business news in context, analysis with attitude

Published on: December 15, 2014

by Kevin Coupe

The New York Times this morning reports that the French government, six months after passing a law prohibiting online retailers from offering free shipping in conjunction with discounts as a way of protecting small bookstores from competitive threats, has said that it will ban the Uber low-cost ride sharing service in 2015.

According to the story, "With Paris taxis creating traffic chaos on Monday morning with a go-slow strike to protest the ride-booking company, an Interior Ministry spokesman said that Uber’s low-cost service, UberPop, would be prohibited in France as of Jan. 1."

It hasn't been a good week for Uber.

As the Times writes, the French announcement came in a week "in which Uber services were banned in the Netherlands, Spain and Thailand. In New Delhi, the Indian capital, the service was outlawed after a passenger accused an Uber driver of rape.

In Australia on Monday, as the police surrounded a cafe in Sydney where an armed individual was holding hostages, Uber began raising its rates. The move, which the company calls surge pricing, is governed by an algorithm and kicks in when demand for rides in an area spikes. Many people who were stranded in the area were asked to pay roughly four times the normal rate, according to complaints on social media."

Nobody here is going to defend any driver accused of rape. And clearly price-gouging in dire circumstances is not good policy (though it sounds as if it kicked in automatically … the problem with algorithms is that they don't appreciate context).

But it is fascinating to me when governments try to protect entrenched businesses from new-world competition. After all, nobody passed a law requiring French taxis to provide better service, or French bookstores to offer lower prices.

Every new business model hits speed bumps. Some succeed, and some fail. But in places where innovations such as Uber are under attack, authorities and traditional competitors need to open their eyes to the fact that protectionist laws only delay the inevitable.

Get used to it.

Published on: December 15, 2014

The Seattle Times reports that AmazonFresh, which has been free to Seattle residents since it began as a test in 2007, next year will carry an annual membership fee of $299 there - the same as in other markets where it operates. However, it also "has lowered the minimum amount Fresh customers need to purchase to get free delivery from $100 to $50."

According to the story, "Amazon is calling the new $299-a-year subscription Prime Fresh. That membership also includes Prime benefits, such as free two-day shipping on goods from Amazon’s retail website, as well as access to its Netflix-like Prime Instant Video service.

"And Prime Fresh subscribers can also receive Amazon Dash, a wandlike device that lets customers scan bar codes in their homes to add products to their shopping carts. They can also speak into the device’s microphone to add items as well."

In addition to Seattle, AmazonFresh is offered in San Francisco, Los Angeles, Philadelphia and sections of New York City.

Published on: December 15, 2014

Politico reports that the National Labor Relations Board (NLRB) has issued a long-awaited rule that "will require businesses to postpone virtually all litigation over eligibility issues until after workers vote on whether to join the union, thereby depriving management of a stall tactic that unions widely claim benefits the employer. In effect, regional NLRB directors will be given broad discretion to rule such litigation unnecessary until an election takes place … The regulation will eliminate a previously-required 25-day period between the time an election is ordered and the election itself, and it will require employers to furnish union organizers with all available personal email addresses and phone numbers of workers eligible to vote in a union election. An NLRB decision handed down yesterday essentially prohibited employers from denying union organizers access to company email. The rule will also, for the first time, allow for the electronic filing and transmission of union election petitions."

This regulatory shift, Politico writes, "represents a clear victory for a labor movement that has often felt taken for granted by the Obama administration. In 2009, labor leaders felt frustrated when the White House declined to press for the Employee Free Choice Act, the so-called card check bill, which would have streamlined union elections in different ways. More recently they’ve opposed the president’s push to fast-track the Trans Pacific Partnership without certain labor protections."

"It’s clear the Administration has an aggressive agenda to uproot longstanding and effective labor policy,” said Jay Timmons, president of the National Association of Manufacturers, in a written statement after the new rule was issued. “Shortening the time frame before an election robs employees of the ability to gather the facts they need to make an important and informed decision like whether or not to join a union and denies employers adequate time to prepare.”

The National Association of Manufacturers, National Retail Federation and other trade associations are expected to mount a legal challenge to the new rule.

You can read more about the new NLRB rules here.

In a related issue, Fortune reports that the NLRB also ruled last week that "workers can use an employer’s email system for union organization," writing that "Employee use of email for statutorily protected communications on nonworking time must presumptively be permitted by employers who have chosen to give employees access to their email systems."

Published on: December 15, 2014

Good story in Direct Marketing News about NY-based e-grocer FreshDirect, focusing on how the company uses purchase and behavioral data as a way to target customers. FreshDirect knows not just what people are buying, but it also is able to track what customers are looking at and for how long, using that information to "deliver targeted banner ads, customized offers, and specific product suggestions through its recommendation engine."

A major factor in customer engagement is the creation of a level of trust, the company says - providing education and relevant products and services. "When it comes to keeping customers engaged, FreshDirect aims to inspire its patrons, primarily through content," the story says. "The online grocer uploads comedic videos about seafood, writes entertaining ideas on its blog, and produces a plethora of recipes based on trends, dietary concerns, courses, and special events."

Here's a critical observation., compliments of Aaron Cano, the company's VP of consumer analytics: "Far too often marketers view the analytics department as a service, rather than as players on the same team. He warns that if companies want to succeed, the two divisions - along with the rest of the company - have to be on the same page."

Published on: December 15, 2014

Bloomberg reports that "millions of Target Corp. customers whose credit card data and identifying information was stolen by hackers face the prospect the retailer owes them nothing for their ensuing troubles, and they may have the government to thank for it.

"The retailer is counting on a U.S. Supreme Court ruling from last year grounded in the principle of no harm-no foul to win dismissal of about six dozen lawsuits that piled up after it disclosed a massive data breach six days before Christmas. The high court’s 2013 decision that people have no basis to seek damages from the government if they can’t prove they were in imminent danger of being hurt by wiretapping surveillance already has helped at least half a dozen companies fend off lawsuits over lost or stolen customer data. A victory for Target would also benefit retailers including Home Depot that face lawsuits after an explosion of hacking intrusions."

Essentially, the Target argument is this: just because the data breach may have put customers at risk for having their identities stolen does not mean that anyone actuallywas hurt … and that in the absence of actual, provable damage, customers don't have anything to complain about.

The story notes that "the consumer lawyers’ best shot at keeping their claims alive is to impress upon the judge that frozen bank accounts, unreimbursed late fees and other costs are tangible losses that go beyond the mere threat of future injury at the heart of the Supreme Court case."

The courts have not dismissed suits by banks looking to collect damages from Target, saying that they were plausible.

Published on: December 15, 2014

The Washington Post has a story about same-day delivery service Deliv, which was launched in 2012 and currently operates in eight metropolitan areas with some 250 retailer partners. Some selected passages from the story about the Deliv business model:

"Deliv’s model is geared toward a generation of shoppers who want service that is both predictable and flexible. It’s designed to accommodate a shopper who wants his purchase to arrive in the two-hour window between his haircut appointment and his kid’s soccer game. It’s for the shopper who schedules a 6 p.m. delivery, but needs to push it back to 6:30 at the last minute when a conference call at the office runs late."

"Deliv relies on a crowdsourced network of on-demand drivers, a set-up that carries few expenses: no inventory, no fleet of vehicles, no fuel costs and a small permanent workforce. And while larger rivals are trying to entice consumers directly, Deliv is selling to retailers and mall operators. The stores and malls then decide for themselves how much to charge shoppers for the service."

"Like so many Silicon Valley start-ups, Deliv is built on an algorithm, one that can adjust delivery routes on the fly and understand exactly how many boxes of what size will fit into each driver’s model of car. Its partnerships with old-school malls effectively create a system of warehouses and distribution centers."

Published on: December 15, 2014

The Washington Post has a long piece about what many would argue is one of the most troubling elements of the modern economy. An excerpt:

"The American economy has stopped delivering the broadly shared prosperity that the nation grew accustomed to after World War II. The explanation for why that is begins with the millions of middle-class jobs that vanished over the past 25 years, and with what happened to the men and women who once held those jobs.

"Millions of Americans are working harder than ever just to keep from falling behind … Those workers have been devalued in the eyes of the economy, pushed into jobs that pay them much less than the ones they once had.

"Today, a shrinking share of Americans are working middle-class jobs, and collectively, they earn less of the nation’s income than they used to. In 1981, according to the Pew Research Center, 59 percent of American adults were classified as 'middle income' — which means their household income was between two-thirds and double the nation’s median income. By 2011, it was down to 51 percent. In that time, the 'middle' group’s share of the national income pie fell from 60 percent to 45 percent.

It is worth reading in its entirety here.

Published on: December 15, 2014

USA Today writes that "as the food-truck trend continues to grow, cities across the country are struggling to develop regulations that treat the restaurants-on-wheels and their brick-and-mortar counterparts fairly.

"Food trucks are one of the fastest-growing sectors of the restaurant industry, with sales of almost $700 million in 2013, according to the National Restaurant Association. Proponents say they provide affordable, diverse and easily accessible cuisine to consumers. But opponents say they pose a threat to long-established restaurants."

From cities as diverse as Palm Springs, Des Moines and Washington, DC, officials are trying to figure out where to draw the line - protecting established businesses in a lawful manner while not throwing a wet blanket on the culinary excitement that food trucks can bring to a municipality.

Published on: December 15, 2014

• The Boston Globe reports that the sale of Market Basket has been completed: "Arthur T. Demoulas and his family members have finalized the deal, originally struck in August, to buy out the shares of the grocery chain they did not already control. Arthur T.’s side of the Demoulas family, which previously held 49.5 percent of the company, is acquiring the remainder from the side of the family led by his cousin and long-time rival, Arthur S. Demoulas."

According to the story, "The deal became official Friday at around 1 p.m. Reported at about $1.6 billion, the sale is being funded with debt, according to a source, with no private equity involved. Arthur T. has said he does not expect the debt to have much of an effect on the company’s business model."


• In what the New York Times described as "the biggest private equity deal of 2014," PetSmart has agreed to sell itself to investment firm BC Partners for about $8.7 billion. PetSmart operates more than 1,300 pet stores in the United States, Canada and Puerto Rico.

Published on: December 15, 2014

Got the following email the other day about Whole Foods' attempts to shed its "whole paycheck" image:

Several months ago I picked up one of the Whole Foods in-store flyers, after hearing news about their efforts to change their ‘whole paycheck’ image.

The tone of the flyer was interesting. They said all the right words, but it felt like they were trying to do me a favor, and wanted to prove to me that they still are (and always will be) wonderful - because “we heard you!!” and…we even took the time to address you - the lowly average American who is boring enough to want to talk about prices. ‘Patronizing’ is definitely the word I am looking for here.

Not sure who wrote the text of the flyer, but the tone came through loud and clear. They may need an outside agency to write their verbiage, or a different one, because the tone pushed me away from the store – again. I am not surprised at the minimal impact of their TV ad campaign.



On the subject of whether fast food employees ought to be paid wages that are adequate enough to allow them to support themselves, one MNB user wrote:

I don't think most people believe that higher wages are bad for the economy.  I know that I do not believe this, however, I believe that higher wages that are not driven by the market are bad for the economy.  The story about Moo Cluck Moo is not really a good comparison of entry level low skill jobs, multiple jobs including baking is not the same a front counter person at McDonalds.

And yet … isn't McDonald's talking about a far greater emphasis on meal customization that, in fact, will require a more skilled employee?

And regarding McDonald's plan to eliminate some menu items as a way of improving its nutritional profile, one MNB reader wrote:

Not sure what McDonald’s could cut that would change the perception of them serving junk food. It’s not like people are going there for the salad.




Responding to last week's rant about Chase not accepting cash deposits for someone else's account, one MNB user wrote:

Their cash deposit policy seems to be based on the premise that their customers are "guilty until proven innocent." This leads to the conclusion that Chase (and an unfortunate number of other businesses) establishes such policies to protect themselves from their enemy, the customer.




Commenting on the story about a GMO labeling mandate narrowly failing in an Oregon referendum, and my comment that manufacturers ought to be concerned about the voters - almost half - who want GMO labeling, one MNB user wrote:

That is like asking; What do we do about the majority of people who now don't like this administration? We live to fight another day. But more importantly, the majority don't want labeling. Supporters should find out why they lost first before they just believe theirs is the only right way! Obviously it's not!

You miss my point.

If you don't like this administration, or any administration, you get to vote again in four years. you also get to vote in mid-term elections.

I think that the folks who lost this election know exactly why they lost. They got out-voted. In part, it may be the message, and in part, it may be all the money behind the anti-GMO labeling forces.

But my point has nothing to do with elections or referendums. If I am selling a product that almost half the population doesn't seem to trust, I think it is incumbent on me to figure out how to address that problem - through education, outreach, whatever. It seems to me that anti-GMO labeling forces' work has only just begun with the win in Oregon … this is an issue they have to continue to address.




Regarding the retirement of Kroger chairman Dave Dillon, one MNB user wrote:

I echo your sentiments regarding Dave Dillion of Kroger. Years ago I called on him for a short time when he was a District Manager in Phoenix and he was absolutely the same then. His retirement is well deserved, his example of how to conduct ourselves in business is priceless. Thank you Dave for your contribution to our industry and for your example to those lucky enough to work with you closely (on both sides of the desk).

And from MNB reader George Denman:

Dave Dillon is the real thing. I have had numerous opportunities to meet with Dave over the years and he is one of the brightest lights on this planet. He came for a plant tour a few years back at Graeter’s and he drove himself to the plant wearing jeans and a button down shirt. When our previous esteemed “mayor” of Cincinnati came in for a tour, he came with a stretch limo, driver, and body guard. What’s with that??

I saw Dave recently at the final game of the World Series as the TV panned the audience ( he is a Kansas fan…) and texted him. Later that evening after midnight and his flying to the game from Cincinnati, he texted me back. The guy never stops….

You're right. Pity the poor fish when he decided to start devoting his attention to that particular pursuit.

Published on: December 15, 2014

In Week 15 of National Football League action…

Pittsburgh 27
Atlanta 20

Jacksonville 12
Baltimore 20

Green Bay 13
Buffalo 21

Tampa Bay 17
Carolina 19

Cincinnati 30
Cleveland 0

Houston 10
Indianapolis 17

Oakland 13
Kansas City 31

Miami 13
New England 41

Washington 13
NY Giants 24 Denver 22
San Diego 10

NY Jets 16
Tennessee 11

Minneapolis 14
Detroit 16

San Francisco 7
Seattle 17

Dallas 38
Philadelphia 27



And, this weekend, as expected, Marcus Mariota, a junior quarterback at the University of Oregon, won the Heisman Trophy, the most prestigious award in college football.

Published on: December 15, 2014

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Published on: December 15, 2014

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Published on: December 15, 2014