retail news in context, analysis with attitude

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.


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: