retail news in context, analysis with attitude

Published on: January 21, 2015

by Kate McMahon

First it was U.S. Central Command.

Then Crayola crayon.

Then the New York Post and the wire service United Press International.

These most recent episodes of high profile social media accounts being hacked may cause the cyber-wary to rethink the benefits of posting on Facebook, Twitter, YouTube, Instagram and more. I would beg to differ, and think these incidents provide important lessons on how to protect your presence on social media and how to react if compromised.

To recap:

The Twitter and YouTube accounts for the U.S. Military Command that oversees operations in the Middle East were hacked last week with pro-ISIS messages and photos. The breach occurred while President Obama was speaking on the importance cybersecurity.

Then, Crayola’s G-rated Facebook page was infiltrated with decidedly off-color and lewd cartoons and posts.

And then, the New York Post and UPI Twitter accounts went off the rails almost simultaneously, with some tweets obviously bogus -- “Pope: World War III has Begun” -- but other economic news posts that could feasible.

Hacking happens – just ask Sony Pictures - along with the devastating data breaches that have plagued such retailers as Target, Home Depot, Kmart and Michaels.

Data protection is way over my head, but I’ve culled advice from security experts online on how retailers, marketers and service providers can better protect their social media sites. (Much of the advice applies to individuals as well).

Never re-use passwords: We all have a go-to password. If a hacker cracks one of your accounts, he/she will seek to use that password on other accounts.

Change your password(s) on a regular basis: Bothersome, I know, but wise.

Utilize two-factor authentication: If someone logs on to your account from a new location – a different phone or computer – they have to enter a code that’s send to a trusted device (your cellphone).

Sign up for a password manager: This software application does most of the above for you.

Beyond the nuts-and-bolts, the best advice is to make sure your accounts are diligently monitored. Hackers are in business, 24-7.

And if your account is compromised, move quickly to delete the material, reset your security and immediately notify your audience what happened. Of course if someone on your social media team made a mistake, apologize. If you are hacked, explain.

Interestingly, Crayola apologized to its Facebook community (a page with more than 2.4 million likes) for the “inappropriate and offensive posts” -- even though the manufacturer was obviously not responsible. The feedback was overwhelmingly positive, even from parents of children who frequent the site. (Not surprisingly some adults found the off-color posts hilarious. I thought they were crude.)

As always, social media gave consumers the opportunity to express opinions, positive and negative, on the Crayola product, creating a dialogue and a sense of community. And that is why the benefits of social media far outweigh any risks of being hacked.

This post said it perfectly: “Not mad atcha, but could you bring back that lemon yellow crayon, please?

Comments? As always, send them to me at kate@morningnewsbeat.com .

Published on: January 21, 2015

by Kevin Coupe

Some interesting numbers that highlight some disruptive forces...

• The Associated Press reports that "Netflix Inc. added 13 million worldwide subscribers last year, including 4.3 million during the final three months, according to figures released Tuesday in the company's fourth-quarter earnings report. It marked Netflix's biggest quarter of subscriber gains ever, eclipsing the 4.07 million added in the final three months of 2013."

• Variety reports that The Interview, the controversial comedy about the assassination of North Korean leader Kim Jong-un that major movie theater chains declined to show because of threats of violence against them, has generated more than $40 million in digital rentals and sales for home viewing. It has made just $6 million in independent theaters.

To be clear, these are very different business models.

Netflix has designed itself to be a disruptive force in the entertainment content business, challenging traditional methods of content consumption and helping to put companies such as Blockbuster out of business. And it continues to challenge both TV networks and movie theater chains by developing private label content ("House of Cards," for example) that they can't get anywhere else ... a strategy also being adopted by Amazon.

The Interview, on the other hand, in a business model born out of necessity. Sony, the producing company, had no choice but to go the home viewing route if it wanted to make any of its production and post-production costs back. (And it probably hasn't turned a profit yet, with total costs estimated to be about $75 million.) But the approach it took showed that non-traditional marketing approaches can work, can generate revenue .. and one has to think that this experience will inform future decisions and strategies.

Disruption can come from anywhere. From anyone. At anytime. Sometimes it works, and sometimes it doesn't.

But it almost always is an Eye-Opener.

Published on: January 21, 2015

Reuters reports that the US Supreme Court has declined to weigh in on debit card swipe fee rules, leaving in place a Federal Reserve determination that 21 cents per transaction is appropriate. An appeals court already had confirmed the Fed's position, but that decision was appealed by a coalition of retailers, grocers and restaurateurs.

According to the story, "The dispute between banks and merchants centers involves swipe, or interchange, fees that are determined by Visa Inc, MasterCard Inc, and other card networks.

"Before Congress intervened, retailers paid as much as 44 cents per transaction, which they said made it hard for small businesses to accept debit cards.

"In 2010, lawmakers ordered the Fed to cap the fees in a bid to reduce prices for consumers. Banks said lower fees might not cover all of the costs in providing cards, such as monitoring for fraudulent purchases." But the Fed did not go as low as retailers hoped, and as low as they believed the spirit of the legislation required.

Leslie G. Sarasin, president/CEO of the Food Marketing Institute (FMI), responded to the Court decision: “We are disheartened that the Court rejected our case, reflecting utter failure to recognize the significance the ‘swipe fee’ issue holds for consumers and American businesses. The food retail industry, on average, operates at a 1-to-2 percent profit margin, so every penny matters. When transaction fees are arbitrarily set by the big banks and the card companies they service, this becomes a matter of justice that threatens the economic survival of community grocery stores, businesses, charities, schools and every institution utilizing a debit and credit cards payment system. We now look to the Fed to improve this rule and carry out both the clear language of the statute and the intent of Congress.”

Published on: January 21, 2015

The Washington Post has a story about a a new report from market research firm IBIS World saying that "online grocery sales grew at an annual rate of 14.1 percent over the last five years and they are expected to grow at a rate of 9.6 percent between 2014 and 2018." These numbers are based on relatively low market penetration: "Online grocery sales were only 1.9 percent of total grocery sales last year; by 2018, even given the rapid growth the researchers anticipate, online sales are still expected to equal only 2.9 percent of total grocery sales."

"But look more closely at the report," the Post goes on, "and you see the major challenges these companies will face as they try to make these fledgling businesses viable. IBIS World estimates that the online grocery business collectively brought in $10.9 billion in sales in 2014.  Profit, it estimates, was just $927.1 million, or 8.5 percent of total revenue.  By 2018, the researchers project that profit margins will slip to 6.9 percent of sales.  In part, that's because these operators will continue to contend with the high distribution costs associated with getting perishable items to customers."

Some of this margin pressure, the story says, comes from the plethora of competitors old and new in the e-grocery space. And making the problem more acute are the big players, such as Amazon, that want to have a big impact.

AmazonFresh, the Post writes, "will play a role in compressing margins for the whole industry.  Amazon has often sought to vanquish its competitors by undercutting them on price, and the report suggests that the company may use that tactic in the grocery business, dropping their prices as low as possible and, in doing so, pressuring their competitors to make similar price cuts."

Published on: January 21, 2015

As previously noted here on MNB, there has been a lot of speculation lately - largely prompted by an analyst who issued a report and press release - about Kroger being ideally positioned to make a new acquisition.

While the analyst didn't offer any specific insights, that hasn't stopped the media from weighing in ... and the newest story from the Milwaukee Business Journal says that Wisconsin-based Roundy's, which operates stores under the Mariano's, Pick 'n Save and Copps banners, may be an ideal target.

A column in the Cincinnati Business Courier suggests that perhaps Kroger might be more interested in buying out Tesco's 50 percent stake in data analytics firm Dunnhumby, which would give it total control of the company and "control over its joint venture partner in the U.S. unit. Kroger uses the analytics to target ads and determine product offerings that match its customers' needs."

Published on: January 21, 2015

Walmart yesterday announced what it called "a first-of-its-kind service that allows consumers to 'skip the check' and pick up their tax refunds in cash ... Walmart is working with Tax Products Group (TPG), a Green Dot Company, and Republic Bank & Trust Company, member FDIC, two leading providers of tax-related financial products and services, to provide Walmart Direct2Cash as an option to millions of customers. The more than 25,000 tax preparation locations using software with the Walmart Direct2Cash option may provide this service for no additional fee or charge a maximum of $7 at the time of filing. "

Walmart says it will not charge customers a fee when refunds are claimed in a store. The announcement said that "when customers choose Walmart Direct2Cash, they will receive a confirmation code for their federal and/or state tax return through an email from TPG or Republic Bank as soon as their refund is ready to be picked up. Customers will then go to the Walmart MoneyCenter or customer service desk at their local Walmart store, show their confirmation code, confirm their identity, and then receive their refund in cash."

Published on: January 21, 2015

Seattle-based PCC Natural Markets, a 10-store member-owned cooperative, announced yesterday that it has hired Cate Hardy, most recently a Starbucks executive, to be its new CEO.

According to the announcement, Hardy was with Starbucks for 9 years and most recently held the position of vice president of operations. She also held vice president roles for global commercialization, customer service, and global store development, as well as director positions in store development and strategy for the Seattle-based coffee company. Prior to Starbucks, Ms. Hardy was a vice president at Washington Mutual and a management consultant with McKinsey & Company and Deloitte."

PCC's last CEO, Tracy Wolpert, left the company last June "to pursue other interests."

In its coverage, the Puget Sound Business Journal reports that "Hardy comes on at a time when PCC is readying for a huge competitive push on several fronts. As the economy recovers, many natural grocery stores are expanding. The Northwest corner of Washington has been kept free from tough competition for some time, but it is coming now at full force."

Published on: January 21, 2015

• The Los Angeles Times this morning reports that an activist investment firm called Starboard Value is calling for a merger between Staples and Office Depot, suggesting in a letter that "the two companies can double their operating profits and better compete with online retailers if they merge."

Office Depot, of course, merged with the other major player in the segment, OfficeMax in 2013.

Starboard Value holds a stake in both Staples and Office Depot, and said in its letter that if Staples did not follow its recommendation, "it would be a clear sign that significant leadership change is needed at Staples."

Published on: January 21, 2015

• Wholesaler Unified Grocers announced a series of management changes yesterday, saying that President of Market Centre Joe Falvey and Chief Marketing Officer Sue Klug have been elevated to Executive Vice President, and Chief Information Officer Gary Herman has been promoted to Senior Vice President.

"Joe, Sue and Gary have proven track records of delivering solid results for our organization," said Bob Ling, Unified's president/CEO. "All are dynamic leaders whose vision and passion have helped drive Unified's recent successes. They will play important roles in driving the next phase of the company's growth."


• The Wall Street Journal reports that Mitchell Klipper, CEO of Barnes & Noble's retail group and a 28-year veteran of the company, plans to retire on May 2. A search has been launched for a successor.

Published on: January 21, 2015

...will return.