business news in context, analysis with attitude

Published on: May 28, 2015

This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. 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.

I was listening to a story on National Public Radio's Marketplace the other day that I think teaches a valuable lesson about how to compete in tough times.

The story concerned a Rhode Island jewelry factory that was opened in 1966, and that for years made jewelry for a number of companies and brands. That made it part of what, for Rhode Island, was a robust industry - during the 1980s, the state produced an estimated 80 percent of costume jewelry made in the U.S., and Bulova once had a factory there that employed more than a thousand people.

But the industry has been hit hard by outsourcing and recession, and the state has lost more than 80,000 manufacturing jobs. I think it is fair to say that those jobs are not coming back, and so government and industry have to work together to find a solution that will help revitalize the economy there.

However, at this particular factory, the news is good. Very good, in fact. It is now run by the founders' daughters, and it has transitioned from a business that made jewelry for other companies to one that makes jewelry under its own brand name - Alex and Ani. Annual revenue is in the neighborhood of a quarter of a billion dollars, and co-owner Carolyn Rafaelian is resolute about keeping the jobs there, about making the pieces by hand as much as possible, about being true to a very American origin story.

I'm actually a little familiar with Alex and Ani because my wife and daughter both love their designs ... I've actually been in Alex and Ani stores, and done some shopping there.

It is such an important lesson. To succeed in any business, you can't just be selling stuff that anyone can sell. You have to find your differential advantages, whatever and wherever they happen to be, and exploit them to the fullest ... and constantly be on the lookout for the next one.

This is a battle that never ends, and in the end, there aren't ultimate victories. Just survivors, and the opportunity to compete again tomorrow, hopefully by telling a story that nobody else can tell.

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

Published on: May 28, 2015

by Kevin Coupe

The Associated Press reports that the Gulf of Maine Research Institute in Portland is developing a tool that will allow consumers to use their smartphones to scan a fish-specific QR code while in the store, enabling them to find out where the fish was caught, what fishing boat caught it, and perhaps even seeing a picture of the fisherman who caught it.

The tool is called the "Boat to Plate" project, and is designed to increase "the cachet of local seafood" by establishing the source of the product in unambiguous and tech-friendly fashion.

According to the story, "The plan is the latest in the fast-growing food traceability tech sector, which seeks to connect retailers, restaurants and customers with the origin and journey of their food. The world market for food traceability technologies will reach $11.15 billion in 2015, an increase of more than a half-billion dollars from the previous year, according to market research firm Visiongain."

And, the AP goes on to report, "The Gulf of Maine seafood tool represents a new horizon in food traceability in that it will use data from multiple sources to bring traceable seafood from a large, diverse fishery to supermarket consumers, Levin said. Hannaford Supermarkets, which has more than 150 locations in New England and New York, is on board."

I find this fascinating, in part because I saw similar technology in Japan more than a decade ago, used to help consumers learn more about the source of beef and certain fruits and vegetables. I wondered then how long it would take the technology to become mainstream ... and in some ways, I'm still wondering.

But I think we're getting there. It is all part of the traceability-trackability-transparency continuum that I keep talking about here, and that I think eventually will reach a tipping point.

A growing percentage of consumers are going to want to know where their food comes from, and, I suspect, an even larger percentage of people will be reassured that this information is available, even if they never actually access it. It is why so-called "big food" companies find themselves either buying smaller, more "authentic" companies or reworking their internal processes so their products seem or actually are more like real food. And it is why, I believe, the companies and trade associations and governmental agencies that work against total transparency when it comes to things like GMOs will find themselves on the wrong side of history.

It is a trend that will affect manufacturers and retailers alike, because it establishes one essential truth - that consumers have greater power than ever, intend to act based on both their power and knowledge. Companies and institutions that do not act on this truth will find themselves marginalized and irrelevant.

It is, and will continue to be, the ultimate Eye-Opener.

Published on: May 28, 2015

Walmart has unveiled - albeit accidentally - the name of its new service designed to compete with Amazon Prime.

"Shipping Pass."

TechCrunch reports that a test site for Shipping Pass was accidentally made public yesterday.

"During the brief time the link was live," Tech Crunch writes, "shoppers were able to sign up and even place orders using ShippingPass, and were able to see which types of items were included in the new program, as well as which geographies ShippingPass served, among other things. They also found that the service would include free shipping on a number of items beyond those that could ship in three days’ time.

"Walmart says the sign-up link was part of its internal alpha test, and was not meant to be distributed. The price of the service advertised on the internal site – $1 per year – is also not the expected pricing. As the new waitlist page now shows, unlimited shipping will be $50 per year when it goes live."

The Tech Crunch story goes on: "The ShippingPass website explained to customers via its FAQ that the new service would only be available in limited geographies to start due to pilot testing. It didn’t detail which states or cities would be first to launch, but did note that Alaska, Hawaii, Puerto Rico and other U.S. territories would be ineligible, as would customers with P.O. Boxes in the continental U.S.

"The FAQ also noted that three-day delivery was only guaranteed when orders were place by noon your local time. For example, if you order by noon on a Monday, your package would arrive by Thursday.

"Additionally, Walmart had previously hinted that the items that could be shipped via ShippingPass would be easy to find on the Walmart.com website, and the leaked link revealed how that’s the case: items will be identified on the site with a ShippingPass badge across a number of product categories, including Baby, Clothing, Electronics, Health & Beauty and more ... ShippingPass will also offer subscribers free shipping on a number of items beyond those that are eligible for the three-day shipping option itself. Explains the website, “select products” will ship for free within a 4-6 day time period."

Published on: May 28, 2015

Fortune reports this morning that Amazon "is waving fees for Prime members using its same-day delivery and expanding the markets where the service is available, its latest volley in the e-commerce wars," describing it as "the latest volley by a retailer looking to one-up rivals with ever-faster and ever-cheaper service."

The story notes that Amazon is adding San Diego and Tampa Bay to the list of markets - including New York, Los Angeles, Chicago, Dallas, San Francisco, and Philadelphia - offering same-day delivery. Shoppers there can "place an order of at least $35 from an assortment of 1 million different items, as late as noon in most of those cities, and get it that day by 9 p.m. for free, eliminating the $5.99 fee members previously paid. The $9.98 basic fee and 99-cent-per-item charge for non-Prime members will remain. (Prime members pay $99 a year and get free unlimited two-day shipping.)"

The move is designed to keep Amazon ahead of retailers such as Macy's and Nordstrom that are offering same-day delivery for a fee, as well as Google, which has an option allowing third-party retailers to order from Target, Costco and Walgreen via Google's Express service and get products delivered the same day. And, of course, there's Walmart, which is spending billions on ramping up its tech capabilities and catch up with Amazon on the e-commerce front.

Published on: May 28, 2015

The Los Angeles Times reports that Taco Bell "is looking into testing deliveries for its Irvine-based Taco Bell subsidiary, potentially to college campuses." CEO Greg Creed said that "food delivery is a popular customer request, but if it were to happen, it wouldn't be lunch, and it wouldn't be every day -- only Thursday, Friday and Saturday nights."

Creed told a NYC conference that the ability to deliver "would be a massive sales driver for the brand," though he conceded that some products - such as XXL Grilled Stuft Burritos, Crunchwrap Supremes and Doritos Locos Tacos - would be harder to deliver than, say, pizzas.

Published on: May 28, 2015

Mashable reports that "Apple has reclaimed a long-running title as the world's most valuable brand after Google's stint in the top spot briefly disrupted its reign last year, according to the annual BrandZ ranking compiled by marketing research firm Millward Brown ... This year, Apple's brand surged 67% in value to a staggering $247 billion, compared to Google's 9% jump to $174 billion, a commanding lead for the Cupertino company."

The story goes on to say that "Nigel Hollis, chief global analyst at Millward, said convenience is the number-one driving power of brands. People want a product that will make their life easier in a meaningful way and one that sets itself apart from competition. That arena is where tech companies excel, he says."

Following Apple and Google on the top-10 list are Microsoft, IBM, Visa, AT&T, Verizon, Coca-Cola, McDonald's, and Marlboro.

Published on: May 28, 2015

The Daily Meal reports on a study from the American Journal of Clinical Nutrition finding that "almost two-thirds — 61 percent — of American grocery purchases are highly processed foods. In addition, 77 percent of American grocery purchases consist of either moderately or highly processed foods.  This means the average American consumes more than 1,000 calories of processed foods every day."

However ... for the purposes of this discussion, "processed" has a broader definition than some might think. The Daily Meal writes that "the word processed, according to USDA standards, is defined as 'a retail item derived from a covered commodity that has undergone specific processing resulting in a change in the character of the covered commodity.'  By this definition, pasteurized dairy products, like milk, yogurt, and cheese, as well as frozen vegetables, are processed foods: not just your usual suspects like Oreos and Twinkies."

Published on: May 28, 2015

Reuters reports that McDonald's is saying that it will change the way it serves its burgers - the goal is to "toast its hamburger buns longer so sandwiches would be warmer, and change the way it sears and grills its beef so that the patties are juicier."

“It’s these little things that add up to big differences for our customers,” says CEO Steve Easterbrook, who has committed to making the company's food "tastier."

Easterbrook also says that McDonald's will stop reporting monthly sales.

Published on: May 28, 2015

We've had a number of stories about food waste on MNB recently, and here's another ... Entrepreneur has a story about a Washington State-based company, WISErg, which has "developed a solution: the Harvester, a machine that, in six to 24 hours, turns food matter into a high-nutrient liquid that can be converted to organic fertilizer. It works with anything from fish scales and carrot tops to wine."

Interestingly, WISErg worked for two years with one of the nation's best food cooperatives, PCC Natural Market, so that it really understood how food waste is created. The solution is designed to be practical, not academic ... and you can read more about it here.

Published on: May 28, 2015

• The Wall Street Journal reports that even as Ahold negotiates a possible merger with Delhaize, it saw its "underlying operating margin fell to 3.5% in the first quarter from 4% a year before even as net sales jumped by 15%, boosted by the strong dollar.

"The Amsterdam-listed grocer has had to lower prices and spend more money on promotions and marketing to compete against Wal-Mart in the U.S. and discounters Lidl and Aldi in its home market. U.S. sales grew by 20% in the first quarter, but underlying operating margins fell by 0.2 percentage point. In the Netherlands, revenues were up by 5.7% but margins shrank by 0.6 percentage point."


• Bloomberg reports that Tesco is likely to face a lawsuit in the UK, filed by shareholders looking to hold the company accountable for a multimillion dollar profit overstatement that has roiled the retailer's management and financial position.

According to the story, "A vehicle set up by U.S. law firm Scott & Scott to explore legal action in the U.K. and Europe said in a statement Thursday that it expects to issue a claim later this year. The group, Tesco Shareholder Claims Ltd, has hired a senior British lawyer, Philip Marshall, to provide advice." The claim is expected to be "substantial." Tesco has not commented on the report.


• National Public Radio reports that Walmart has settled the lawsuit filed against it by comedian Tracy Morgan following the 2014 New Jersey Turnpike crash in which a Walmart truck struck Morgan's car, killing a companion and leaving the "30 Rock" actor seriously injured.

The terms of the settlement are confidential and "amicable," according to both sides.

Published on: May 28, 2015

Got the following email following up on a discussion we had earlier this week that compared the Mariano's takeover of Dominic's stores in Chicago with Haggen's takeover of Safeway/Albertsons stores on the west coast:

The point of the comparison was to illustrate how Mariano’s is taking over those stores - which of course Mr. Mariano knows well since he was their President at one time-came in and did something significant to let people know these were now under the Mariano’s banner.

The best analogy I can use is real estate. Anyone who owns a home, anyone buying one or selling them as private person or real estate agent knows there are certain things address to enhance the value of the home.

Some of these are “curb appeal, bathroom and kitchen.” That was the point about comparing Haggen and Mariano’s. The latter understands there are  specific things you address in order to hit the right buttons with a prospective buyer - the customer you’re trying to attract and keep - in order to make a great  impression.

The people overseeing the roll out of the “new” Haggen stores in Southern California seem to be unaware of the equivalent kind of considerations as they apply to a grocery store.  When Mariano’s took over the Dominick’s they made them their own through the various perimeter strategies they adopted. It had less to do with utilitarian measures than aesthetic enhancements which also delivered new and improved services and product offerings that demonstrated a new regime was in charge, one that is giving you a more exciting shopping experience backed up of course with knowledgeable, enthusiastic store personnel.
 
Despite the signage above the converted Haggen stores, in my opinion they failed to make these new stores their own. They certainly aren’t like the original ones up in WA which do have things that establish a Haggen identify through signature looks like the display of Washington State produced spirits that are arranged behind the check stands  in one store up there. Or the flowers lining the entrance which is an A frame like shape speaking to the native architecture of the Northwest…etc.




Regarding the "reinvention" of Sam's Club by Walmart, one MNB user wrote:

The real issue with Sam's is they can't really stay focused on their customer.  If you look at Costco they are focused on their customer, delivering what the customer wants,  or having a great ideal of what the customer is looking for.  Merchandising is flat at Sam's there is no wow factor and at best they present their product in a Kmart fashion compared Costco.  I do agree that they are more reflective of BJ as a club than of Costco.  Sam's is in that ugly spot of  "who is my customer" the business person or lower end. This is where the merchandise tells the story, and what it screams they have given up the Costco customer all together.  When you give up competing with the leader in the market place and try to copy the #3 in the market you just have no hope of being top dog.  Sam's has been giving up ground for years to the competition hopefully they will wake up soon, it really is a question of leadership of which they have a short supply.

From MNB reader Mike Freese:

Not one of these initiatives addresses two major problems with Sam's Club.

Their out of stock situation is so severe that at times you would honestly think they are getting out of the meat and seafood business.

And as a frequent shopper of Costco, comparing the customer service in the two chains is dramatic. In Sam's they have at most 2 check lanes open with no help unloading your purchases. At Costco, at least 4 check lanes open with someone emptying your basket(s) and smiling and engaging the entire time. And if you need to find and associate in a Sam's to direct you to something you are looking for…..good luck. At Costco, you find many associates who literally walk you to the requested item.
 
If my closest Costco wasn't 340 miles away, I would never shop at Sam's Club.




Following up on our story about how US airports seem to be moving toward allowing Uber to operate there, MNB user Tim McGuire wrote:

I think your conclusion of "consumers want what they want - deal with it" is simplistic.  The existing taxi regulations were put in place to protect the consumer from unsafe or unscrupulous operators - for example, requiring taxis to be inspected to make sure they are safe; requiring vehicles and drivers to be properly insured; requiring fares to be fair and not take advantage of people who needed to rely on the service.

Uber wants to innovate, and that is great - but they aren't just changing business practices (which I'm al for) but have effectively declared that laws don't apply to them.  No authority inspects the Uber vehicles to make sure they're safe to be on the road.  No authority checks the licenses and driving records of their drivers. Uber says they check all those things and everyone should just trust them to be good. The ultimate arrogance is Uber's insistence that regulators and passengers should "just trust that we have sufficient insurance" but refuse to prove to authorities that they have any insurance because their top-secret insurance policy is such a competitive advantage that only 4 people in the world are allowed to know how it works.  How do you think it will work next time you get pulled over for a traffic violation and you tell the police officer "trust me, I have insurance"?  Should we let food manufacturing plants tell safety inspectors "trust us, those ingredients are safe"?  There are lots of examples of consumers not getting what they want because it's not safe - not safe for them, not safe for others around them.  Motorcyclists want to ride without helmets.  Drivers want to drive without seat belts.  Just because consumers want it doesn't make it right.

Now does that mean I don't want Uber to be available?  Not at all.  But they need to play by a logical set of rules - proof of insurance, proof of safety of the vehicles and the drivers they use.  Hard to make that sound like an unreasonable restriction on a new business model.  Then we need to solve one other issue, which is tougher because there's lots of money involved.  Taxi licenses were sold by local governments to taxi operators in return for the right to be the only providers of that type of passenger service.  Those licenses in many cities are very expensive.  Allowing Uber (or Lyft, or any similar service) to compete for that business without paying for a license makes the competition unfair, and opens the cities up to thousands of lawsuits from license-holders who see their business devalued by the government not protecting the exclusive business rights they sold with the license.  Someone has to figure out how to either:  1.  Compensate the license-holders for the loss of the exclusive rights they paid for; or 2.  Restrict Uber and others from operating without a license.  Otherwise it's like a retailer signing a lease with the exclusive right to be the only grocery store in the mall and then the landlord changing their mind and letting 3 competitors build stores in the same mall - imagine the lawsuit there.

I'm a consumer - I love Uber.  It's a fast, convenient, reliable service.  But we can't just say they're allowed to play by a different set of laws than anyone else because they're cool guys from Silicon Valley.  Change the laws, or shut them down.  That's the "deal with it" that is needed.




On another subject, an MNB user wrote:

The $5.5 billion dollars that the banks have to pay for “Currency Manipulation” is a rounding error for these big banks. RBS, CHASE, CITI, JP MORGAN, etc. The punishment for bad behavior was way too lenient. Ditto for what happened in the 2008 meltdown. When are going to learn that we cannot tolerate the behaviors of the these gigantic financial institutions? They pretty much control the world financial markets and have way too much power. Personally, I have been with a much smaller financial institution for a long time and have developed personal relationships with the people at KEY Bank.




Regarding Staples, one MNB user wrote:

First, I just wanted to comment on the Staples insight from Friday. I actually tried to shop at Staples for moving supplies last week, but ended up leaving empty handed because I thought everything there was 3xs more expensive than other places and the atmosphere was horrible… Maybe I don’t know proper moving item costs, but bubble wrap was $20, tape was $10, and boxes were around the same…I can get boxes for free from a grocery store and just use newspaper and save $40. I think the atmosphere had a lot to do with me leaving empty handed as well. At Target the store is nice, upscale, clean, and has bright lighting so if something is more expensive it makes sense to me because I trust in the company and the quality of the product. I walked into Staples and it was dark and dirty, if they aren’t putting money into their own stores to make them nice, why would I trust that their product will be of good quality.  It doesn’t surprise me that they are having to reanalyze their business tactics.




Regarding Fairway's poor performance and my reaction to it, one MNB user wrote:

Kevin, after reading the Fairway CEO's statement, I had the same thought that this was a company focused around financial performance rather than attracting customers and enhancing their shopping experience.

Not a way to succeed, IMHO.




And, regarding our ongoing "Millennial Mind" discussion, one MNB user wrote:

Always amazing to me that particularly the Millennials are “so busy” doing all their most important stuff, yet have time to check their Smartphone’s when using some of their precious time in a grocery store…and then demand “speed of light” service at checkout. Equally interesting the Millennials are also the group struggling financially, yet the Boomers (with the money) are under marketed too.

Guess what. They have different priorities than you do. Than we do.