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    Published on: October 16, 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.

    While I'm happy to say that I'm filing this report from Portland, Oregon, I actually want to talk for a few minutes about New Jersey. Specifically, the Meadowlands…where there is a stadium that hosts a couple of football teams that say they're from New York. That sounds logical until you actually are in Met Life Stadium for a game, at which point you realize that no matter what the helmets say, you aren't in New York.

    (To be clear…this is not an anti-New Jersey rant. I'd feel the same way if a team said it was from New York and played in Bridgeport, Connecticut. I just think that if they're going to be based in Jersey, they should say they're the Jersey Jets or the Jersey Giants.)

    Last Sunday I actually had the opportunity to go to a Jets game at Met Life. Mrs. Content Guy had never been to an NFL game and that's what she wanted for her birthday this year. She puts up with me, so I figured it was the least I could do … I got tickets for a Jets-Broncos game when the weather was likely to be nice, even though it was six weeks before her birthday, and we'd have a chance to see Peyton Manning play.

    It ended up being a terrific day, and Manning threw three touchdown passes, and the Jets didn't even stink as much as I expected. But here's what really surprised me…

    Tell people that you are going to an NFL game, and most of the time they'll say in conversation that you really get a much better view of the game at home, on television. Which is sort of annoying when you've already paid for the seats. But the argument for going to the game, as opposed to watching it from the comfort of your family room with a big screen TV, a nearby kitchen and no line at the bathroom, is that you get to have "the experience."

    Here's what I found, however, and it actually is a pretty good business lesson. We were sitting in the upper deck, pretty much on the 50-yard line … and we loved it, in part because we could choose what to watch, as opposed to having the TV networks make the decision for us. When you do that, you actually get a much more holistic view of the game, and a far better sense of how things are playing out. (if you are a Jets fan, this can be painful.) From the very first play, I found myself much more involved in the game than I usually am at home. Which I didn't really expect.

    The business lesson? Don't let other people dictate what you know about the company you are trying to run, the associates you are trying to lead, and the competition you are trying to best. There's an old rule of agriculture that says that a farmer's best fertilizer is his shadow, and I think the same things goes for business. Sometimes, you just have to sit in what sportscaster Red Barber used to call "the catbird seat" - sitting pretty, with a great and even enviable view, able to decide what you think is important and what you think is not.

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

    KC's View:

    Published on: October 16, 2014

    HBO said yesterday that beginning next year, it will make its programming available via a stand-alone, web-based service, allowing even those without cable television or an HBO package to see its shows. There are 80 million homes in the US that do not get HBO programming, and the move is seen as a potential financial bonanza for the company, generating hundreds of millions of dollars in new revenue.

    According to the Advertising Age coverage of the story, "The question is what effect the move will have on streaming players such as Netflix, which has long said HBO is its main competitor, and pay-TV companies that have held onto subscribers partly because they were they only way to get HBO.

    "Other popular cable channels may eventually make similar moves. CBS Corp. CEO Les Moonves has hinted that the company may consider selling Showtime directly to consumers, bypassing pay-TV providers, while ESPN recently laid the groundwork for a web-based service that would stream live NBA games even to non-cable, non-satellite subscribers."

    HBO programming currently is available on the web to HBO subscribers, via the HBO Go application.
    KC's View:
    That sound you hear is that of the walls tumbling down, as this move by HBO conceivably could change everything about how people consume programming and pay cable companies that have had virtual legal monopolies in many communities. Suddenly, one can imagine an entirely a la carte approach to TV viewing - if I only want to watch "Last Week Tonight" from HBO, and "Homeland" from Showtime, and I want to see this stuff in real time, I no longer have to invest in packages that are unilaterally decided upon by Cablevision.

    And why has this happened? Ultimately, it is happening because that's what the consumer demands … and it plays nicely into the goals of companies like HBO to grow their influence and revenue. As consumers, the balance of power has shifted to us … and the companies that do not recognize this are the ones that, in the long run, will suffer from creeping irrelevance.

    This particular story is about cable television entertainment. But the broader lesson should be taken seriously by anyone trying to reach consumers.

    By the way … a lot of young people already have made the shift. They don't have cable, they watch everything online, and were making companies like HBO less relevant by the day. HBO had no choice, in the big picture, but to make this move.

    And now, watch and listen as the walls come tumbling down.

    Published on: October 16, 2014

    The Wall Street Journal has an interview with Kip Tindell, chairman/CEO of The Container Store, in which he discussed the company's compensation policies, ands the national discussion about raising the minimum wage.

    Some excerpts:

    • "One of our foundational principles is one equals three: one great person can easily do the business productivity of three good people. If you really believe that they can do three times the productivity then you can pay them 50% to 100% above industry average.

    "The average salesperson makes $48,000 per year. [According to Bureau of Labor Statistics, median weekly earnings for retail sales people in 2013 was $598 or $31,096 per year.] We give big annual increases each year because we believe in keeping people mildly tickled about their rate of increase. We really and truly believe in paying according to contribution. So we want the 17th greatest contributor to get the 17th largest piece of the pie."

    "Everybody loves to say that it’s not all about pay. But pay is more important than most people realize, particularly if you’re trying to attract and keep really great people. We have single-digit turnover in an industry that has triple-digit turnover."

    "As incoming chairman of the National Retail Federation, my personal and my business’s position on the minimum-wage issue is different from that of the NRF. The NRF has of course just the traditional mass retailer’s attitude toward this. I’ll work to get the NRF to actually moderate and review that. I also think certain companies will soon come out in favor of raising the minimum wage because they’re going to have to politically. Better pay leads to better profitability."
    KC's View:
    One of the things that some folks will say is that the flaw in Tindell's philosophy has been exposed by the fact that The Container Store has had some rough going recently, but he actually addresses it in the interview, saying, "We’re very confident in the strategy. You don’t start changing your business model because comparable-store sales are a point and a half or so lower than you thought they would be."

    Wow. An adult who doesn't change everything he believes in just because some analysts get over-excited.

    There also will be some folks - and you know who you are - who will argue that The Container Store can afford to pay people well because it only hires great people and encourages them to be greater, and that companies like Walmart can't do that, because their employees are the dregs of retail employment. (I'm not making this up. This is the kind of email I get.) Well, I would argue that as an employer you get what you deserve … and if you think that the best way to be both efficient and effective is to have a lowest-common-denominator approach in your hiring, then that's exactly what you'll get.

    Published on: October 16, 2014

    Colloquoy and FanXchange are out with a new study saying that "more than half of American loyalty-program members (54%) are unhappy with the reward options offered by their favorite brands and 48% have experienced frustration during the reward redemption process."

    In addition, the study says, "93% of U.S. consumers said the type of reward offered is a “very important” or “somewhat important” factor in their decisions to join a loyalty program and to remain engaged with a brand."

    Furthermore, according to the study, "Consumers said that in addition to unappealing rewards, the reasons for their frustration with the redemption process were expired points (43%), not enough points to redeem (39%) and the reward item not being available (37%) … Once enrolled, 43% of American consumers have purchased more frequently because of reward offerings or customer-loyalty program membership."
    KC's View:
    Let's face it. The real reason that loyalty programs don't really work and don't help business transcend old ways of doing business is that they're not really loyalty programs … they're just glorified electronic coupon programs, and consumers for the most part will belong to two of them or twelve of them to pick off discounts where and when they can.

    And I'd have to guess, based both on personal experience and a somewhat jaundiced view of how many retailers use such programs, that part of the reason that consumers get frustrated is that retailers build these programs so the house always - or at least mostly - wins.

    Published on: October 16, 2014

    In remarks offered yesterday at Walmart's annual meeting for members of the investment community, CEO Doug McMillon said that the company is positioning itself to improve on four key customer issues - price, assortment, experience and access, and will continue to invest in new capabilities both in its bricks-and-mortar and online businesses.

    Excerpts from his speech:

    Re: price… "“At Walmart, we serve value-conscious customers that come from all walks of life and all income levels. Price matters to our customers and it always will. As a company, being a low cost operator is in our DNA. This will never change and we will be the price leader, across a broad assortment, everywhere we operate."

    Re: assortment… "“Today, a customer has a desire for more items, more assortment, more choice than ever before,” he continued. “We have tens of millions of customers visiting us weekly online and through our mobile apps looking for information, product options and then buying merchandise from us in stores and online. We’re known for assortment and we will be in the future."

    Re: experience… "Experience is about customer service. From our associates in stores to our engineers and data scientists, we’ll invent new ways to surprise and delight customers.”

    Re: access… "There is a growing consensus that the future of retail is not just in-store and not just online. The winners in retail will be those that can put them together. Frankly, we think we’re already doing the harder part. Locations matter because convenience matters. We have the stores, the associates, and the expertise in the physical world that others will need to build.”

    McMillon went on to say that "in the past, we’ve tended to roll up our plans from markets and segments, but this year we’ve started with an enterprise-wide approach. The internet, mobile, data and technology present opportunities across the world and across our businesses to better serve the changing customer,” he said. “We’ve taken a fresh look at where we want to play – what businesses, markets, formats, and services we need and how to win – what our customer value proposition should be.

    "Our strategy will guide our approach to capital discipline. We will change the mix of our capital spend through reductions in areas we have invested in historically to fund investments in new growth opportunities. Specifically, we will moderate the growth of investments in stores, and we will increase our investments in e-commerce."
    KC's View:

    Published on: October 16, 2014

    American Express said yesterday that by the end of this year, all of its cardholders enrolled in its Membership Rewards points system will be able top use those points to buy burgers, shakes and fries at McDonald's restaurants in the US.

    "We’re leveraging our technology to make it easy and seamless to redeem points in real-time,” said Leslie Berland, executive vice president, Digital Partnerships & Development at American Express. “When Card Members pay with their American Express Cards at McDonald’s, this technology adds flexibility and choice to that payment experience.”

    The program will work so that when someone uses an Amex card to pay for a McDonald's meal, the card reader will give the shopper the option of using points to pay for it - at the conversion rate of 100 points for $1 worth of food.

    Bloomberg Businessweek reports that "American Express’s upscale, business-traveler image notwithstanding, card members already spend hundred of millions of dollars at McDonald’s every year. No word on how much of that figure consists of meals in airports during business trips. Berland expects customers will go to McDonald’s more frequently and spend more money because of the rewards program. That’s what happened earlier this year, when American Express worked out a similar arrangement with Uber and with New York taxis via Verifone, she says."
    KC's View:
    I have to be honest here … I have trouble with that sentence that starts out, ""American Express’s upscale, business-traveler image notwithstanding … "

    Because somehow linking Mickey D's to the brand positioning of American Express - where the goal seems to move people from the green card to the gold card to the platinum card to the black card, all with the idea of creating the image of a club that not everyone can join, and by the way, you pay for the privilege - seems incongruous.

    Maybe this works. Maybe the idea is to get people to burn off points on Big Macs rather than use them for more expensive items. But for me, this is like fingernails on the chalkboard … and one has to wonder if it is a short-term answer to a problem that required more long-term, big-picture thinking.

    Published on: October 16, 2014

    Yesterday seemed to be a day during which the theme for some companies was cutting consumer benefits…

    In Washington, DC, WTOP News reported that Ahold-owned Giant Food has decided to no longer offer shoppers a five-cent reward for every reusable shopping bag brought into the store, an incentive that it has had in place for almost two decades.

    According to the story, Gordon Reid, the company's president, wrote to shoppers, saying: "Approximately 20 years ago, we launched our reusable bag program and began offering our customers a 5-cent incentive every time they used a reusable bag when shopping in our stores. At the time, this was a very new idea and the program encouraged our customers to change their habits and adopt the use of reusable bags. We've continued this incentive program over these many years, but times have changed and the public is much more aware of environmental issues and our responsibility, as individuals, to reduce our environmental impact."

    Reid said that Giant will continue "to invest in new programs that will contribute more to our environmental objectives."

    Meanwhile, in the UK, the Telegraph reports that grocer Sainsbury "is halving the rewards available to shoppers from its loyalty scheme Nectar in the latest stage of the supermarket price war. The changes, which have prompted a backlash on social media, mean that from April 11 next year Sainsbury's will award one Nectar point for every pound spent compared with two at present. Also, shoppers will no longer receive one point every time they use their own bag, although they will still earn a point for each litre of fuel purchased."

    The story says that CEO Mike Coupe (no relation, as far as we know, to the Content Guy) has said that "said that Sainsbury’s wants to simplify its pricing and reduce the number of promotions it runs."
    KC's View:
    Forgive my cynicism, but it is hard for me to believe that either of these cuts have anything other than the notion of saving nickels - or pounds - for retailers that are under pressure. Hard to say whether ending such programs will hurt their image with consumers, but let's at least call it the way things are.

    One thing, though … it's been 20 years since Giant started offering a nickel for reusable bags brought into the store? That's amazing …

    Published on: October 16, 2014

    Internet Retailer reports that Amazon has begun a referral initiative for its Prime guaranteed two-day shipping program, offering referring customers who get someone else to join and make a purchase via Prime a $5 Amazon credit.

    According to the story, "The Prime referral program marks at least the second time in recent months that Amazon has offered an incentive to members of its shipping program. In late July, Amazon launched a “no-rush” shipping option for Prime members. In return for a bit of patience—instead of getting their goods within two days, customers will receive orders in five to seven business days—Amazon will reward those customers with a $1 credit that can be applied to titles offered by Amazon Instant Video."

    It is believed that as many as 50 million consumers may belong to Amazon Prime.
    KC's View:
    Maybe someone can enlighten me on this. I thought one of the main complaints about Prime - outside the Amazon community, that is - was that was so successful that it eroded the company's ability to be profitable, which is why they started offering instant video credits to people who didn't take advantage of the two-day delivery guarantee. But now they're looking to add even more people to the program?

    This may have more to do with loyalty than anything else - making sure that it gets as many people committed to the Amazon ecosystem as possible, which makes it less likely that they will shop anywhere else. (Like, say, Walmart.com….)

    Published on: October 16, 2014

    Marketing Daily reports that "the International Council of Shopping Centers (ICSC) says it expects holiday spending to gain 4% this year, in line with previous forecasts from the National Retail Federation and Deloitte … The ICSC says it expects Americans to spend $488.6 billion at shopping centers, fueled by lower unemployment and increases in household income. Holiday hiring in the retail sector, which it says is another important indicator, is expected to climb 7.3%."


    Fortune has a piece about how "Bloomingdale’s, the upscale department store owned by Macy’s Inc., thinks technology can help solve a common problem that has cost apparel retailers dearly in sales: frustrated customers who give up and leave rather than take the time to acquire the right piece of clothing.

    "The solution? 'Smart' fitting rooms equipped with wall-mounted tablet computers. At five of its 37 stores, Bloomingdale’s has installed Apple iPads that connect to the complex inventory-management systems it uses to keep track of tens of millions of items. With the iPads, a customer or a store associate can scan the item in question to find which colors and sizes are in stock, as well as see ratings and reviews by other customers. The tablets also recommend items that would complement the scanned original. And with a tap, a customer can summon an associate."
    KC's View:

    Published on: October 16, 2014

    …will return.
    KC's View:

    Published on: October 16, 2014

    The Kansas City Royals completed a clean sweep of the Baltimore Orioles, winning Game Four of the American League Championship Series 2-1, earning the AL pennant for the first time since 1985. The Royals have not yet lost a game in the 2014 postseason, and will face off against either the St. Louis Cardinals or the San Francisco Giants in the World Series, which begins next Tuesday.

    As for the Giants and the Cardinals…the Giants defeated the Cards last night 6-4, to take a 3-1 edge in the best-of-seven championship series.
    KC's View: