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    Published on: December 10, 2014

    by Kate McMahon

    Finally. We had reached consensus on the photo for the family holiday card. The fire had dwindled to glowing embers. It was 10:30 on the Sunday night after Thanksgiving and the card company’s 40% off discount and free shipping offer was expiring at midnight.

    I hit "place order."

    Nothing.

    Again.

    Nothing.

    Due to demand, the website for the popular online stationery boutique Tiny Prints stalled, and my tweaked-to-perfection holiday card order was stuck in its cart.

    The Tiny Prints slowdown didn’t generate as much buzz as the Best Buy site crash on Black Friday, or the hiccups that hit the HP Store, Staples, Cabela’s, Footlocker and Forever 21 sites over the holiday weekend through Cyber Monday.

    But it did provide an excellent example of how a retailer should respond when technology fails. Reach out to your customers and offer a meaningful apology. And extend the discount.

    That was not an option for Best Buy, which saw its site go down from 10 a.m. to 11:30 on Black Friday – a crucial day in the electronics retailer’s battle for market share with Amazon and other e-commerce rivals. It said a “concentrated spike in mobile traffic” overwhelmed the site.

    Frustrated shoppers found a holiday themed apology online and on Facebook and Twitter, which of course provided a wide-open forum for the disgruntled to complain.

    Wrote one: “Well, after a good few hours of setting up what I'm gonna get for my first potentially amazing Black Friday..... you crash. If you intend to be one of the leaders among sales in technology and electronics maybe, just maybe you should know how to run tech.”

    Forever 21, a moderately-priced, hip fashion chain, also experienced plenty of frustrated “omg” comments and emojis when its site crashed during a three-hour “50% off flash sale” on Monday.

    This tweet is certain to make both teachers and parents cringe: “And now the Forever 21 site is down … even though it was JUST up when I was on it in class.”

    Since I am on Forever 21’s email list, I did receive a “Dear Valued Customer” email from a “no-reply” address apologizing for the problem and extending the deals until Tuesday.

    But the Tiny Prints response set a new standard: It was timely, personalized (Dear Kate) and from Levi Hamilton, the Tiny Prints customer service manager. The tone was genuine and I did feel the company appreciated my business.

    Gretchen Sloan, a spokesperson for the Shutterfly Inc.-owned brand, said it chose to communicate directly with impacted customers via email rather than utilizing social media, and the extension on the discount was well-received by customers.

    It worked for me.

    I think there are a few takeaways from the holiday shopping season thus far for e-commerce retailers, marketers and service providers:

    • Have a worst-case scenario plan which allows you to reach out to your customers immediately if your site crashes or stalls. If yours is a 24-hour online operation, have someone on deck at 10:30 Sunday night.

    • If you choose to utilize social media, be prepared for immediate backlash and a have a measured response ready to go.

    • Acknowledge that the stunning increase in mobile shopping is a game-changer, and if you want to be in the major leagues, you’d better have an app for that.

    • And finally, if you think you have the whole Black Friday and Cyber Monday thing figured out, think again. Scores of retail analysts and tech-types are doing that right now, and by this time next year there will be another new technological development at play.

    And while awaiting my printed card order, I’d like to use this online platform to wish everyone in the MNB community and their families all the best for the holiday season, and health and happiness in the new year.


    Comments? As always, send them to me at kate@morningnewsbeat.com .
    KC's View:

    Published on: December 10, 2014

    The Associated Press reports that a a House of Representatives subcommittee today will begin reviewing legislation that would make it entirely voluntary for companies to label their products as containing genetically modified organisms (GMOs), a law that would supersede any state laws mandating such labels.

    The story says that "the bill, introduced by Rep. Mike Pompeo, R-Kan., is supported by the food industry, which has said labels would mislead consumers into thinking that engineered ingredients are unsafe." While the Food and Drug Administration (FDA) has maintained that foods with GMOs are essentially the same as those without, and stayed out of the labeling debate, the Congress is stepping in because of the "potential patchwork of state laws requiring the labeling."

    Vermont has mandated GMO labeling, as has Connecticut, though the Connecticut law is contingent on enough other states passing similar legislation so that it is not out on the proverbial limb. California and Washington State voters have rejected GMO labeling mandates, and Oregon currently is going through a recount after an initial vote showed a similar if extremely narrow defeat.
    KC's View:
    So the food industry has maintained that we need a national approach to GMO labeling, not a state-by-state approach. But what the food industry really has wanted is a national approach that doesn't mandate them at all.

    Listen, the Congress is going to do what it wants to do. Or what highly paid lobbyists tell them they want them to do. I'm too old to believe that Mr. Smith is ever going to go to Washington.

    But I continue to believe that in the long run, the food industry is making a mistake here … that they are working against the tide of transparency that is sweeping through every industry. I think it will hurt the food industry in the long run, and erode trust. Maybe I'll be proven wrong. But I don't think so.

    Published on: December 10, 2014

    In what clearly is an effort to expand its ecosystem, Amazon said yesterday that it is making a number of movies and TV shows available in Ultra HD, or 4K, versions, providing competition with similar services being offered by Netflix. For the time being, the streaming Ultra HD videos are only available to Amazon Prime members, who pay a $99 annual fee for guaranteed two-day shipping and assorted other benefits.

    The Wall Street Journal notes that prices have been dropping for Ultra HD television sets, which "have about 8 million pixels packed into their screens, compared with about 2 million pixels found on standard HDTVs."
    KC's View:
    This is an example of what Amazon does. It sells the hardware, then offers software to go with the hardware, then lowers the prices on the hardware, and packages the whole thing so that its best shoppers get the greatest benefit and have the highest levels of accessibility.

    I have to be honest. I have HD televisions, and while I've seen the Ultra HD TVs in stores, I've never been tempted. Until now. I'm not quite ready to pull the trigger, but Amazon has got me thinking about it. That's what Amazon does.

    Published on: December 10, 2014

    USA Today reports that Costco's greatest bargain may be its CEO, Craig Jellinek.

    The story says: "In an era of oversized pay packages and  stock grants, Jelinek pulled in a relatively modest $5.6 million in fiscal 2014 compensation, up 4.8% from 2013, the members-only warehouse giant and USA’s second-largest retailer said in a preliminary proxy Tuesday.

    "That’s about half the median $10.5 million pay Standard & Poor’s 500 company CEOs made in 2013.

    "Jelinek’s compensation included $650,000 in salary, $4.8 million stock award and a $90,000 bonus – about what some CEOs get in annual personal use of the corporate yet."

    USA Today goes on to say that "Costco said it had a 2014 pre-tax income target of $3.25 billion, it ended with $3.197 billion, hitting 98.4% of target.  The company is scheduled to report third-quarter earnings Wednesday.  Year-to-date, Costco shares are up about 20%."
    KC's View:
    Nobody is suggesting that Jellinek is a pauper, nor that CEOs shouldn't be rewarded for their efforts. But I think the culture of a company is reflected by how high CEO compensation is compared to that of the people on the front lines …

    Published on: December 10, 2014

    Reuters reports that KFC in China has issued an invitation to its customers there, offering to give them tours of its chicken farms and kitchens as a way of assuring them that it is doing everything possible to maintain a high level of food safety.

    According to the story, the move was made after a food safety scare in which one of the company's suppliers was accused to adding expired meat to its products, creating consumer uncertainty about fast food restaurants in China.

    The Reuters story notes that "customers can register online to book a visit. A tour led by the manager of a Shanghai restaurant this month showcased employee hand-washing (20 seconds), the oil used in the fryers (regularly tested and changed), the way the chickens are raised (safely) and the water used in the food (purified). Tour participants, however, were not allowed to use their mobile phones, take pictures or video or record any audio."

    The piece also says that "food safety is a particularly emotive issue in China, where scandals ranging from toxic baby milk formula to dirty food oil are common."
    KC's View:
    I think that this is one example of a company trying to be transparent, though I'm not sure that I'd ever use Chinese-style transparency as a model. But it offers a lesson in one way to deal with such issues.

    Published on: December 10, 2014

    The New York Times reports that the USA Supreme Court ruled unanimously yesterday that Amazon does not have to pay its workers for time spent going through security screenings at the end of the work day. The screenings, designed to prevent thrift, can take as long as 25 minutes, time for which the workers said they should be paid.

    The ruling is seen as a blow to labor interests. There have been more than a dozen lawsuits filed against Amazon and other retailers challenging such pay policies.

    According to the Times analysis, "The case that the Supreme Court ruled on Tuesday turned on the meaning of a 1947 law, the Portal-to-Portal Act, which says that companies need not pay for 'preliminary' or 'postliminary' activities, meaning ones that take place before and after the workday proper. The Supreme Court interpreted the law in 1956 in Steiner v. Mitchell to require pay only for tasks that are an 'integral and indispensable part of the principal activities for which covered workmen are employed'."
    KC's View:

    Published on: December 10, 2014

    The New York Times has an interesting story about how older people who in the past might have opted for retirement are choosing to keep working … a trend that certainly will have an impact on marketers, who may find that senior citizens have more disposable income than ever to spend on products and services.

    The story notes that there is an expanding "group of people who are sometimes labeled workaholics or, more kindly, “driven achievers,” who work simply because they love it. For many, the 'ideal retirement includes work in some capacity,' says Ken Dychtwald, founder and chief executive of Age Wave, a group that researches the aging population.

    "Many retirement dropouts are highfliers who land right back in the executive mix. Of course, many over age 55 work to pay the bills, but others just want to keep busy, so they help a family member’s business.

    "These workers are swelling the ranks of the work force aged 55 years and older. There are more people in the retirement-age work force than at any time since the 1960s, the federal Bureau of Labor Statistics has found. About 33 million seniors are currently employed, up 49 percent from the 23 million such workers a decade ago, according to the government data."

    The entire story can be read here.
    KC's View:

    Published on: December 10, 2014

    • The Washington Post reports that mass transit officials in Washington, DC, are "negotiating an agreement with Giant Food to allow the chain’s in-house delivery service, Peapod, to set up distribution areas at the Fort Totten, Glenmont and Van Dorn Street Metro stations.

    "The six-month pilot program … could begin as soon as next spring, and if successful would be expanded to more stations. The service would add an amenity for commuters and a potentially lucrative revenue source for the transit agency. If expanded beyond the pilot, Peapod, or another provider, would pay Metro a fee."


    Bloomberg reports that Amazon is "seeking to avoid shipping delays that marred last year's holiday season, is taking more control of its delivery system by opening 'sorting centers' around the country" that take over responsibilities assigned to "partners such as United Parcel Service Inc. and FedEx Corp., giving greater flexibility over precisely how packages are delivered and more control over costs."

    The story says that these sorting centers take packages "that have already been packed and labeled elsewhere," and are then "organized by zip code and stacked six-foot-high on pallets, before getting trucked to nearby post offices for the final leg of deliveries."


    • In Minnesota, the Star Tribune reports that Best Buy "has raised the stakes in the online shopping wars by offering an eye-popping holiday promotion: free two-day delivery on thousands of items through its website.

    "The deal, which went live over the weekend, is an aggressive move by the Richfield-based electronics retailer to win over holiday shoppers who are especially concerned about shipping speed when making online purchases in the home stretch before Christmas. Best Buy has not yet announced an end date for the holiday delivery offer."

    The story continues: "The offer does require a $35 minimum purchase, which is Best Buy’s typical threshold for standard free shipping … Best Buy has not yet announced the date by which online orders must be placed to guarantee delivery by Christmas. Last year, it set Dec. 20 as the cutoff date, earlier than many other retailers.


    • There's no question that Amazon has gotten a lot of attention with its drone development program, which hopes to use unmanned aircraft in selected markets to speed up delivery times.

    But in New York, the Wall Street Journal reports, Amazon is taking a more earthbound approach, "practicing one-hour deliveries with bike messengers … Amazon has been holding time trials with messengers from at least three courier services to pick the speediest and most careful for the bicycle-based service, which is being referred to as Amazon Prime Now and is operating out of the company’s new Manhattan building, according to a person familiar with the test."
    KC's View:

    Published on: December 10, 2014

    Restaurant Hospitality reports on a new NPD Group survey suggesting "that no matter how hip or trendy a particular food item might be, a key factor in its success will be how easily consumers can prepare or acquire it." And the story adds that "a new study from the Culinary Visions Panel (CVP) seconds this conclusion. The Chicago-based research and forecasting firm, a division of Olson Communications, queried 1,200 consumers about the ethical choices that impact their decisions when dining out or purchasing food away from home. One takeaway: even for those who engage in mindful dining, convenience is king."


    • Tim Horton Inc. shareholders have voted to approve the company's acquisition by Burger King Worldwide. Subsequently, the companies said the new name of the combined business will be Restaurant Brands International; they said that "the transaction remains subject to customary closing conditions, including, among other things, approval and issuance of a final order of the Ontario Superior Court of Justice."
    KC's View:

    Published on: December 10, 2014

    • Golub Corporation/Price Chopper said yesterday that it has hired Leo Taylor, most recently COO at Dunkin’ Donuts National DCP, to be its new Senior Vice President of Human Resources.


    Bloomberg reports that Abercrombie & Fitch CEO Mike Jeffries has stepped down, and that the company will immediately begin a search for a replacement.

    The story notes that Jeffries "came under fire after the Abercrombie and Hollister clothing lines lost their cachet with teenage shoppers. The company also suffered from a broader drop in shopping-mall traffic, contributing to 11 quarters of same-store sales declines and a 77 percent plunge in profit last year."
    KC's View:
    Jeffries also was criticized - justifiably - for comments he made last year about how he really only wanted slim, good looking people to come into his stores and buy his clothes, and that he was really only interested in marketing to cool people - to the point that the company does not even make large sizes. Which sort of annoyed people who are not particularly slim but might've gone into an A&F store to buy presents for people who are. In addition, the company's reliance on scantily clad models for marketing purposes seems to have lost its luster, with three straight quarterly declines. And, Jeffries was criticized for having peculiar demands of the flight crews who work on the company's private jet, down to what scent and undergarments they wear.

    He seemed like the poster boy for self-centered leadership, not servant leadership. hard to imagine that A&F is not better off without him.

    Published on: December 10, 2014

    We had a story the other day about airlines considering "dynamic pricing" on extra fees, and I made the broader point about how I think that the airlines are playing with fire when it comes to customer loyalty, and that they are vulnerable to disruption by some aggressive operator who decides to not play the same games.

    Which led one MNB user to write:

    I recently wanted to bring my kitten with me on an airline for the final part of a relocation.  I thought a 1+ hour flight would be less stressful than a much longer car ride.  I was assured that if I used a small carrier, all would be okay, as long as it would fit under the seat for takeoff and landing.
     
    The agent next informed me that He thought I should purchase a 1st class seat “to be sure the carrier would fit.”  I was ready pay the $800+ fare; which normally would have been just over $300 for the sardine section. 
     
    When I agreed to the 1st class ticket; I swear that the agent’s voice was coming through a widely smiling mouth, as he informed me I that I would also have to cough up an additional $150 to bring my pet on board.  

    That was the final straw.  I didn't even argue that I was bringing only a carry-on cat.  I just said no thanks and the agent unceremoniously hung up on me. Perhaps they get a piece of the action when a customer gets gouged. 

    I rented a car and the cat and I enjoyed a nice road trip.
     
    I used to have a platinum membership with that airline. In the last few years, I haven’t even achieved their silver level, even though my business and personal travel has spiked upward.  

    I now shop for the cheapest fares on a number of carriers and drive, upwards of 3 hours, since it takes at least that that long on non-stop flights. 

    Connections, while saving money, waste the better part of a day.  I also have yet to be wanded or groped for the sin of using a rental car…
     
    That airline in particular, and other carriers in general, have lost a lot of revenue, from a former frequent flyer (part of the 20 percent of passengers that used to comprise 80 percent of their clientele).


    And from another reader:

    I found your reporting of the LA Times story on airline bag fees interesting on any number of fronts.

    Speaking specifically to the point on pricing: the concept of dynamic pricing for airline seats is well established.  Therefore, a natural outgrowth would be to dynamically price for everything else, like location of a seat on a plane. Or, snacks (near expired food, anyone?)  I agree that we learned from "Thinking...Fast and Slow"; the way something is positioned can have a dramatic impact on how it's perceived.  So, if airlines position that the standard cost per bag was $100, but flights during certain time periods would receive a discounted price per bag, then people might not be so resistant to paying different prices per bag over the course of a year.  In fact, if technology were upgraded, it could tell if the flight looked like it wasn't carrying enough bags, the airline could text / email out a special promotion to those who'd not booked a bag in advance for a flight, to encourage them to do so.  I have to believe all the airlines are on top of this as a continuing revenue source.

    Speaking more to your comments on the impact of Brand:  Using US Airways as my example, I’ve been on 5 flights in 5 days and on three of them, at least 2 overhead bins were labeled as “inoperable”.  Therefore, bags had to be gate checked and flights were delayed.  From my viewpoint, US Airways seems to have an ongoing issue with overhead bins – so before they invest in technology to “sell more” bag revenue, I’d rather they use technology to advise the need for parts and to fix the plane when parked overnight at one of their hubs.  Is it really asking too much to have overhead bins where the door opens and closes?

    Then, today, I get one of the US Air / American emails, trying to create some excitement about their merger. They promise 4 things:

    • New planes every week – (calling them “air candy”, which is a little like painting an Onion red & calling it an Apple. You can only fool me till I take a bite..)

    • Powerports at every seat.

    • Revamped lounges  (how about AA lounges that have USA Today or WSJ’s?  I heard all about a billing dispute at an AA lounge this week, that is keeping the lounge from offering them to customers and how the Agents aren’t allowed to go buy them at airport shops)  and… drum roll…

    • New, lie-flat Business Class seats on select aircraft

    No mention of bags that get to carousel in a reasonable time nor mention of staffing with additional agents when the weather is bad & flights are cancelled and we need to talk to a real person.  You know – the stuff that matters.  No mention that with fuel prices at historical lows, how about some price reduction to go somewhere interesting.

    And, today, Bloomberg Businessweek provided a glimpse into Delta’s new 5 cabin aircraft system. To the financial types, I’m sure this makes lots of sense. To a million miler type traveler who is just trying to get re-booked when the airline has weather or mechanical troubles impacting their existing reservation… this is just another example of how Delta really doesn’t understand reality through the eyes of their customers.

    We desperately need more competition in the airline industry. And, frequent fliers on the Boards of the existing airlines.


    Agreed.




    Yesterday's Eye-Opener was about income adequacy, prompting one MNB user to write:

    One thing missing in your Eye-Opener: the McDonalds tablet like kiosks will replace some entry level positions. Sounds to me like preparation on McD’s part to function with less staff once minimum wage is increased. 
     
    If the Fight for 15 people did not see this coming, shame on them.
     
    There will be more to come. I heard a news blurb showing how a sit down chain (I believe it was Chili’s) is installing pay terminals at your table so wait staff doesn’t have to process payments (in other words, less staff needed).
     
    I have said from the beginning of the minimum wage increase discussions that if the economy was creating non-entry level, non-service oriented jobs, this would not be an issue. Market driven economies work both ways. Seems that when jobs are plentiful and employees jump from job to job/company to company, it is the businesses who complain about not being able to keep workers. Everything is cyclical.


    You think these technology innovations are a response to people wanting higher wages? I don't. I think they are a response to the availability of this kind of technology, and that they would have happened anyway.

    MNB reader Steve Swenson wrote:

    Minimum wage laws absolutely, positively reduce employment, particularly among those that have the highest unemployment--minority youth.  This has been proven over and over again.  

    Arguing for a national minimum wage is arguing for higher unemployment among the very people who can least afford it.

    The real problem is loss of purchasing power of the US dollar due to our suicidal monetary policy.  Although everyone thinks there isn't inflation, dropping prices for popular consumer goods such as cell phones and TVs plus dropping energy prices have masked the double digit increases in fresh food bought at the grocery store.  

    We have subsidized Wall Street for more than 2 decades with below market interest rates.  Once we stop doing that, we will have a more balance economy where the middle class has hope.


    On the other hand, not every economist agrees with you. Some do, but not all.

    Which is why there is a debate.

    I wrote yesterday that I think that for a variety of reasons - cultural as well as economic - the nation's businesses have to do a better job at creating income adequacy, which prompted MNB reader John Domino to write:

    I agree 100%.  Fast food restaurants and way too many grocery stores feel that they need to keep wages at the same levels they were at 15 years ago.  Turnover is a major problem for grocery stores and if better pay reduced turnover and absenteeism and training expenses, I am sure there would be a payoff.  Costco and Whole Foods pay their workers significantly above the minimum and provide a realistic benefits program, and other than Kroger, they have been the most successful public food retail companies the past 10 years. 

    I am sure that the executives at McDonald's, Wendy's and Burger King all work together to support lobbyists to keep wages low.  What message does this send to their employees? When the manager says we need to do better and be faster and friendlier so that we can beat the competition, the employees think, why does this only apply to me, and not you?

    Especially for supermarkets, if there were an increase in the minimum wage, the staff and their families, neighbors and friends would be able to spend more money on food, which would ultimately grow sales.


    One of our readers yesterday took issue with the fact that I included the line "no arrests were reported" in a story about fast food workers protesting for higher wages, suggesting that "when a group of ordinary citizens use one of their very few possible methods of gaining attention, a public protest that demonstrates support by gathering people together in large enough numbers to be significant, we assume there might be violence and it is considered normal reporting to comment 'no arrests have so far been reported' – a statement which besides being utterly gratuitous, contains within it an assumption of future arrests being well- nigh inevitable."

    His argument was - and I agreed - that when rich and powerful and well-connected people get together to discuss issues and lobby for positions, we make no such observation. Which hardly seems fair.

    And I added, in agreement:

    It is a pretty good bet that there are higher incidences of corruption at that level of society than there is on the streets of major American cities where people are seeking some level of income adequacy.

    One MNB reader had an issue with that comment:

    How about reporting facts and leave the sensationalism to the tabloids?

    To be clear, that was commentary. I think that it was obvious that it was commentary. That's what I do here.

    And for the record, I totally believe what I wrote. I think it only seems like "sensationalism" to people who have a stake in keeping things as they are, and who don't want to acknowledge that our culture has certain inequities.

    I'm not saying that the best way to address income inadequacy is for government to pass new laws. What I am saying is that some companies - ranging from Costco to Moo Cluck Moo - have figured out that a better compensated workforce results in a better motivated, committed, engaged and productive workforce.

    And I think that's an important lesson.
    KC's View: