retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: December 8, 2014

    by Kevin Coupe

    The Los Angeles Times has a story saying that one airline industry expert is saying that he believes that major airlines will soon move to a "dynamic pricing" model for all those extra fees that passengers have to pay these days. For example, this would mean that during the holiday season, instead of paying $25 to check a bag, you'd have to pay more.

    In fact, it has already begun - Spirit Airlines charges more for checked bags between December 18 and January 25, saying on its website that the move is designed to "'encourage customers to pack a bit lighter' to make room for more bags during the crowded holiday season."

    Airlines for America, a trade association, says only that "the marketplace, and more specifically customers, decide every day what they are willing to pay."

    Sorenson says that while there may be initial pushback, consumers will learn quickly to accept and pay the increased fees.

    I'm not so sure about that. Accept and pay the fees, maybe … but I have to wonder if out of some kind of arrogance born from lack of competition - and what often looks like de facto collusion - the airlines are doing irreparable damage to their brand equity. It just seems as if they do less and less to prove any sort of loyalty to the consumer. Sure, they have frequent flyer programs, but they make them less and less rewarding and less and less accessible to their customers. But they also raise their fees whenever costs go up, but last time I checked, they rarely lower them when costs go down.

    I think it is a cautionary lesson for any marketer, for any brand.

    This hasn't come back to haunt the airlines. Yet. But such behavior inevitably does, usually in the form of a competitor that decides that a little disruption is in order. When it happens, it is an Eye-Opener … but it sometimes is too late to do much about it.
    KC's View:

    Published on: December 8, 2014

    USA Today reports that McDonald's, "responding to declining same-store sales, falling stock prices and a shrinking base of younger customers … plans to vastly expand its 'Create Your Taste' test platform." The 'Create Your Taste' concept, the story says, "lets customers skip the counter and head to tablet-like kiosks where they can customize everything about their burger, from the type of bun to the variety of cheese to the many, gloppy toppings and sauces that can go on it." In addition, as the concept is rolled out, chicken will be added to the build-it-yourself menu.

    The story says that a current four-store test will be expanded to 2,000 locations throughout the US next year, and will be available in one out of seven US McDonald's.

    The concept is not without risks for McDonald's, which has been built over decades on two basic premises - fast fulfillment and low prices. The new "Create Your Taste" sandwiches take about seven minutes from order to delivery, which can be an eternity in fast food terms, and they cost several dollars more than the pre-prepared sandwiches.

    Another problem - the wait means that they cannot be sold at drive-through windows, where, the story says, some McDonald's do as much as 70 percent of their business.
    KC's View:
    McDonald's has to do something … and maybe this is it. The biggest problem is that young people more and more are making other choices; they see places such as Chipotle and Five Guys and Shake Shack as being far more reflective of their tastes and desires. And getting them to shift back is going to take some serious work.

    Published on: December 8, 2014

    The Wall Street Journal reports that Sam Kass, the White House senior policy advisor for nutrition policy and longtime personal chef for the Obama family, has submitted his resignation and plans to leave Washington early next year, when a replacement is named.

    The story notes that Kass, a Chicago chef who joined the Obamas in Washington when he was elected to the Senate, has moved from cooking their meals to working closely with Michelle Obama on her "Let's Move" campaign, which encourages increased physical exercise and better eating habits for young people.

    "From constructing our Kitchen Garden to brewing our own Honey Brown Ale, Sam has left an indelible mark on the White House,” President Obama said in a prepared statement. “And with the work he has done to inspire families and children across this country to lead healthier lives, Sam has made a real difference for our next generation.”

    Kass said he plans to move to New York, where his wife, MSNBC anchor Alex Wagner lives. The Journal writes that after taking some time off, Kass "will begin a to-be-determined position in the private sector promoting healthy eating and will deliver speeches."
    KC's View:
    Kass has been a powerful spokesman on the subject of nutrition awareness, though, to be fair, much of that power has come from proximity to the First Family. I do think, however, that he brings a lot of experience and persuasiveness to the cause, the cause is not going to go away, and I suspect he'll find the private sector to his liking.

    Published on: December 8, 2014

    In Toronto, the Globe and Mail reports that the Canadian government has decided to approve the $12.5 billion takeover by Burger King of Tim Horton's, but with conditions.

    Among those conditions are an agreement to maintain current hiring levels throughout Canada for five years, to not change the financial structure of Canadian franchisee deals for at least five years, and to guarantee that half of Tim Horton's board seats will be held by Canadians.

    The story notes that "Burger King has committed to setting up the new merged company’s headquarters in Oakville, Ontario," a decision that has been labeled a tax dodge by US critics.

    The Wall Street Journal writes that the deal "is still subject to approval from the Ontario Superior Court of Justice and Tim Horton’s shareholders, who are set to vote Tuesday."
    KC's View:
    Let the debate about "tax inversion" continue. It'll be healthy. I just hope that it addition to being about tax rates, it also looks at what people and companies get for being based in the US. Because that's a legitimate factor in any comprehensive discussion of this issue.

    Published on: December 8, 2014

    Gigaom reports that after giving a speech last week, Amazon founder/CEO Jeff Bezos "was asked the zillion-dollar succession question."

    And, the story says, the answer was yes, "Amazon does have a CEO successor lined up should something happen to Bezos, as it does with all senior managers."

    Who is it? “It’s a secret," Bezos said.

    During the Q&A, Bezos also told the audience that Amazon is far more focused on a work ethic than on work-life balance, and does not offer benefits such as free gourmet lunches to its employees. And, the story says that Bezos believes that "taking a job with the company that offers the best free massages may not be the optimal career choice for a young engineer."
    KC's View:
    This is utterly consistent coming from a man who has said more than once that people who are worried about work-life balance must not like their work very much.

    Published on: December 8, 2014

    • The San Jose Mercury News reports that even as online sales as a percentage of total holiday sales increase, "the ease of online buying and guaranteed before-Christmas delivery are pushing back holiday shopping decisions for some shoppers, said Marshal Cohen, chief industry analyst with The NPD Group."

    In part this is being fueled by retailers promising next-day and second-day deliveries, and in part by shipping companies that have ramped up their capabilities so they will not be caught off-guard as they were last year; the US Postal Services even plans Sunday deliveries from now until Christmas.

    However, the story also notes that businesses will be careful not to over-promise, and that consumers will have to be careful not to wait too long. “Just because a retailer says we will ship it within 24 hours, it doesn’t mean it will be delivered in 24 hours,” Cohen tells the paper.
    KC's View:
    I have to say that we got some stuff delivered on Sunday by a postal worker, and he was happy, cheerful, conversational and in a very customer-service oriented mood. That's a good face to put on the business at a time when the USPS is seeking relevance.

    Published on: December 8, 2014

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

    Advertising Age reports that "Kraft Foods Group is planning a major campaign to back the national rollout of McCafe bagged coffee, which is expected to begin hitting stores next week. The product is being introduced in partnership with McDonald's … In August, the two marketing giants announced their intentions to take the product national. Varieties will include premium roast, breakfast blend, French roast, Colombian, decaf, French vanilla, hazelnut and French roast whole bean. The coffee will also be available in single-serve 'K-Cup' format geared for Keurig machines."

    Reuters reports that "US fast-food workers and supporters marched for higher pay in Chicago, Milwaukee and Boston" last week, "as demonstrations advocating for a $15 minimum wage and other labor rights in about 190 cities began around the United States."

    Organizers said that the protests "under a banner organization called Fight for 15 and aimed to include home care and airline industries, are the most expansive to date, increasing to about 190 cities from 150 in a similar protest in September. No arrests have so far been reported."
    KC's View:

    Published on: December 8, 2014

    • Kansas City-based Associated Wholesale Grocers has named David Smith, the company's senior vice president, to be its new executive vice president of division operations, succeeding Mike Rand, who is retiring.
    KC's View:

    Published on: December 8, 2014

    Responding to our story last week about a new format being created and tested in Las Vegas by the new owners of Fresh & Easy Neighborhood Markets, MNB reader Scott Nelson wrote:

    I was in one of the Las Vegas stores this week and the transformation is amazing.  I think it is what the concept should have been from the start.  I ordered one of the artisan sandwiches  and it was very good.   The store to me looks like a Whole Foods convenience store with Trader Joe’s pricing.

    Regarding our recent story about Girl Scout cookies now being available online, and how the shift is being described as away of helping teach kids about online marketing, one MNB user wrote:

    I raised three Girl Scouts and I am somewhat familiar with cookie sales. Even been the “coordinator” for an specific area. As the program is today I do not see where the girls learn anything other than how much pull their parents have at their place of employment. There is no way for an individual girl to get to any of the incentives (which may not be the correct reason to sell cookies anyway) without their parents doing a significant amount of the work, in some cases all.

    Certainly some would cite the safety of going door to door and I would simply say, why would you send them alone?

    Maybe this will bring it back to a real learning experience for the kids as I do not believe that is what it is today.

    I still think that most of these kids are going to know more about the online experience than the vast majority of scout leaders … which is a lesson for a lot of businesses about how and where to mine the talent necessary to make them successful for the digital age.

    Another MNB reader had a comment about our story saying that Hershey is looking to replace high-fructose corn syrup in some of its products with sugar:

    Chocolate flavored syrup was recently on my shopping list.  Choices were Hershey or Nestle.  The Nestle label features "No High-Fructose Corn Syrup", and in fine print on the back, "Product of Canada".

    Sugar prices in the U.S. are higher than in Canada due to import controls etc.  As part of the switch from HFCS (made from corn) to sugar I wonder if Hershey will have to shift manufacturing to Canada (or elsewhere) to remain competitive.  More jobs lost.

    And on another subject, an MNB user wrote:

    Your reader’s point that Martha Stewart IS her brand was a good point in respect to her magazine (I have no idea if she still has a television show).  However, I believe her merchandising efforts are well poised to carry on indefinitely.  I don’t believe that she personally designs the pots and pans, utensils, towels and bed linens that bear her name any more than Vera Wang engineers the mattresses on which her name (inexplicably, at least to me) appear.

    It’s quite possible that future consumers of Martha Stewart merchandise will not even realize that there was ever a actual person named Martha Stewart.  How many of us are aware that Ettore Boiardi (Chef Boyardee) or Duncan Hines were real people—celebrity chefs of their day.  But, regardless of the state of print journalism, I think the actual Martha Stewart Living magazine will—when the time comes—die when she does. Without her appearance in the pages, it would lack any meaningful differentiation from its competitors (both print and non-traditional delivery methods).  The Martha Stewart reader/subscriber buys is looking for her personal (whether actual or implied) endorsement of the style and recipes contained within.

    KC's View:

    Published on: December 8, 2014

    In Week 14 of National Football League action…

    Pittsburgh 42
    Cincinnati 21

    Indianapolis 25
    Cleveland 24

    Tampa Bay 17
    Detroit 34

    Houston 27
    Jacksonville 13

    Baltimore 28
    Miami 13

    NY Jets 24
    Minnesota 30

    Carolina 41
    New Orleans 10

    NY Giants 36
    Tennessee 7

    St. Louis 24
    Washington 0

    Kansas City 14
    Arizona 17

    Buffalo 17
    Denver 24

    San Francisco 13
    Oakland 24

    Seattle 24
    Philadelphia 14

    New England 23
    San Diego 14
    KC's View: