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    Published on: March 3, 2014

    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.

    Last week, American Airlines announced that it was ending what is called "bereavement fares," which consisted of five percent off the listed ticket price when people need to get home for the funeral of a loved one. It was doing so, it said, because it needed to align its policies with those of US Air, with which it is merging. Plus, the company said, there are plenty of ways to get cheaper fares from low-cost airlines, and so it didn't make sense of offer them anymore.

    Forgive me, but either this decision was made by accountants, which proves once and for all that accountants shouldn't make decisions, or it was made by someone with so little sense of public relations and customer service that they ought to be summarily fired.

    These guys are morons.

    Now, let's be clear. I actually agree with some of the analysis out there that says that, in fact, bereavement fares were no great bargain, and so nobody should mourn their loss. But that's not the point.

    Because all American Airlines has done is say a) the bottom line is more important than our customers, and b) when you are in trouble or have a desperate need, go do business with somebody else.

    Morons.

    If I were American Airlines, my policy would be a little bit different. (Though I grant you, I've never run an airline, will never be asked to run an airline, and that probably is a good thing.)

    I'd say that instead of aligning our policy with that of US Air, we're doing it the other way - we're aligning its policy with ours.

    And then, I would tell anyone who is a member of my frequent flyer program who is facing such a personal emergency, when these kinds of disasters strike, call us. Because we'll move heaven and earth to get you where you need to be at the cheapest possible fare. And if we're lucky enough to have all our planes full, I'd reach out to other airlines to help my customers as best I could.

    Sure, you'd have to have some rules, just to make sure that people don't abuse the program. But I don't think it would be that hard … especially today, when you can call up almost any piece of information - like obituaries - you need online.

    There are probably all sorts of reasons that American Airlines would cite as being justification for its announcement, just as there are probably all sorts of reasons that lots of businesses have for dumb policies.

    But that doesn't make it any less moronic.

    Companies that depend on the customers doing business with them have to do their best whenever possible to be the go-to solution when it comes to needs and desires related to whatever segment they are in. Otherwise, what's the point?

    American Airlines has just effectively told its customers, whenever you are in a time of great personal need, don't call us. Go on Kayak. Or Expedia. Or Priceline. Because they're better at serving your needs than we are.

    And here's the irony. Let's say that someone in my family dies, and I immediately have to fly cross country. I go on Priceline, I name my own price for a fare, I get it accepted, and I'm on my way … and I may well be on an American flight, and they had to give Priceline a piece of the action, and get none of the credit.

    This strikes me as one of the more profoundly stupid public relations and customer disservice moves that I can remember.

    And, of course, it is pretty good bet that United and Delta and bunch of the other big airlines will follow suit, like lemmings, and then wonder where the hell their customer goodwill went.

    Well, I'll tell you where it went. You flushed it down the toilet, and you have nobody other than yourselves to blame.

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

    KC's View:

    Published on: March 3, 2014

    by Kevin Coupe

    What does it take to crash Twitter?

    Apparently, just a "selfie" taken of Ellen DeGeneres and a few friends …. such as Meryl Streep, Bradley Cooper, Kevin Spacey, Jennifer Lawrence, Brad Pitt, Angelina Jolie and Lupita Nyong’o.

    DeGeneres took the pic with her smartphone - actually, Cooper took the pic because he has longer arms - during the Oscars broadcast last night, from the floor of the Dolby Theatre … and it quickly was re-tweeted more than two million times, becoming the most re-tweeted photo ever, surpassing a photo taken of President Barack Obama and First Lady Michelle Obama taken immediately after his re-election.

    The Associated Press reports that Twitter "sent out an apology because all of the retweeting disrupted service for more than 20 minutes after 10 p.m. ET."
    KC's View:

    Published on: March 3, 2014

    In the Sears Holdings annual shareholder letter, CEO Eddie Lampert wrote last week that he believes that the company represents the future of retail and that "the entire retail industry is headed to where we already are," which he describes as a "traditional, store-based retailer" that has been transformed "to a membership company that serves its members across an integrated retail platform."

    Lampert said that while the company's 2013 annual results did not necessarily suggest that the company is at the cutting edge of retail innovation, "2013 may have been the year that justifies why so many people across Sears Holdings have been working for several years on our transformation from a traditional, store-based retailer to a membership company that serves its members across an integrated retail platform.

    "Furthermore," he wrote, "if the way the entire American retail industry ended 2013 is any indication, I believe 2014 may well be a year in which Sears Holdings begins to clearly demonstrate the advantages of this transformation.

    "That may sound odd given our financial results, but this letter will detail why I believe that. To be clear, it is not because our performance is where we need it to be. It isn’t. But not only do I believe that we are headed in the right direction in important ways, I believe the entire retail industry is headed to where we already are."

    Lampert goes on:

    "Our two key platforms - Shop Your Way Rewards and Integrated Retail - continue to become more prominent both in how we run the company and in how we serve our members. Some larger retailers and some specialized retailers continue to perform relatively better than the rest, but even they aren’t immune to the drastic shifts in customer behavior and the competitive landscape.

    "Certain key metrics we follow show us that our execution of our core member-centric strategy is enabling us to increase engagement with our members. Sales from Shop Your Way members comprised 72 percent of all sales in Sears Full-line and Kmart stores in the fourth quarter of 2013, up from 58 percent during the fourth quarter of 2012. Overall, Shop Your Way members made up 69 percent of our sales in 2013, up from 59 percent for all of 2012.

    "Others in our industry are struggling to figure out how to adjust their business models to deal with the combination of changing consumer behavior and intense business model competition. We believe that these Shop Your Way results show that even with the challenging results across the industry and in our stores, our integrated retail strategies give us the opportunity to address this changed consumer behavior and to evolve our business model.

    "More importantly, many of the changes that other retailers are making to survive today follow innovations that were either pioneered or significantly advanced in Sears and Kmart locations, like converting physical stores to be able to fulfill online orders and emphasizing ship-to-store and ship-from-store programs.

    "These are areas where much of our investment has been focused over the years, despite the widespread and, we believe, incorrect belief among many outside commentators that what our stores need most are hundreds of millions of dollars more in décor and fixtures. We believe that the developments in the entire retail industry validate our decisions to shift much of our investment instead to digital and integrated retail."

    Furthermore:

    "We have been focused on building long-term trust for nearly a decade, which becomes even more impactful in an era in which customers have shopping choices beyond physical stores and are wary of retailers in general. We ask our members what they want and we listen to their responses. We try hard to anticipate their needs. Our associates have done amazing work in this area and I once again want to thank them for their efforts.

    "One of the newest member experiences we’ve developed comes from this process. In-vehicle pickup allows members to notify us when they have arrived at our stores through the Shop Your Way app, and then have their purchases delivered directly to their cars. We anticipate that experiences like this will become even more popular. Importantly, it’s an option we provide our members because it’s something they’ve told us they want.

    "We made a choice several years ago to focus Sears Holdings on becoming a member-centric company built on the five strategic pillars noted above. Our strategy has evolved further as the retail industry has changed and our ability to compete—with fewer stores, with less space per store and with a marketplace of products—has become more clear. It is up to us to execute on this strategy and to restore profitability to the company."
    KC's View:
    I think that if Sears and Kmart would be a lot more successful if they were selling whatever Fast Eddie Lampert is smoking.

    Really. Because it must be good stuff.

    It takes a special kind of arrogance to suggest that Sears is at the forefront of anything. Especially coming from a guy routinely rated as one of the worst CEOs out there.

    This isn't to say that Sears cannot succeed if it embraces an omnichannel, member-centric strategy. Maybe it can, though I would argue that the company is hardly working from a position of strength. But at one point in his letter, Lampert actually implies (because he cannot come right out and say it with a straight face, even in print) that somehow Sears is more innovative and/or dependable than Amazon.

    Give me a break.

    Published on: March 3, 2014

    Politico reports that the Food Marketing Institute (FMI) and the Grocery Manufacturers Association (GMA) "will roll out a coordinated marketing campaign, spending as much as $50 million … to promote their 'Facts Up Front,' the industry’s own voluntary program for providing nutrition information on the front of food and beverage packages … The two groups first announced they would commit $50 million in marketing for the effort in 2010, but other than launching their website last spring, there has been no national marketing of note."

    The new marketing campaign comes, Politico writes, "right on the heels of first lady Michelle Obama’s unveiling of big changes to the Nutrition Facts panel, altering the way serving sizes are calculated, how calories are displayed and including added sugars, among other changes" that have been proposed by the Food and Drug Administration (FDA).

    The FMI/GMA effort, the story suggests, is designed to show "that the industry is moving forward with front-of-pack labeling even though the new rules could blow up their efforts and cause some food companies to re-think their commitment."

    The Politico story describes a potential face-off between the government and the trade associations over competing initiatives, as the FDA looks to improve the existing mandated method of communicating nutrition information on the back or side of packages, and FMI and GMA look to promote the voluntary front-of-the box effort that "makes nutrition information quick and easy for consumers. It also makes it easy to highlight vitamins and other nutrients right where consumers can see it, which can also help with marketing."
    KC's View:
    It seems to me that there is absolutely no reason that these two approaches to nutrition information should be in any sort of competition, much less at war. One is about mandated scientific information, the other is about marketing … which doesn't necessarily make one better or more useful than the other. Just different.

    I sort of hope that Politico, which spends a great deal of its time reporting on various kinds of political warfare, is overstating this face-off a bit … that in fact these are just going to be two different initiatives running on parallel tracks but both aimed at helping the consumer make smart decisions.

    Published on: March 3, 2014

    ABC News reports that "Idaho Governor C.L. 'Butch' Otter has signed the latest so-called 'Ag Gag' bill, making the state the seventh in the nation to criminalize hidden camera recording inside farm facilities – a tactic used by animal rights groups to expose alleged animal abuse and cruelty … The law will put anyone convicted of recording hidden camera video inside an agriculture operation in jail for a year. There is also a $5000 fine."

    The story says that the corporate agriculture interests that pushed fore the legislation said that they needed it because of death threats that were made against a dairy owner accused of running a facility where animal cruelty occurred. But opponents of the bill say that the government has bowed to corporate interests looking to protect themselves from accusations - and proof - of criminal behavior.

    Animal rights groups are said to be seeking ways to overturn the Idaho law.
    KC's View:
    These "Ag Gag" laws are an outrageous example of how money in politics corrupts the very people who are supposed to be upholding the law. It is disgusting.

    If these farmers don't want to be targeted by animal rights groups, then they should make damned sure that their facilities adhere to the letter and spirit of the law.

    Published on: March 3, 2014

    Bloomberg reports that the US Secret Service is investigating "a possible security breach at Sears Holdings Corp., after a series of cyber attacks on retailers that have exposed the credit-card data of millions of U.S. consumers."

    Sears says in a prepared statement that it has seen no evidence that it has been hacked: "We are actively reviewing our systems to determine if we have been a victim of a breach. We have found no information based on our review of our systems to date indicating a breach."

    Government investigators already are looking into breaches at Target and Neiman Marcus.
    KC's View:

    Published on: March 3, 2014

    • The Cincinnati Enquirer reports that Kroger said last week that it created 7,000 jobs last year, growing "jobs to about 350,000, an increase of 2 percent with most positions at the store or division level. The acquisition of Harris Teeter, which closed last month, added another 25,000 employees – pushing Kroger’s total workforce to 375,000 … Excluding acquisitions, the grocer added it has created 40,000 over the last six years, including 22,456 veterans since 2009."

    According to the story, "Kroger is one of more than 130 companies participating in the '100,000 Jobs Mission' that set out to hire that many transitioning service members and military veterans by 2020. The goal was hit seven years early."


    • New Seasons Market last week announced that its "Grant Fund awarded $91,000 to 36 nonprofit organizations supporting small farmers and increasing access to fresh local food. This year, the Fund was able to distribute the most dollars to the most grantees in a single year since the program launched in 2007. Twenty-nine of the 36 grantees are farmers markets located throughout the Portland-Vancouver region. The majority will use some or all of their grant funds to match Supplemental Nutrition Assistance Program (SNAP) dollars, making it easier for low-income shoppers to enjoy fresh, local produce - and putting additional dollars back into the pockets of farmers from the area."

    New Seasons annually donates 10 percent of its after-tax profits to local nonprofits across the Portland-Vancouver area.


    Marketing Daily reports on a new study saying that "nearly a quarter (23.6%) of Hispanic consumers reported that they use tablets for local shopping, compared with 15.5% of non-Hispanics … Nearly half (48.5%) of Hispanic consumers use mobile devices for local shopping, compared with 32% of non-Hispanics. Among mobile Hispanic consumers, 52.5% report using their tablets and 42.5% report using their smartphones daily for local shopping."

    The conclusion: "Hispanic consumers are outpacing non-Hispanics in their adoption of mobile, social and online sources for local shopping."


    • McDonald's is giving bone-in chicken wings another chance to take flight, albeit at a reduced price.

    USA Today reports that McDonald's pretty much flopped last year with its Mighty Wings, priced at $1 apiece. Now, it is bringing them back - at $3 for five, or about 60 cents apiece.

    The general sense is that McDonald's didn't test price resistance as much as it did taste, but that if this re-introduction does not work, that'll pretty much be it for Mighty Wings.
    KC's View:

    Published on: March 3, 2014

    • The St. Cloud Timesreports that Coborn's has hired Thomas Velin, most recently CFO and senior vice president at Experian Health Care, to be its new CFO, succeeding Pam Osborn, who left the company at the end of 2013.

    Coborn's also has hired Dale Monson to be vice president of information technology, a new position at the company. He most recently was senior vice president and chief information officer the past two years at Oriental Trading Inc.

    And, Greg Sandeno, previously with Nash Finch Co. and the Fred Meyer division of Kroger, has been named executive vice president of sales, also a new position at Coborn's.


    • Home Depot has announced that Craig Menear, who has been in charge of merchandising for the company, has been named US retail president, which is said to be the first step in creating a succession plan that will kick in upon the eventual retirement of current CEO Frank Blake. Blake has been CEO since 2007, following the debacle that was the tenure of Robert Nardelli. The Wall Street Journal reports that Blake "restored battered employee morale and overhauled the company's operations, sending Home Depot's stock up more than 100% during his tenure. The chain's next leader will need to expand the company's presence online and integrate technology with stores to cope with an enduring shift in how Americans like to shop."
    KC's View:

    Published on: March 3, 2014

    We reported several weeks ago on the unexpected passing of Bob Hermanns, a longtime industry executive who for the past five years served as Director of Food Industry Management Programs at the University of Southern California, Marshall School of Business. Bob was a longtime friend to MNB …

    We've had a lot of inquiries about Bob, and wanted to pass along the following information:

    A celebration of Bob's life will be held on: Friday, March 21, 2014 at 11 a.m. Old Ranch Country Club, Enter "Event Entrance", 3901 Lampson Avenue, Seal Beach, CA 90740.

    In lieu of flowers, the family requests that donations be made to: Bob Hermanns Education Fund c/o USC Credit Union, 3601 Trousdale Parkway, STU 106, Los Angeles, CA 90089.
    KC's View:

    Published on: March 3, 2014

    MNB had a piece last week about Winder Farms, a company that's been in the grocery delivery business for more than a century and is adapting to the new economy, and differentiating itself in the marketplace and growing.

    Which prompted MNB reader John Rand to write:

    About four retail revolutions ago (somewhere in the 1990s) I had the brief pleasure of being the one guy in my company responsible for developing a relationship with all the new e-commerce startups-  the late and not terribly lamented Streamline,  Shoplink, Webvan triad among others.

    I felt personally responsible, somehow, for not being able to keep them alive, though I was hardly in a position to do much about it. It was a valiant effort for its day and I’m not sorry to have been part of it.

    But in the course of working on home delivery retailing I came across an astonishing fact – in 1950 about 35% of all grocery products were home delivered!

    By contrast we are forecasting about 10% in the near term for the new wave of e-commerce – and a lot of that will be some form of click-and-collect, where shoppers order online but pick up at a store or dedicated location.

    We forget, today, that there was a time when the milkman came to every house on the street, when the pretzel-and-chip truck delivered every week, when wooden crates of seltzer water were routinely brought to your door and the empties carried away. Talk about buggy whips! We had trucks that came by and sharpened your knives and scissors – now you just buy new ones.

    Sure – this was before item and category proliferation, vastly expanded frozen foods, dairy, deli products, packaged goods. Diapers were cloth and the diaper service came and took away the stinky ones and exchanged clean ones for you every week if you were affluent enough.  Towels were usually cloth, not paper. Most people gardened and canned their own, citrus fruit and juice was only available seasonally unless you lived in the South. It was a simpler list of products, and it was still common to go to a specialty butcher instead of a chain grocery store, and that store was about the size of today’s drugstores. But people who say it can’t be done, that e-commerce won’t impact the store very much,  that the last mile will never be conquered – pay attention, people, this has happened before.

    I am only a little older than the Content Guy but I can just remember those days. So it was delightful to hear of Winder Farms, well into their second century, as the wheel comes around their way again. Most excellent. And instructive to those who can listen and hear the changes happening.


    Well stated.




    MNB took note last week of a New York Times story suggesting that the business community has become the gay community's most powerful constituency, because it works vigorously against legislation perceived as intolerant - such as the Arizona bill that would have allowed businesses to deny service to customers if they claimed that serving those customers would violate their religious beliefs.

    The point that we've been making all along here on MNB is that this is a business story - that companies need to think about how these various scenarios are playing out in their stores, because it could have major implications for how they are perceived in the community. And, it is not just an Arizona story; there also have been highly publicized similar cases in Colorado and New Mexico.

    And, I commented:

    Go figure. Tolerance is good business.

    One MNB reader responded:

    While this sounds good in theory that is not workable in practice.  I am sure you will agree that there are things that are intolerable.   Examples, people producing food in factories that do not meet health requirements, employees stealing from their employers, companies that make addictive products that harm a person’s health (cigarettes). So thus the actual question is what actions are acceptable (those will be tolerated) and what actions are unacceptable (these will not be tolerated).  Who decides what actions are tolerated and what will not be tolerated?  If we think it is society, remember how many actions that we believe are not acceptable today were at one time deemed to be acceptable.  Thus tolerance is not good business, because there always exists some intolerance.

    I'm not sure what your point is.

    The kind of tolerance you are decrying strikes me as hardly the kind that could be cited in a discussion of religious freedom. I suspect that if people try hard enough, they can always find a rationale to be intolerant. There was even a time, if I'm not mistaken, when people used religion as a reason for racial segregation and discrimination.

    MNB user Mike Franklin wrote:

    While I applaud business for its stance against S.B. 1062 in AZ…I continue to believe that the values of America should be derived from a secular American (corporations and religious sects are not citizens) vision that protects and provides opportunity for all and extends a helping hand to the vulnerable amongst us. Business is for making profit, religion is for soothing life, and neither should be defining our values…but both should be supporting them.




    Responding to our story about how H-E-B has found success with private label Creamery Creations ice cream, which is effectively competing with the iconic Texas brand Blue Bell, one MNB reader wrote:

    HEB has such large market share in the San Antonio market that they sometimes forget that consumers want choice.  They have a great private label program, but have delisted many national brands, giving their consumers few alternatives within many categories.  I look forward to trying their new PL ice cream, but hope that they recognize that selling Blue Bell, which consumers like me love, is not a bad thing.  Congrats to HEB and any other retailer when they provide new, innovative products in a category.  But when they copy the national brand and provide a less expensive alternative, let me, the consumer decide which product to buy.  If they don’t, the next thing we’ll read about is how Blue Bell has an ice cream shop inside the Amazon warehouse….won’t that be fun!




    On another subject, an MNB reader wrote:

    Kevin, one of your readers commented on the minimum wage issue "Management and boards are entrusted with delivering shareholder value which in most cases works directly against increasing expenses."

    That is such a narrow short-term perspective on delivering shareholder value. Perhaps in the long-term (years and decades down the road), shareholder value is better delivered when you take better care of your employees.

    If I recall, Costco has been communicating this long-term vision for years, but the Wall St investment community just cannot think beyond today or this week or at most this month.

    This is why I'm so wary when a CFO ascends to the top spot in a company.





    We had a story last week about how a video rental chain, Family Video, has managed to remain relevant even in a world where Blockbuster has fallen victim to the competition provided by the likes of Netflix and Redbox, and now has acquired a pizza chain franchise that it intends to pair with those video stores. Which prompted MNB reader Christine Neary to write:

    Wow, it sounds like Family Video is really listening to what their customers want/need! It’s certainly refreshing to hear about, and I know that –were I to live in that area – I would be likely to visit a Marco’s/Family Video location.




    I noted last week that I particularly admired an email I got from an Arizona restaurant called Cowboy Ciao! that referred to Arizona being "once again the national butt of jokes thanks to politics from the 1800s," and added, "To recap, we are apparently against immigrants, gays, lesbians, transgenders, drinkers, people of color, female golfers – did I leave anyone out?  Trombonists?"

    Which prompted MNB reader Mitch Hill to write:

    What a wonderful little restaurant! I love their food!

    Good point. For the record, Cowboy Ciao! makes one of the best chopped salads I've ever had … utterly delicious. And, they have a great wine list … and a scallops-and-risotto dish worth driving long distances for. Just FYI.




    And finally, I noted last week - within the context of a review of 3 Days To Kill - that my kids occasionally have advanced the theory that, in fact, I am an assassin. They can't imagine that being the "Content Guy" is a real job, plus I travel a lot by myself, and they suggest that while I may say that I'm in Chicago, who is to say that I'm not actually in Paris killing terrorists? This is not the case, of course, though I admire their imaginations and appreciate their belief in my non-existent abilities. At least, that's my story and I'm sticking to it…)

    Got lots of email about this one … but my favorite was from the MNB reader suggesting that when they make the movie, they should cast Sam Rockwell as me.

    And I'd just like to say that I'm totally cool with that. Like every American male, I probably would have chosen Clooney or Pitt … but Sam Rockwell seems like an inspired choice. Or, if he says no, maybe Greg Kinnear? (That's who I've cast in my mind for the movie version of the novel I'm writing … though Sam Rockwell seems like a pretty good idea, too…)

    What can I say? I have a rich fantasy life…
    KC's View:

    Published on: March 3, 2014

    Last night, the major winners at the Academy Awards included:

    Best Picture: 12 Years A Slave
    Best Actor: Matthew McConaughey, Dallas Buyers Club
    Best Actress: Cate Blanchett, Blue Jasmine
    Best Supporting Actor: Jared Leto, Dallas Buyers Club
    Best Supporting Actress: Lupita Nyong’o, 12 Years A Slave>/i>
    Best Director: Alfonso Cuaron, Gravity
    Best Original Screenplay: Spike Jonze, Her
    Best Adapted Screenplay: John Ridley, 12 Years A Slave
    Best Animated Feature: Frozen
    KC's View:
    I did pretty well with my "will win" predictions … missing only on "Best Original Screenplay, which went to "Her" and not American Hustle. (That's okay…I probably would've voted for Her.)