business 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: January 20, 2015

    by Michael Sansolo

    Hopefully you had a chance to read/watch Kevin’s commentary last week about William Shatner because it packed a huge business lesson. Essentially it matters not whether you like Shatner, Star Trek, or anything he’s done. (If you didn't, here it is.)

    The key is that Shatner likes who he is and is comfortable living inside his skin. In that way he understands his brand. It is the essence of being authentic and successful.

    In a very similar way consider the best-selling car in the US, the Toyota Camry. The Camry is sort of the every car. It isn’t sexy, powerful, glamorous or even the most fuel-efficient. Yet it succeeds because it delivers exactly on its promise.

    Here’s how Warren Brown, the car expert for the Washington Post, summarized the Camry’s appeal in a recent article.

    “It’s simple: Camry works and works flawlessly. It works in rain, snow and super-frigid temperatures. It works in the flatlands and the mountains, in urban traffic jams, and on expressways where the majority of drivers are either unaware of or simply unwilling to comply with posted speed limits.”

    Obviously cars are not sentient beings, but you get the sense of authenticity all the same. The Camry is comfortable being what it is: a reliable means of transportation.

    Yet the story goes further, which explains why the Camry has been the best-selling car in America for most of the past 20 years. That seemingly nondescript car line is constantly changing.

    Go on line and Google up the Camry and you’ll see the remarkable changes the model has undergone since its introduction in 1982. It keeps getting sleeker, better and even more technological. For the Post review, Brown drove the new hybrid version and couldn’t stop raving about how well the car performs.

    Again, the Camry doesn’t win awards for eye-catching design, power or fuel efficiency. It simply lives up to the promise of its brand even as the brand evolves with the times.

    There was a second story in the Post that captured the essence of brand authenticity, this one focused on Sonic, the fast food feeder. Problems in the fast food industry are hardly news these days. McDonald’s, the behemoth of the industry, is struggling with sales and is heading for menu additions, deletions and who knows what else.

    Sonic, a company one-fourth the size of McDonald’s, is bucking the trend. Sonic is growing and hasn’t suffered a sales decline in more than three years.

    Partially that’s a result of a smaller base to expand upon. However, as the Post reported, most of Sonic’s growth is due to brand authenticity: Sonic understands what it sells and what it is.

    Unlike other fast food companies, Sonic doesn’t offer salads or other “healthier” items beyond smaller sizes of some products. Sonic’s ads usually feature two guys sitting in a car discussing their fries, shakes, burgers or hot dogs. You may not like the cuisine, but you have to admit: Sonic is simply being Sonic, focusing on what it is and making it better all the time.

    Of course, there’s another important side to this argument. If what makes you authentic and distinct is no longer relevant and valuable to your shoppers you need to change fast. No doubt smarter minds than mine inside McDonald’s felt experiments with salads were a better choice than building better burgers. Instead that business moved to Five Guys, Shake Shack, In-n-Out and others.

    Authenticity doesn’t mean rigidity, especially as we see with the Camry. Know your brand, understand its value and grow with it.

    On Star Trek they would probably find that quite logical.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
    KC's View:

    Published on: January 20, 2015

    by Kevin Coupe

    Variety reports that Amazon, fresh from having one Golden Globes for its streaming television series "Transparent," has announced that " it will produce and acquire original movies for theatrical release and early-window distribution on Amazon Prime Instant Video starting in 2015 ... According to Amazon, it expects to produce about 12 movies per year, indie-style projects with budgets ranging from $5 million to $25 million per title. Amazon said its original movies will premiere on Prime Instant Video in the U.S. just four to eight weeks after their theatrical debut — versus up to a year for regular windowing."

    The plan is not without controversy within that industry: "A key question at this point is whether Amazon’s four to eight week theatrical release window will be long enough to convince theater chains to exhibit the films," Variety writes. "Movie theaters have balked at early digital releases; major chains have said publicly their preference is for minimum windows of 90 days in the cinema to maximize ticket sales."

    I have to admit that I'm a little conflicted about Amazon's decision here.

    On the one hand, it seems entirely typical. The company has made its reputation challenging conventional methods of doing business. So suggesting that it will try to reduce the amount of time between theatrical releases and home streaming releases is completely in character ... though, as usually happens, traditional businesses challenged by this move are likely to fight back.

    I'm just not sure why Amazon would want to get involved with a traditional business model like the theatrical film game. It is hard enough for any movie other than major, tentpole-style blockbusters to get any sort of traction in movie theaters, and I can't see Amazon producing "Transformers 12" or "Jurassic Park 9."

    I always think that companies like Amazon are better served when they are working against the system, and doing so in the name of consumer choice. That's when the Amazon option becomes an Eye-Opener ... at least in my humble opinion.
    KC's View:

    Published on: January 20, 2015

    There have been a number of stories over the past 24 hours about how two former Tesco CEOs - Sir Terry Leahy and Philip Clarke - are sniping at each other, casting blame for the retailer's recent failures and crisis.

    The BBC writes, for example, that Leahy, who presided over the company for 14 years of sales and profits growth, says that Tesco lost its reputation for low prices, which "eroded" the trust of its customers. ""Tesco is the biggest, people expect it to have the best prices and know they can trust Tesco to deliver that and not have to shop around and check that they're getting the best deal," he says, placing the blame firmly on Clarke.

    ""In the end that's a failure of leadership, not a failure of the business, not a failure of the people who work hard every day in the business," he says. "When you're the CEO, if it goes well, you get credit, if it doesn't go well, you must take responsibility and Phil Clarke has taken that responsibility and paid the price with his job."

    There has been some criticism of a corrosive culture that permeated Tesco, and Leahy blames Clarke for that as well: ""I think the culture did change under Phil Clarke and not for the better ... I think if you talked to people who knew Tesco, worked in Tesco when I was there, actually the culture was pretty positive and it has to be because it employs half a million people and you can't make them do things, you have to motivate them to do things, they've got to want to do it."

    Clarke, who has kept a low profile since leaving Tesco, responds that changes made at Tesco when he took over the CEO role were necessary because of issues " "that had been building for some time," and all of the strategies embraced had the full backing of the board.

    "Although the company had enjoyed unprecedented success in the past, it was plainly the case when I took over Tesco in March 2011 that it faced a number of critical challenges which had been building for some time," he says. "It was recognised that this involved achieving cultural changes as well as business ones in order to move the business forward."

    The stories have been prompted by a television documentary that also found that Tesco demanded a million-pound payment from L’Oreal as part of a supplier agreement; L’Oreal threatened legal action if that demand was not withdrawn.
    KC's View:
    To me, it seems patently absurd to suggest that Clarke, who was CEO for three years, is completely responsible for problems at a company where his predecessor was in charge for 14. Not that Clarke is blameless, but it strikes me as fair to suggest that there is plenty of blame to go around.

    After all, it was Leahy who decided to go to the US with the Fresh & Easy experiment, which quickly became the Fresh & Easy debacle. Financial pressures on the company were at least in part created by the losses being generated by Fresh & Easy ... Clarke's biggest mistake may have been not cutting off that particular limb within 24 hours of taking over. (He should've done what Brian Cornell did so decisively with Target Canada.)

    I also think that Clarke makes a legitimate point when he says that the board supported his strategic and tactical moves (until, of course, it couldn't and didn't anymore). Again, this isn't an excuse ... but it is a reality. Plenty of blame to go around.

    Here's another reality. Twenty-first century retailing is incredibly difficult and amazingly challenging - there is so much competition, so many moving parts, that it isn't hard to screw up. That's what happened at Tesco. Trying to assign blame to the other guy is entirely self-serving, and - except for the fact that it gives me something to write about - I kind of wish they'd shut up.

    Published on: January 20, 2015

    Consumer Reports has a story about how "coffee drinkers are more likely than nondrinkers to smoke, eat red meat, skimp on exercise and have other life-shortening habits, according to a large 2012 study published in the New England Journal of Medicine ... But even after adjusting for such factors, they found that people age 50 to 71 who drank at least one cup of coffee per day had a lower risk than nondrinkers of dying from diabetes, heart disease or other health problems when followed for more than a decade. That may be due to beneficial compounds in coffee such as antioxidants — which might ward off disease — and not caffeine. Decaf drinkers had the same results."

    Even better ... the story also notes that coffee "has been linked to a lower risk of depression. In a study led by the Harvard School of Public Health that tracked 50,000 women for 10 years, those who drank four or more cups of caffeinated coffee per day were 20 percent less likely to develop depression than nondrinkers. Another study found that adults who drank two to four cups of caffeinated coffee were about half as likely to attempt suicide as decaf drinkers or abstainers."

    And: "A recent Harvard-led study of more than 120,000 men and women found that those who increased the amount of caffeinated coffee they drank per day by more than one eight-ounce cup, on average, were 11 percent less likely to develop Type 2 diabetes than those whose coffee habits stayed the same. And those who decreased their daily intake by at least a cup per day, on average, were 17 percent more likely to develop the disease."
    KC's View:
    Needless to say, there are exceptions ... like if you have an anxiety disorder, irritable bowel syndrome or heart disease. But I don't think I have any of those, and I drink a lot of coffee, so I think I may make it to 120.

    Published on: January 20, 2015 reports that Sears Holdings is "rolling out Connected Solutions shops to 200 Sears and 300 Kmart stores around the country, and is planning a major demo-home prototype display in San Bruno, Calif. The shops are under 2,000 square feet and feature live displays of over 100 wireless products, including wearables, locks, garage door openers, thermostats, motion sensors and monitors, along a 50-foot aisle."

    Ryan Ciovacco, president of Sears' Connected Solutions division, says that the concept "leverages the company’s traditional strengths in such areas as installation services, home appliances, automotive and exercise equipment." And, he says, "The only way this business will move past early adopters is if we show the practicality of it."
    KC's View:
    I'd be impressed by this ... except that if Sears behaves in typical fashion, the next thing it will do is announce a special Google Glass department.

    Published on: January 20, 2015

    The Wall Street Journal reports that Sears Canada has decided to offer employee discounts - 25 percent off on soft goods and 15 percent off on hard goods, for a period of 16 weeks - to the "thousands of Target Canada employees who will lose their jobs after the retailer leaves the country," and also is encouraging them to apply for jobs at Sears.

    According to the story, "Sears Canada said it will hold a meet-and-greet for Target Canada workers at its main office in Toronto on Wednesday. Sears will also hold job fairs throughout Canada."
    KC's View:
    Am I too cynical to think that this is one way of preventing Target Canada employees who are losing their jobs from shopping at Walmart?

    Published on: January 20, 2015

    GeekWire reports that as Chinese e-commerce giant Alibaba plots its American strategy, it isn't initially competing directly with Amazon. Rather, "Alibaba is courting some of Amazon’s competitors by offering them a way to sell merchandise in China."

    Among the companies involved, according to the story, are Neiman Marcus Group, Saks, Macy’s, Bloomingdale’s, Ann Taylor, Gilt Groupe and Aeropostale. The story also says that "Alibaba is also working with Borderfree, a retail services company, and Shoprunner, a company that competes with Amazon Prime (and is partially owned by Alibaba)."

    Today, the amount of US good sold in China is valued at about $15 billion a year, but some estimates suggest that by 2020 the number could approach $300 billion.
    KC's View:

    Published on: January 20, 2015

    The Wall Street Journal reports that JC Penney has decided to revive its paper catalog, five years after it decided to stop distributing it because of the rise of the internet.

    The story says that "catalog mailings are down considerably from 2007, when they peaked at 19.6 billion, according to the Direct Marketing Association. But in a sign the decline might have bottomed out, mailings grew in 2013 for the first time in six years to 11.9 billion."

    The company says that the lack of a catalog caused it to lose customers. The JC Penney catalog was first published in 1963 at the rate of three a year, and they sometimes were as big as 1,000 pages. The one that comes out this March is expected to be 120 pages.
    KC's View:
    There is some argument for a judicious distribution of paper catalogs. LL Bean still does it. So does Restoration Hardware (though what it does with more than 3,000 pages of catalog hardly could be considered judicious). But I'd be concerned that JC Penney is engaged in good-old-days thinking, which almost never works out.

    Published on: January 20, 2015

    • The Dallas Morning News reports that "shopping center vacancies in Dallas-Fort Worth have fallen below 10 percent for the first time in a decade." And that low number, the story says, is largely due to "strong expansions by grocers and a lack of new construction."

    More than 75 percent of new commercial construction, one expert tells the paper, is related to supermarket chains that are expanding there.
    KC's View:

    Published on: January 20, 2015

    We had a story yesterday about how Hyatt Hotels Corp. has announced that it plans to "offer free Wi-Fi at all Hyatt hotels worldwide, providing connectivity and convenience regardless of booking method or loyalty program participation."

    And I commented:

    Michael Sansolo and I have long puzzled over the fact that the more expensive the hotel chain, the more expensive internet connectivity seems to be. So it is nice to see one hotel chain that seems to get it.

    MNB reader Mark Baum responded:

    I was struck by your piece on MNB today regarding Internet Connectivity in hotels.  It is a pet peeve for me.  As a (very) frequent traveler I am often amazed at the internet charges at some hotels – and yes – many pricey properties in the mix.  There are precious few that provide complimentary access for all guests, a few more that waive charges for loyalty program members, and many that not only charge loyal card-carrying customers but have tiered pricing – so if you want high speed downloads you pay even more!

    In today’s travel, work, leisure environment that just seems oddly out-of-date, and a poor customer service policy.  Remember the loan-shark like charges hotels used to tack on for long distance calls.  I wonder how many folks use an in-room telephone for so much as a wake-up call much less long distance communications these days? I applaud Hyatt for their decision and  – believe it or not, it will be a deciding factor when choosing among “similar” hotels in the future!

    MNB reader Chris Esposito chimed in:

    I stick to Kimpton Hotels whenever I can (and since I travel to Boston a lot, that means three choices).  Sign up for the rewards program and for 7 nights and you get a free night, you get a $10 Raid-the-Mini bar coupon and free Wi-Fi.  And all the hotels have some unique aspect to their design, in my opinion.  Nothing like opening a free Harpoon IPA after a rough trip to Boston.

    However, MNB reader Larry Owens is less impressed:

    Hyatt may “offer free Wi-Fi at all Hyatt Hotels”, but I guarantee, it’s not going to be free.  Like any organization, they will recoup the cost somewhere else.

    We also reported yesterday on a story in the Washington Post saying that "a recent survey by the Oklahoma State University Department of Agricultural Economics finds that over 80 percent of Americans support 'mandatory labels on foods containing DNA'." Which is the same number of people, roughly, who think that there ought to be labeling of GMOs in food. And which casts a least some doubt on the intelligence of the people being surveyed.

    I commented:

    I generally prefer to take an optimistic view of the American citizenry; I think they are not stupid and should not be treated by marketers as if they are.

    On the other hand, stories like this remind of the great quote from H.L. Mencken, who once said that "Nobody ever went broke underestimating the intelligence of the American public."

    My argument always has been that GMO labeling makes sense because companies will be better off in the long run if they pursue a policy of total transparency - that this is the smart strategy, even if it is the more challenging one. Are all Americans smart enough to get it? Maybe not ... but this is, in my view, should be a case of reaching for the highest common denominator.

    One MNB user wrote:

    I always get a laugh out of this sort of thing because it does make me take pause when thinking of what people truly know about their food supply.

    However, I think most anything can be supported by a survey if one asks the question the right way... or the wrong way as the case might be.

    MNB reader Duane Eaton wrote:

    I wish I could share your optimism regarding the intelligence of the American citizenry, but what would explain the popularity of The Kardashians, Duck Dynasty, Jersey Shore, The Bachelor, Jerry Springer, etc., etc., etc.  The average citizen knows more about any of them that they do GMOs.

    You may be right. And now I'm really depressed.
    KC's View: