business news in context, analysis with attitude

Published on: January 22, 2015

This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy.

Just a couple of random things on my mind this week, having nothing specifically to do with the industries I spend most of my time writing about ... and yet, I think they both provide valuable lessons.

I'm sure that, like me, you've noticed that the price of fuel has been going down lately. I'd gotten used to paying $3.50 per gallon or more, and now there are stations near me charging less than $2.50 a gallon. That's an enormous savings.

I thought about this the other day when I was booking a flight, and it occurred to me, like I'm sure it has to a lot of people, that pretty much all of the airlines raised their prices over the past few years as fuel costs were going up, and they said they had to compensate for it. And I thought about it the other day when I was in the supermarket, and noticed that prices for certain things continue to be pretty high, and I seem to remember that part of the rationale for increased prices was the cost of transportation.

Now, I don't want to seem unreasonable ... but I know when I'm being taken advantage of. or maybe I'm not being taken advantage of, but it just seems that way.

Here's my point. I think companies that had to adjust their pricing models because of extenuating circumstances during the Great Recession owe it to their customers to at least think about whether they are in some way abusing the trust that people feel in them. The airlines probably don't care because there aren't a lot of options if you want to fly to Europe or across country or wherever .... but captive customers rarely are captive forever. The competitive woods are littered with the bodies of companies that thought they had a captive customer base, only to find out themselves competing with competition that they didn't even see coming, and that figured out a way to appeal to these shoppers. Be afraid. Be very afraid. It could happen to you.

The other thing I wanted to talk about is last weekend's football playoffs, most specifically the Green Bay Packers-Seattle Seahawks game. I have a strong affinity for most things in the Pacific Northwest, so I was rooting for the Seahawks. (Don't hate me. My other team is the Jets. I deserve a little happiness.) I was a little giddy when I wrote about the Seahawks' improbable comeback for Monday's MNB, and got a number of emails suggesting that the Seahawks hadn't won as much as the Packers had lost, with some folks even suggesting they'd managed to give the game away.

I don't think the latter is true - I think the Packers are a team of enormous pride and talent, and I can't imagine that they simply gave up. I just think that the Seahawks proved that in sports, as in business and life, when you never give up and keep believing and working and trying, good things can happen. Pick your cliche - "it ain't over till the fat lady sings," "it ain't over till its over." The thing is, they aren't really cliches.

Two of my favorite people in the world are traveling through Europe, and they saw a sign the other day that they said made them think of me. They took a picture and emailed it to me, and it made me think of the Packers-Seahawks game.

"The road to success is always under construction," the sign said. The key word there, I think, is "always."

Sometimes, the minute you think you're done, you're done for.

That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

Published on: January 22, 2015

by Kevin Coupe

Back in early December, MNB took note of reports that Amazon was launching a line of private label diapers and baby wipes under the brand name Amazon Elements, making them only available to members of its Prime membership program. Lower priced than national brands and described as being environmentally friendly, the goal of the line was to add yet more value to the Prime program, even at the risk of alienating some of the suppliers who helped make Amazon the world's biggest seller of diapers.

Well, apparently it wasn't just suppliers that Amazon may have rubbed the wrong way. There also apparently were some babies' rear ends, and maybe some parents....

Yesterday, Amazon said that it was pulling the diapers off the site, pending an re-engineering effort. Here's the email that previous diaper shoppers received:

Thank you for subscribing to Amazon Elements Soft & Cozy Diapers. Based on early customer feedback, we are making some design improvements to the diaper. In the meantime, Amazon Elements Soft & Cozy Diapers are no longer available, and we've stopped your subscription.

As a thank you for trying and subscribing to the diapers, we've applied a $25 promotional credit to your account that can be used on any item shipped and sold by Amazon.com. Your credit will be automatically applied to your account the next time you checkout. If you have any further questions, please contact Customer Service. 

We value your feedback on our products, and we'd like you to test the new diapers once available. Please expect an invitation soon.

Some of the stories suggest that the feedback Amazon was getting from customers really didn't give it any choice.

There are a couple of lessons to be learned from these events.

One is that if you're going to put your name on a product, it probably makes sense to do plenty of due diligence. Apparently these things weren't tested enough on babies before they went up for sale.

But I also have to say that I wonder how much this will hurt Amazon. There's something to be said for a retailer that acknowledges a problem and deals with it expeditiously. The second time around has to go better than the first, but the up-front behavior and the credit will have to help.

These are Prime shoppers, and by definition, that means they are more committed and loyal to the Amazon ecosystem than regular shoppers. Amazon has to return that loyalty, which means getting the products and the prices right.

Which it seems like it is trying to do. It is an Eye-Opener.

Published on: January 22, 2015

The Nielsen Co. is out with a new study suggesting that while the economy seems to be improving, with reduced unemployment, lower gas prices and a resurgence in consumer confidence, "consumers remain cautious when it comes to spending."

According to the story, "With more than half of consumers saying they believe we are still in a recession, many remain focused on mindful spending. Handling the essential expenses is a top priority, with 50% of respondents saying they’re using the extra money to pay off bills, while 36% are paying for everyday essentials like food. When it comes to non-essentials, consumers are choosing out-of-home entertainment and clothing as their top two ways to splurge.

"Due to economic perceptions, many consumers are likely to gravitate toward the middle ground when it comes to essential and discretionary spending through 2015. When asked about their optimism about the economy for 2015, 40% of consumers fall somewhere in between 'not optimistic' and 'very optimistic'."

The story suggests how marketers can appeal to these still-reticent consumers: "Promotions will be a key element to succeed, as consumers’ memories of recessionary struggles remain fresh. But training consumers to buy only when products are on sale isn’t the answer. Instead, retailers should carefully choose which discretionary categories would benefit most from promotions in order to entice consumers when they otherwise might not indulge."

Published on: January 22, 2015

The Los Angeles Times reports that the US Department of Agriculture (USDA) is proposing new poultry standards that would recommend that "the percentage of chicken parts found to contain salmonella cannot exceed 15.4%, down from the current sampled average of 24%. Salmonella in ground chicken would be limited to 25%, down from an average of 49%. Ground turkey would be limited to 13.5%, down from an average of about 20%."

The USDA reportedly believes that these new standards could prevent as many as 50,000 salmonella cases a year.

According to the story, "The proposed standards come at a time when the poultry industry and federal inspectors have been under growing pressure to take a harder stance on salmonella contamination. Hundreds of people were sickened nationwide starting in 2013 by an outbreak linked to Foster Farms chicken processed in California ... The proposal marks the first time federal inspectors have issued standards for poultry parts, which represent the majority of the poultry products available to U.S. consumers."

A 60 day public comment period has commenced, and the new standards are expected to take effect later this year.

Published on: January 22, 2015

• The Journal News reports that Walmart has reached a settlement with the family of James McNair, the comedian who was killed in the June 2014 crash in which a Walmart truck struck a limo van carrying McNair and comedian Tracy Morgan.

Morgan survived but was seriously injured, and has sued Walmart.

According to the story, "The out-of-court settlement between the company and the estate of McNair – who was known as "Uncle Jimmy Mack" – is the first connected to the New Jersey Turnpike crash." Under the terms of the agreement, the family will not reveal how much it got paid, and Walmart does not have to accept responsibility for his death.

Published on: January 22, 2015

Anthem Marketing Solutions is out with a look at online and in-store pricing of consumer goods across a range of regularly purchased categories. Among the findings:

• "71% of items reviewed were found at same price online and offline"
• "Beauty category had highest proportion of items priced lower online"
• "Almost 90% of Hardware/Home Improvement items same price both offline and online"
• "Office/School Supplies only category with offline price edge"
• "Pharmacy retailers had lowest level of pricing consistency across channels"
• "Most online coupons are applicable to the basket, not individual items"

The report goes on: "Across almost every category, price tier and store you are likely to find a lower price online when a price variance exists. There are still bargains to be had in-store - they are just becoming more difficult to find."

Published on: January 22, 2015

• The Associated Press reports that eBay plans to lay off seven percent of its workforce, or some 2,400 people, saying that it wants to "simplify its structure and boost profit ahead of a planned separation of its business." That business is its PayPay division, which is expected to be spun off later this year.

According to the story, "The e-commerce company said the job cuts fall across its marketplaces, PayPal and enterprise businesses. The San Jose-based company announced plans Wednesday to spin off or sell the enterprise unit, which develops online shopping sites for brick-and-mortar retailers."

Published on: January 22, 2015

...with brief, occasional, italicized and sometimes gratuitous commentary…

• Bloomberg reports that Mondelez International has announced the next flavor of Oreo that it plans to introduce - Red Velvet Oreos.

The new Oreos are being made with red cookies and cream cheese-flavored filling, will be introduced in early February, and will be available for "at least six weeks or while supplies last."

The story notes that red velvet is expected to be almost as popular a food flavor as pumpkin spice in the coming year.

I have to be careful about how many Oreos, but my sense is that these are going to be dangerous. Because it's hard for me to imagine a more appealing cookie concept...


• The Financial Times reports that "Tesco is closing in on the appointment of a new chairman, with two City heavyweights vying for the role, as the retailer tries to rebuild its reputation following a string of profit warnings and an ... Those that made the cut include Sir Ian Cheshire, who recently stepped down as chief executive of DIY retailer Kingfisher, and John Allan, chairman of housebuilder Barratt and a co-deputy chairman of Dixons Carphone, said people familiar with the situation."

Tesco has been looking for a new chairman since Sir Richard Broadbent said he would step down in October, an announcement that followed revelations that the company overstated its profits and understated its costs as a way of gilding the lily of its own books.

Published on: January 22, 2015

• Bloomberg reports that Melvin Gordon, chairman/CEO of Tootsie Roll Industries, has passed away at age 95 after a brief illness. He will be succeeded in the job by his widow, Ellen Gordon, 82, to whom he was married for 65 years.

The Bloomberg story suggests that Gordon's passing after more than 50 years as chairman makes it more likely that Tootsie Roll Industries could be sold.

Published on: January 22, 2015

...will return.