence of various technologies, I wrote about always packing my bag with a MacBook Pro, iPad, iPod Classic, and iPhone.

Which led one MNB user to write:

I own several Apple computers, devices (iPhone 5/iPod Touch x 2), and accessories (Apple TV, Airport Extreme Base Station), however my issues with the iPad in general are two-fold.

• The iPad is a great device, however for price of the device they are NOT very practical in the grand scheme of things.  For the amount of money Apple will charge for their new 128GB iPad ($929), I could in theory pay an additional $170 for a new Mac Book Air ($1,099) and get the capability to increase storage via USB port (USB Storage Drive/External HD), a keyboard and more potential memory.  The ability to input files/music/movies, etc. via a USB drive on a computer versus having to connect the iPad to another computer via iTunes is a huge advantage in my opinion.

• Paying for mobile connectivity on the iPad seems a bit outrageous versus a AT&T/Verizon connect card for a Mac/PC.  Obviously a lot of people are using their iPads in lieu of a computers so they would ultimately need mobile internet access if this was the case.  I’m already paying for a Verizon connect card, so I figure I don’t need to pay an additional $20-$30 a month for mobility for an iPad.
 
Quite frankly Apple is a corporation of control freaks.  That’s why they won’t allow USB drives/micro SD/SD card slots (Adobe Flash) in any of their smaller devices (iPad/iPod/iPhone).  They don’t mind holding their consumers hostage by forcing them to pay more for increased storage on these devices and obviously their consumers are paying for the nonsense.  That being said, I have a love/(slight) hate relationship with the company, although I firmly believe most of their products are second-to-none. 
 
By the way, how could you possibly need all of those devices (4) when you travel?!  My iPhone 5 (64GB) has virtually replaced everything, as I can listen to music, watch movies (albeit on a much smaller scale/screen), play games (“Hill Climb Racing”), and do email in a flash!!!!  While I’m traveling of course and not all at once.

I recognize that I'm overdoing it a bit. But I use the laptop to research and write MNB as well as work on other writing projects ... I use the iPad primarily as an e-reader (I like the Kindle app), though I also will watch movies and TV shows on it ... I like using the iPod to plug into the rental car so I can listen to my own music, or podcasts by either Tony Kornheiser or Alec Baldwin (who has an NPR interview show that is fantastic) ... and then my iPhone has the obvious uses. (Just to show you how nuts I am, depending on my travel itinerary I'll sometimes throw my Garmin in the bag ... I prefer its mapping software to that offered on my various i-devices.)
 



On another subject, MNB user Norm Krause wrote:

Your comment, "Companies have to choose the places where they can create for themselves a differential advantage," is spot on.

I worked for President's Choice International (Loblaw-Toronto) in the U.S. Office and I can remember Dave Nichol saying in the meeting  (circa 1990) that "Marketing is the Art of Differentiation." He preached "Anyone can give away Tide" but he wanted to ratchet up the food business and change food producers to make products that were better than the National Brands at costs that were competitive.The PC label is still very strong in Canada.

(President's Choice grew in the U.S. for about 6 years until Loblaw Canada bought other Canadian retailers and abandoned the U.S. market.)
 



On the subject of Super Bowl ads, one MNB user wrote:

I loved all your comments today about the sexism in the Super Bowl ads. You missed the one that had me wondering -- why were all the farmers they extolled in the Dodge Ram ad men (almost all the great farmers I know who sell at our farmer's market happen to be women)? And yes, why does smart have to look like that goofy guy and not the beautiful woman? I hate Go Daddy's ads in general, anyway.

Kudos for pointing those out. These things have a lot of power, even if it's subliminal (especially because of that, probably).

And somehow, I missed all the really good ads -- maybe they were on while we switched over to watch Downton Abbey during the third quarter!

I said the other day that while I found the Go Daddy kissing commercial to be "a little disgusting," I sort of liked it because Walter was having the best 30 seconds of his life.

Which led one reader to respond:

A LITTLE disgusting? Seriously Kevin, I just lost a lot of respect for you with your view of this commercial. It was flat out disgusting and inappropriate. Period. Go Daddy has a history of using women in provocative ways to pimp their products-which is web hosting. Danica Patrick and Jillian Michaels simulate stripping down because the suits at the company insist, even though they protest. Other commercials are just as bad.
But this one is way past the line. The actor that portrayed the young man appear to be underage. In addition, I don't expect to see ten seconds of a sloppy tongue kiss between a twenty something woman and a young boy in a prime time commercial. That would be something I expect to see in an R rated movie.

Funny ads are supposed to make you laugh-like the Got milk ad and the Bud Lite ads. Good ads are supposed to stick in your mind-like the Cowboys herding cats from 2006 (for EDS). Good ads are supposed to tug at your heartstrings like the Ram/Chevy ad with the Paul Harvey voice over, the Jeep/USO ad with the Oprah voice over, the Clydesdale ad. The Go Daddy ad just made me want to reach for a gallon of brain bleach.

You're entitled to your own opinion.

But just to be clear, that "underage" young man was 34 years old.




Regarding the decline in the US fertility rate, which has enormous implications, one MNB user wrote:

Totally agree.  This is a global problem not just in the USA.  Less balance in the age groups of people creates a spiral which remains to be seen if you can pull out of it ... Populations that are shifting older have predictable patterns.  Emphasis on Health Care, Social Benefits in financial ruin, loss of Global Power.  The list goes on...

No wonder why the baby categories have been falling for several years.  What categories are next that are dependent on younger generations?  Cereal, Soda, Salted Snacks, Candy?

Another reader wrote:

This makes you think differently about the role of immigration and how America could sustain its “balance” with new waves of immigrants similar to other times in our history.  The more we embrace this truth, the more we can continue to be THE country that people around the world dream about.  The land of opportunity.  The more we reject it, the quicker our decline.

Agreed.

From another:

I thought your article to declining fertility rates in America was very interesting. I've heard these statistics before and as a young professional female I feel these articles always fall short of what is really happening. We're seeing more women become more educated but with education comes opportunity. The unfortunate reality is that a lot of women feel compelled to win in the workplace and utilize their education but current work conditions do not encourage women to have kids. As a nation our maternity leave and childcare policies are far behind others. Don't get me wrong, the shift is starting but until women can balance work and 3 children they won't. Ultimately, more could be done to encourage childbearing (even with a 50% divorce rate) if there were a more encouraging community to support such a shift.

Another MNB user offered:

Although the population will age, I doubt very much we'll see a decline in the US.  Immigration will more than make up for the decline in American birth rates.  Worldwide, the fertility rate is sufficient for population growth.  The demographic cliff is more about a more diverse population rather than declining.  Also, Universities in the US are attracting more and more foreign students, so even with the decline in domestic college age citizens, the competition to get into top schools remains fierce.

Again, I agree about the importance of immigration. But I do think that one of the things we need to do is start stapling green cards to college diplomas earned by foreign students.

And from yet another reader:

This is the second article I've read in as many weeks that talks about the declining fertility rate in the US. I think you nailed it with your comment about parents being more concerned with their own personal happiness and therefore having smaller families. But I would also add that feeding into that is the notion that kids require a) a lot of money (not true!); and b) a lot of parental time (again, not true!).

As a mother with four children between the ages of 4 and 10, I wish I'd had such information when I was pregnant with babies number three and four, as I got a surprising amount of "You're having another?" looks from people and comments (especially with #4, given at that point, we had two girls and a boy). Maybe now those of us with more than 2 kids will get some respect--after all, we've done our part to keep the population numbers up!




And on another subject, one MNB user wrote:

I say “AMEN!” to your response to the reader who accused you of taking a “cheap shot” at the Catholic Church.

And another wrote:

I say, Amen!  Well said.

MNB user Mike McGuire wrote:

I love your daily content and find it very useful, but don’t often have a reason to send you an email directly.  Your comments on the Catholic Church could not have been more spot on and it is wonderful to see this in a public forum.  I agree with 100% of what you said – and can’t remember the last time I agreed with 100% of anything that anyone said.

Thanks for all of your factual insight as well as, more importantly, your editorial take on issues both retail and also social.




In what apparently was one of the more controversial statements I've made here on MNB, I said the other day that I hate Brussels sprouts.

Roy St. Clair responded:

Have you ever tried roasting Brussels sprouts (split in half) drizzled with a nice balsamic, salt & fresh ground pepper, and topped with fresh grated parmesan?
 
Or in a slaw prepared on the stove with crumbled bacon, cider vinegar, a little spicy mustard?
 
They’re pretty damn good.

MNB user Jill M. LeBrasseur wrote:

Just had to write in to let you know that Brussels Sprouts are one of my favorite veggies!!! You should try them roasted with some shallots, bacon, and chestnuts – a perennial Christmas side dish at our house. And if you live in Delaware like me then you can get them (and anything else) without paying sales tax! Even from Amazon! Just another great reason to call the first state home!

Another reader chimed in:

As a card carrying member of the Society for the Prevention of Cruelty and Demeanment of Brussels Sprouts in America, I ask you to desist in your YUKKING of this wonderful vegetable.  High in vitamins such as K and C, they are also useful in the fight against high cholesterol and cancer.  And if cooked right, they’re durn delicious too!  I’ve recently converted my wife, a notorious ABSer (anti-brussel sprouter) with a variety of recipes including a citrus based sauce and her favorite, pan fried split Brussels using EVOO and a healthy dose of garlic and herbs.

And MNB user Bryan Silbermann wrote:

My friend, your tired and listless response perhaps betrays an upbringing marked by being fed vegetables cooked to death.  Forbes has the trend to basic veggies, including Brussels sprouts, right on the money.  Witness this item being offered in so many white table cloth restaurants, where chefs have learned to get diners to look beyond the tired assumptions of Boomers raised by parents with limited knowledge of cooking.  This wonderful vegetable cooked in many delicious ways is (dare I say it?) sprouting up all over the place and getting rave reviews.  Why?  Because chefs understand the human need to take basic, good for you foods, and turn them into something unexpected that pleases the palate.  From California to Connecticut, tasty Brussels sprouts offer a lesson in food marketing: it’s not the food, it’s how you prepare it that makes all the difference.  Flavor rules!  Yuck is out.

There is nothing tired and listless about my dislike of Brussels sprouts. I actually feel rather strongly about it.

BTW...I also hate beets. (And egg salad. And liverwurst. If I'm making a list.)



Finally, an email I just got this morning:

The weatherman has predicted a crippling blizzard this weekend for the northeast with 2-3 feet of snow.  As a regular MNB reader, the first thing I thought of was….if they used Subway’s Foot-Long Subs to measure the snow…..it won’t really be that bad out.

Just brilliant. A perfect MNB email.

Thanks.