business news in context, analysis with attitude

Published on: April 29, 2013

by Kevin Coupe

As of this writing, the details surrounding the deadly building collapse in Dhaka, Bangladesh, are not entirely clear.

We know that more than 340 workers were killed.

We know that thousands of other employees have been rioting in Dhaka, protesting what are seen as substandard working conditions.

We know that there reportedly were four garment factories operating on the top floors of the eight story building. According to a New York Times story, "labor activists have found labels inside the wreckage for clothes being made for J. C. Penney, Cato Fashions, the British retailer Primark and other clothing brands."

We know that as many as five people, described as owners of the building, have been arrested, and that investigations have begun.

ABC News reports that :"most of the victims were crushed by massive blocks of concrete and mortar falling on them when the 8-story structure came down on Wednesday morning -- a time many of the garment factories in the building were packed with workers. It was the worst tragedy to hit Bangladesh's massive garment industry, and focused attention on the poor working conditions of the employees who toil for $38 a month to produce clothing for top international brands."

And here's what else I think we know - that is not the first time this has happened, and it will not be the last. Retailers will say that they didn't know their products were being manufactured there, that these programs were being outsourced, that they will redouble their efforts to make sure it does not happen again.

But what these retailers need to consider is whether, in an interconnected and global business environment, whether this is enough. They must ask themselves questions that involve ethics and morality, as well as dollars and cents. (Make no mistake. It is not hard to conceive of evens like these having an enormous impact on the bottom line, if they are found to be culpable and/or responsible.) And perhaps they must conclude that the old way of doing things, which focused on efficiency and cost, may not be the best for their corporate reputations, for their customers, and even for their souls.

The events in Dhaka should be yet another Eye-Opener. Let's see if it is.

Published on: April 29, 2013

The New York Times reports on how venture capitalists "are making big bests on food."

Here's how the story frames the issue:

"In some cases, the goal is to connect restaurants with food purveyors, or to create on-demand delivery services from local farms, or ready-to-cook dinner kits. In others, the goal is to invent new foods, like creating cheese, meat and egg substitutes from plants. Since this is Silicon Valley money, though, the ultimate goal is often nothing short of grand: transforming the food industry ... Some investors say food-related start-ups fit into their sustainability portfolios, alongside solar energy or electric cars, because they aim to reduce the toll on the environment of producing animal products. For others, they fit alongside health investments like fitness devices and heart rate monitoring apps. Still others are eager to tackle a real-world problem, instead of building virtual farming games or figuring out ways to get people to click on ads."

What this essentially means is that there is a lot of big money dedicated to the proposition that how food is produced, marketed, sold, prepared and consumed can be forever altered.

Grand goals indeed.

The story is worth reading, and you can do so by

clicking here.

Published on: April 29, 2013

TheNetWeb reports that Costco has been added to the list of retailers served by Instacart, a grocery delivery service in the San Francisco Bay Area.

Costco joins Safeway, Trader Joe's, and Whole Foods on the Instacart service, which employs some 150 personal shoppers to save people the trouble of actually doing their own food shopping. The Instacart model does not have any formal connection to the retailers, but rather serves as an agent for the shopper; this means that in the case of Costco, shoppers do have have to be Costco members - it is enough that Instacart is.

On its website, Instacart says that it is available in San Francisco, Palo Alto, Mountain View and parts of Sunnyvale," and is "expanding quickly into other areas"; offers delivery in as little as one hour after an order is placed, and as long as seven days in the future, if preferred by the shopper, with text messages being sent to customers once the exact time of arrival is determined; with pricing that varies depending on the size of the order, the lowest being $3.99 for orders over $35 with 2 hour delivery.

The story on TheNetWeb says that Costco, for the time being, is something of an exception to the rules - it is only available to San Francisco residents, and the lowest fee for delivery is $9.99.

Published on: April 29, 2013

Gizmodo.com has a cheeky, to-the-point piece explaining why Amazon is supporting federal legislation that would allow states to force online retailers to collect sales taxes, something that it fought for a long time.

Some excerpts:

• "Isn't Amazon screwing itself over by supporting the legislation? Why no, no it's not! Sure, the tax-free party it's been enjoying for the past 21 years was a great business strategy for a while, but times are changin'. Most people these days are united by at least two factors: an irrational demand for instant gratification and a desire to have as little face-to-face interaction with other people as is humanly possible.

"So to keep up with our whiny, misanthropic ways, Amazon has installed same-day, one-click delivery in 10 cities across the country. Same-day delivery means huge, fully stocked warehouses. Warehouses mean obeying state tax laws. And the heavy populations in the places getting the service will almost always mean a state sales tax.

"So with these additions, Amazon's days of skirting the IRS are coming to a close. Rather than find another way to sneak around the sales tax rules, its lawyers and lobbyists have opted to make damn well sure that everyone else is going down with them. Or as they chose to frame it, create 'an even-handed federal framework for state sales tax collection'."

• "With the rate we as a nation have been growing increasingly dependent on online shopping, those extra dollars spent are going to add up quick. Long story short: it's going to make your life a whole lot more expensive.

"It's not just going to hurt your wallet. The diversity of the marketplace could get slashed as well. As individual sellers with retail aggregators like eBay and Etsy decide the tax hike isn't worth the time it takes to carefully craft their cat hair necklaces, they'll start taking down their online stores. And YOU'LL never get to know the joys of wearing metal balls of cat sheddings around your throat."

Published on: April 29, 2013

Dow Jones reports that "a federal judge overseeing a pending $7.25 billion class-action settlement involving Visa Inc. and MasterCard Inc. ordered merchant trade groups opposed to the deal to show why they should not be held in contempt over a website blasting the accord."

Earlier this month, the judge had ordered trade groups behind the website - including the National Association of Convenience Stores, National Grocers Association and National Restaurant Association - to post a banner on the site saying that its "facts,' which seek to encourager retailers to opt out of a proposed settlement with the credit card companies, were misleading.

As the Dow Jones story notes, "The pending settlement would end litigation filed in 2005 against Visa, MasterCard and several large banks that issue the payment networks' credit cards by merchants and several trade groups. The plaintiffs alleged that Visa, MasterCard and the banks conspire to set transaction fees that retailers pay at arbitrarily high levels. The fees, known as interchange, are set by Visa and MasterCard but collected by the banks that issue their cards each time a customer makes a purchase.

"The merchants also alleged the defendants have limited their ability to drive down costs by forcing them to abide by rules that have prevented them from surcharging customers who pay with credit cards." In addition, the merchants and the associations representing them argue that the proposed settlement would prevent them from ever suing the credit card companies in the future, and would allow the card companies to raise fees virtually at will.

Published on: April 29, 2013

Shine from Yahoo reports that it appears that Whole Foods and designer Christian Louboutin have collaborated on a kale running shoe - one that is estimated to cost about $1,100.

According to the story, "Perhaps the organic supermarket giant figured that if people love fueling their workouts with a kale smoothie they’d be inspired to go whole hog and strap a pair of veggies on their feet," despite the price tag.

There is some question, however, about whether the kale running shoes actually exist - according to the story, a photo of the shoes leaked on Instagram and then was quickly taken down, but not before people got wind of the shoes. The story also says that the shoes would be "compostable, organic and that some proceeds would go toward Whole Foods’ non-profit farming initiative."

And, Shine writes, "Until the kale sneaker officially debuts, it will remain an Internet oddity, a fashion urban legend that causes us to re-evaluate everything we know about life, the universe and our values as a modern society. Perhaps Whole Foods is trolling us and our willingness to fork over thousands of dollars for a pair of sneakers that you can toss with a little balsamic and olive oil and eat in case you get lost on a hiking trail."

Published on: April 29, 2013

• The Associated Press reports that research firm IDC is saying that "more smartphones than 'dumb' phones are being made this year, a milestone in a shift that’s putting computing power and Internet access in millions of hands worldwide ... IDC said smartphones made up 51.6 percent of the 419 million mobile phones shipped."

Published on: April 29, 2013

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

• Bloomberg reports that "confidence among consumers fell in April to a three-month low as Americans grew more pessimistic about the outlook for the economy.
The Thomson Reuters/University of Michigan final index of consumer sentiment declined less than forecast, to 76.4 from 78.6 a month earlier. The median projection in a Bloomberg survey was 73.5 after a preliminary April reading of 72.3."


• The Wall Street Journal reports that Metropoulos & Co. and Apollo Global, the new owners of Hostess Brands, "is gearing up to reopen plants and hire workers, but it won't be using union labor.

It is not a hugely surprising position, since in part it was labor disputes that led Hostess into bankruptcy in the first place, forcing the company to liquidate its various divisions and brands.

According to the story, the disaffected unions representing Hostess employees were convinced they'd get a better deal from the new owners, believing that their members' expertise gave them a strong negotiating position. But, the Journal writes, new ownership "expressed confidence they would be able to find skilled, nonunion workers near the four plants, which are in areas with high unemployment."

How, exactly, was this a surprise to the unions? Unionized employees bit the brands once. Under what circumstances would new owners decide to put their hands into the big, toothy mouth of that particular animal one more time?


• USA Today reports that McDonald's president/CEO Don Thompson said Friday that the fast feeder may soon begin serving breakfast all day, and could even begin delivering its meals to homes and offices, saying that this represents a "big opportunity."

See? Didn't I say above that retailers ought to be working on the delivery issue as a way of being more relevant?

Though I'm not sure that when I wrote it, I was thinking about mediocre fast food burgers...


• Bloomberg reports that daily coupon site LivingSocial says "that more than 50 million customers may have been affected by a cyberattack, and the company is working with law enforcement to investigate the matter ... While data that was accessed includes names, e-mail addresses, dates of birth and encrypted passwords, credit-card information was not accessed," according to the company. Customers are being advised to change their passwords.


• CNBC reports that Goldman Sachs has agreed to set up a $1.75 billion financing package for troubled JC Penney, in addition to the major investment by billionaire George Soros last week.


• The Oregonian reports that Portland State University's Center for Retail Leadership is "launching a certificate program aimed at preparing students to work in Oregon's athletic and outdoor industries. Enrollment begins this fall ... Coursework for the certificate will center on major competitive issues in the industry with an emphasis on marketing, retailing, distribution and sales."

The Center for Retail Leadership, part of PSU's School of Business Administration, was created in the 1990s to focus on Oregon's food industry.

And I'm proud to say that I get to do a variety of things for the Center for Retail Leadership. Good to see it expanding into new and exciting directions...

Published on: April 29, 2013

• The Chicago Tribune reports that Jon Flannery has been promoted to executive creative director at Draftfcb Chicago.

And who is Jon Flannery?

He's the guy who came up with the "Ship My Pants" ad for Kmart that went viral, earning the troubled retailer millions of online views and some badly needed street cred.

You can see it at left.

Published on: April 29, 2013

On Friday, MNB took note of a USA Todayreports that "the Food and Drug Administration will conduct fewer food safety inspections this year because of the government sequester," according to FDA commissioner Margaret Hamburg."

My comment:

That said, it is interesting that Congress isn't moving to deal with the FDA's assertions, but is moving to address flight delays because of sequestration and airport furloughs. Y'know why? Because the people stuck on the tarmac are rich people who write campaign checks.

Well, apparently I hit a nerve. Because, man, did I get email on this one.

MNB user Ray England wrote:

Really? Congress is acting to offset flight delays and airport furloughs because according to your view “the people stuck on the airport tarmac are rich people who write campaign checks”. Do your really think that? I wonder how many folks that read MNB consider themselves rich as they fly around the country going to meetings, calling on clients, attending conferences, or expositions in an effort to earn a living for their families, or keep their companies afloat? Or do they consider themselves really tired, but freaking fortunate to have a job.

If I’m stuck on the tarmac or in an airport trying to get home to my family because of delays the FAA says is due to sequestration, I’m pissed. Especially when I know that sequestration did not cut one dime from federal spending, it only cut the increase of spending, I’m pissed because the FDA lets the USDA continue to promote food stamps to illegal aliens, I’m pissed because even in the light of sequestration the Federal Government is spending 1.5 million dollars to study why Lesbians are overweight, I’m pissed because the Federal Government spends 1.5 Billion dollars on Free Obama Phones even in the light of sequestration………now I believe that a well-informed citizen would expect their Congressional representative to get off his or her duff and address the issue. Now to the point of the USDA food inspections, the money is there for these inspections…..just like with the FAA, it is how the budget dollars are allocated.  The unfortunate problem is that way too many citizens are not informed, they are more than happy to take things at face value and blindly march in lock step with the current culture in our country that feels it should demonize those nasty rich people that write campaign checks.

I got it. You're pissed.

I was curious because I'd missed the stories about the "free Obama phones," so I checked a source that I think of as being reliably conservative - Forbes. According to Forbes, the free phone program doesn't give out free phones to minorities and wasn't started by Obama. It actually dates back to 1996 (Clinton was president - another Democrat! Ah-ha!), "as part of the Telecommunications Act of 1996. The Act did a number of things, including increasing internet access to doctors and patients in rural hospitals (for consults with specialists); subsidizing internet and phone coverage for schools and libraries and providing free or subsidized coverage for families who can’t afford it so that they have links to emergency and government services. The Act was not taxpayer funded… exactly. Taxpayers do pay for coverage but not via federal income taxes. Instead, the Act 'mandated the creation of the universal service fund (USF) into which all telecommunications providers are required to contribute a percentage of their interstate and international end-user telecommunications revenues.' So that little fee on your phone bill labeled USF? That’s what you’re paying for."

As for the $1.5 million being spent to figure out why lesbians are overweight, I was curious about that one, too. Turns out that the study does exist, but how it is described tends to depend on your political leanings. The right says it is being conducted to see why lesbians are overweight, while the left (and the people conducting the study) would say that the study is into whether there is any connection between sexual orientation and obesity. Now, I can understand why this seems like money not particularly well spent, especially these days ... but I also think that $1.5 million is such a tiny, tiny, drop in the bucket that it doesn't really worry me.

I think I'd be more worried that, according to a story from the Associated Press there is bipartisan support for an extra $436 million in funding for tanks that military experts say are not needed. Why? Because even building useless and unneeded tanks creates or keeps jobs in certain Congressional districts. That would worry me more than $1 million spent over two years on an obesity study. But that's just me.

I get it, you're pissed. I'll address the air travel part of your complaint below.

MNB user Blake Steen wrote:

Ok, I think that your assessment of people on the tarmac who are rich is a little harsh.  Rich people eat meat as well last time I checked.  Let’s not forget who gets to pick and choose the programs that are cut.  The Obama administration.  Also, it was the Senate who moved faster on this legislation than anything in 4 years, which is controlled by Democrats.  The House has not even seen it yet.  We are $16 trillion in debt and we had to cut a little bit out as all Americans have had to do in their own houses.  Why don’t we cut some of the other things that are not life threatening like electric car subsidies to a high end car maker (rich peoples Prius) that is made in the Netherlands with our tax dollars?  We cut out White House tours??? Really??? If that is not political I don’t know what is.  So is the cutting off of air traffic controllers.

From another reader:

Okay KC, I normally follow and agree with much of your commentary, but have to voice an exception to this one....  I'm certainly not rich, nor writing campaign checks, but AM feeling the travel woes this week.  Traveling every week for work sucks under the best of circumstances and when issues creating delays are completely avoidable, just makes the whole thing hard to swallow.   My commute just happens to be 1,500 miles these days....

From MNB user Rick Rector:

Now, now…some of us stuck on the runway are neither rich nor write campaign checks but are just working stiffs who are ticked that an already highly unpleasant process is being made more so. And it could have been avoided.

And another reader chimed in:

I’m not one the rich people writing campaign checks, I am the poor salesman that to save money I fly into Chicago see my accounts there, drive into Wis do my business, hurry back to O’Hare and fly home that same day so I don’t have a hotel stay. So my day is already a very very long and if they don’t get this fixed I am pretty much screwed.

And the email kept coming...

One MNB user actually agreed with my point:

Not only is it the rich contributors who are sitting on the tarmac, it is the members of Congress  - they are getting ready for another recess and wanting to fly home without delays!

I concede that I may have painted with too broad a brush in making this observation. I, too, am among those who would be affected by the FAA cutbacks created by sequestration. And I'm certainly not rich, nor am I writing big (or even small) campaign contribution checks.

But I do think my basic point is defensible - that the reason the US Congress acted on this particular piece of legislation is because it affected people with clout. Not only people with clout, to be sure, but I suspect that Congress would not have acted as fast on legislation that would have restored affected benefits to, say, welfare recipients. And yes, I'm sure there were people in Congress who wanted to eliminate airport delays before they had to get on a plane to go home for the recess.

My criticism is bipartisan. I think Democrats and Republicans alike move a lot faster when bills affect the people who financially support their campaigns, because for many of them, getting re-elected is job one.

Furthermore, I'd argue that if people in both parties did their jobs and actually were willing to do the people's business and come to reasonable compromise, then the sequester would not have taken place. But they didn't, so it did. Except, of course, when it came to programs that affected them and theirs. (But, to be clear, not only them and theirs. But the rest of us got lucky.)




I waxed rhapsodic last week, as I often do, about an evening spent teaching at Portland State University. Which prompted MNB user Todd Ruberg to write:

I share your enthusiasm for getting on campus and dialoguing with students about our industry!   I’ve been on the advisory board at Portland State for 15 years now, and it never ceases to amaze me how many great ideas come from students of our industry.

I am surprised more industry leaders aren’t finding their way to programs like PSU’s and the other’s you mention.  First, we are all trying to figure out how to market to the “Millennial” generation, what better way?  Second, one of our very best hires and most promising developing leader came out of Portland State’s program.

Why not focus recruiting on students who are demonstrating interest in our industry? Thanks for opening up the opportunity!

I'll say it again. If you are in the region, you should find you way to Portland on Monday, May 6, for the annual Center for Retail Leadership 2013 Executive Forum, which will feature some terrific sessions and a chance to network with both professionals and executives.

To learn more, click here.




On Friday, MNB reported that hedge fund billionaire George Soros said he has acquired a 7.9 percent stake in embattled retailer JC Penney, buying 17.4 million shares of the company, in what is called a "passive investment."

I commented:

I guess it is a passive investment because Soros is too busy trying to collapse the US economy and create a new world order. Even he would have a hard time doing that and helping to save JCP.

One MNB user wrote:

That is funny about the George S. trying to take over the world.  As a fiscal conservative, he does scare me a little though.

But probably less than the Koch brothers.

That said, I'm glad he got the joke.

Another MNB user wasn't sure if I was joking:

Really?   "Collapse the US economy and create a new world order"….please tell me that it is sarcasm!

And one other guy didn't get the joke at all:

I'm not a Soros fan, but I don't read News Beat to read idiotic, misinformed, ill-considered political blather. Do us all a favor and stick to what you know.

You are not Jay Leno. Don't even try.

First of all, thank goodness. I think Leno is one of the least funny people on the planet.

But I digress.

To be clear, Soros is a man of liberal leanings, but there are some on the extreme right who look to demonize him by accusing of trying to create a new world order and all that other stuff.

I was making a joke. I was being sarcastic. And I certainly wasn't trying to pass off political blather as fact. Far from it.




I got the following email from MNB user Roger Hancock:

A word of caution...

Your blog has been enjoyable to read since its inception.  Generally you do a great job of balancing your views with those of your readers to provide a relatively safe place to take facts and add opinion that doesn't have to be shrouded in spin to pass the test for political correctness.

The amount of humility you routinely communicate, and your usually gracious responses to people who take you to task builds confidence in the community you serve.  Most recently you wrote, "And I am just so lucky to have people like Michael and Kate writing for MNB, because they bring a depth of experience and insight that you can't get in other places. I am so much better for being in their company."

This humility is balanced with a little ego:  "Since I think, immodestly, that MNB has the most robust and differentiated ongoing conversations around, I think I'm going to stick with that."

The caution:  Great retailers have lost their way when they realize they are the most robust and differentiated.  In other words, they have arrived, have cornered the market, are showing others what it means to be a retailer, etc.  I don't have to name the brands because we all know them.

Please don't fall into that trap.  It would be a sad day when reading your blog falls to the bottom of the morning because you've lost your way in thinking you define it.

May I respond without appearing defensive? (Let me at least try...)

To be fair, those two comments - the one about Michael and Kate, and the one about MNB featuring robust and differentiated conversation - were in two different places, in two different contexts. The first one was in "OffBeat," where I was, to be frank, stating what I think is MNB's differential advantage. The second one was in 'Your Views," responding to someone who objected to some emails being posted anonymously, and I was saying that I'm okay with people not being identified on the site if it leads to great conversation and, ultimately, illumination.

I'll be honest. I don't think anyone I know would ever describe me as a humble guy. Humility isn't usually a character trait associated with people who knock out daily blogs/columns, express their opinions, think they matter, and encourage other people to do the same.

I'm proud of MNB. But, I am smart enough to know that the success of MNB is related as much to the people who contribute to it - Michael, Kate, and the 25,000+ subscribers who read it and often write in - as to me.

My friend Norman Mayne is one of the best retailers in the universe. (Hyperbole? Maybe just a little bit. But not much.) And while his Dorothy Lane Markets could and often are described as legendary, Norman is very clear on this. He would say (I'm paraphrasing): "That's very nice. But if we are legendary, we were only legendary yesterday. Today, we have to earn it all over again."

MNB is far from being legendary, but that's a fair description of how I feel. Proud of what it is, but knowing that today, I have to earn whatever legitimacy and credibility it has all over again. And tomorrow. And the next day.