business news in context, analysis with attitude

Published on: December 7, 2015

by Kevin Coupe

The Los Angeles Times had an interesting story over the weekend about how technology is affecting the movie business ... and not just bigger screens and better sound.

Dolby, which has specialized in sound systems, has developed "a laser-guided projection system that brings a higher level of realism to what moviegoers experience in theaters — making viewers, literally, feel the heat or whatever else they are watching on screen.

"Laser-powered projectors. Sound that bounces around the theater. Seats that vibrate and even project mist. The century-old motion picture exhibition industry is in the midst of a technological revolution, deploying the latest in audio and visual research in a bid to attract younger audiences and stay relevant in the digital age."

Or to put it another way, they need to give people "a reason to leave their fast-expanding entertainment options at home."

(People of a certain age will find this amusing. I remember that when a Charlton Heston movie called Earthquake came out in the mid-seventies, they made a big deal about a technology called Sensurround that made it feel like there actually was an earthquake taking place. I think they only used it one other time...for a George Segal movie called Rollercoaster. but it wasn't nearly as sophisticated as the stuff they're describing now.)

You can read the story here .... and it is an Eye-Opener, in that it has a certain relevance to bricks-and-mortar retailers who are looking for reasons to get people to come to the store and not simply use Amazon, Jet or some other e-commerce site.

It doesn't have to be lasers. In a supermarket, it might just be a really great smelling bakery that makes a cinnamon roll that no online store can duplicate.

But it has to be something. Because just doing things the same old way simply isn't good enough anymore.

In movies. In retailing. In product development.

It is an Eye-Opener.

Published on: December 7, 2015

In Washington State, the Bellingham Herald reports that US Bankruptcy Judge Kevin Gross signed an order on Friday approving bidding procedures for Haggen's core 33 stores in what the retailer hopes will be one block. In a statement about the auction, the company says that "the Haggen group of core stores is well run with great staff and is located in great communities. As a group they are profitable. Because of this, we know there will be strong interest in our stores as a group. Our stores are staffed and stocked to high standards and we are well prepared to offer a great store experience for our guests during this holiday time.”

According to the story, "The company will actively market the stores and can negotiate a deal with a potential buyer in what is called a stalking horse auction format. The stalking horse deal can be used to establish a baseline for the auction; other qualified bidders can then come in and offer more for the stores."

The auction is scheduled for Friday, February 5.

Published on: December 7, 2015

Fortune reports on a new study saying that that Amazon Prime "is drawing younger and wealthier shoppers who are now using the website to shop for an increasingly diverse range of products, notably apparel.

The study, by Cowen & Co., concludes that "members of Prime ... have an average household income is $69,300, well above the income of Amazon shoppers in general, and some 24.8% higher than Walmart shoppers’ average income and 4% above Target’s. That means Prime is particularly enticing to the higher income shoppers both Walmart and Target are trying to woo." In addition, "the Prime customer is younger, averaging 36.5 years old, versus 42 at Walmart. (Target attracts a similarly younger clientele to Amazon Prime.)"

The study also reveals that Amazon Prime customers are shopping across more categories that they did a year ago.

Published on: December 7, 2015

The San Francisco Chronicle reports that the California State Supreme Court has ruled that private citizens there "can file damage suits against produce companies that they believe have falsely labeled their products as 'organic'."

According to the story, the ruling challenges the popular interpretation of federal law that only allows citizens to complain about possible mislabeling to the US Department of Agriculture (USDA), which sets national organic standards in accordance with a 1990 federal law.

The Chronicle writes that the case originated when a California consumer "accused an herb-growing company of falsely labeling its products as organic ... under state laws that ban false advertising, a Superior Court judge and an appellate court ruled that such lawsuits would interfere with uniform nationwide standards.

The story notes that Herb Thyme Farms, the subject of the complaint, could appeal the ruling to the US Supreme Court.

Published on: December 7, 2015

CNN reports that Barnes & Noble continues to swim in red ink, with sales down and debt alarmingly up, and with "only $13.4 million in cash -- down from $32 million a year ago."

The story notes that "Barnes & Noble's efforts to keep up with Amazon have mostly been in vain. The company said online sales actually fell 22% in its most recent quarter after it launched a new website that had some notable glitches. And the company's Nook e-reader -- a competitor to Amazon's Kindle -- has been a huge flop. Nook sales (which include digital books as well as the devices) plunged nearly 32% from a year ago."

There are some glimmers of hope for Barnes & Noble, suggests. Apparently there is a coloring book trend that it is capitalizing on, as well as the vinyl record resurgence, which is allowing it to capture some new sales it might not have gotten before. And, sales of Adele's new album, "25," have been strong for the retailer.

For the moment, CNN writes, "it looks like Barnes & Noble should be able to avoid the fate of rival Borders -- which declared bankruptcy and subsequently closed up shop in 2011. For now at least. The company is also buying back stock and paying a dividend to keep investors happy.

"But not even Adele may be able to restore Barnes & Noble to its former glory..."

Published on: December 7, 2015

• Bloomberg reports that the Walmart's Puerto Rico unit sued the island’s government, seeking to overturn a new tax the retailer calls unfairly high" - up from two percent to 6.5 percent "on goods imported from offshore affiliates to local companies with gross revenues of more than $2.75 billion."

The increase, the story says, "comes as the U.S. commonwealth struggles to restructure $70 billion in debt, more than every U.S. state but New York and California. This week, the U.S. Supreme Court agreed to consider reinstating a law that would let Puerto Rico’s debt-ridden public utilities restructure their obligations."

Published on: December 7, 2015

The Wall Street Journal reports that Amazon "plans to roll out thousands of branded semi-trucks to help shuttle inventory between its facilities, an effort to take more control of its shipping processes."

The initiative is described as "partly a marketing effort — the trucks will be seen by customers as they move about — as well as a move towards greater efficiency in stocking its dozens of warehouses."

Published on: December 7, 2015

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

• In Texas, the Denton Record-Chronicle reports that WinCo Foods is building a new 800,000 square foot, $135 million distribution center that should be ready in about a year. Michael Read, vice president of public and legal affairs at WinCo, says the company has the ability to expand the facility by an additional 130,000 square feet.

The story describes the development as "a regional distribution center for the chain, which recently opened six stores in the Dallas-Fort Worth area, including one in Lewisville. It also has two stores under construction in the area, including a Denton store that will occupy about 85,000 square feet at Rayzor Ranch Town Center."


• The San Francisco Chronicle reports that "a federal judge in San Francisco has ordered Safeway to pay almost $42 million to customers nationwide who bought groceries from the market chain’s website and were unaware that they were being charged 10 percent above store prices.

"U.S. District Judge Jon Tigar granted $30.9 million in damages and $10.9 million in interest Monday to online shoppers who had registered with Safeway.com between 2006, when the website opened, and November 2011, when the company reworded its policy to declare that online prices 'may differ from your local store'."

However, Safeway said on Friday that it will appeal the ruling.


• USA today reports that Campbell Soup-owned Pepperidge Farm is suing Trader Joe's "for trademark infringement over a product called Crispy Cookies that it says too closely resembles both the look and package design of Pepperidge Farm's iconic Milano cookies ... Pepperidge Farm accused Trader Joe's of deceptive marketing and diluting the value of Milano with Crispy Cookies, according to a complaint filed Wednesday in Connecticut federal district court."


• The Associated Press reports that Chicken of the Sea and Bumble Bee have called off their proposed merger after the Justice Department said that it would unfairly hurt competition ... the deal "would have combined the second- and third-largest sellers of tinned tuna in the U.S. in a market long dominated by three major brands."

Published on: December 7, 2015

• The Fresh Market said last week that it has "terminated the employment of Mr. Sean Crane as Executive Vice President and Chief Operating Officer of the Company without cause, effective December 4, 2015."

Crane had served as COO of Fresh Market and then became interim CEO when Rick Anicetti, the former CEO of Food Lion, was named to run the company last September.

Published on: December 7, 2015

On Friday, in a story about Chipotle having to adjust its commitment to local sourcing of fresh produce because of the E. coli outbreak that has taken place in a number of markets around the US and sickened dozens of people, it was stated that the company's goal was to "serve vegetables that are grown within 350 million miles of individual restaurants."

As numerous MNB readers pointed out,that's not exactly setting the bar very high.

The actual distance is 350 miles.

Apologies for the goof. Though for Chipotle to resolve its E coli issues, 350 million miles may have to be its new standard.

Published on: December 7, 2015

• Chuck Williams, founder of the Williams-Sonoma retailing empire, died at his home in San Francisco. He was 100.

The Associated Press story notes that Williams "opened his first Williams-Sonoma store in Sonoma, Calif., in 1956 inspired by a trip to Paris three years earlier. A lover of cooking and entertaining, he wanted U.S. professional chefs and home cooks to have access to high-quality cookware and tools." He sold the company in 1979, but had remained involved with it.


• Robert Loggia, who played a series of gangsters and underworld figures in movies ranging from Scarface, Prizzi's Honor, Somebody Up There Likes Me and "The Sopranos," but was perhaps best and most affectionately known for playing the toy company owner in Big who danced with Tom Hanks as they played “Chopsticks” and “Heart and Soul” on a giant piano keyboard at FAO Schwarz, has passed away.

Loggia was 85, and had been battling Alzheimer's disease for the past five years.

Published on: December 7, 2015

I wrote flippantly the other day that Amazon Prime is a way of getting people to spend money so they can spend more money. MNB reader Chris Utz objected:

I use Amazon Prime.  I don’t just ‘pay for the privilege to spend more money’.  That’s what happens with a Costco and Sam's Club membership.  Amazon Prime provides value with their membership fee.
 
I get expedited ‘free’ 2 day delivery service, for a product cost that may be nominally higher than purchasing the same item elsewhere.  Purchasing from another would site most often requires shipping fees, which negate any price savings, unless you meet a minimum spending threshold.   If you reach the threshold, usually $100 you get free UPS Ground shipping, which takes several days.  Worst of all is free shipping from the US Postal Service, which takes an eternity do be delivered. 
 
I’ve sent birthday and Christmas presents (wrapped for a small fee) and had Amazon delivered them several states away in 2 days.  I’ve also sent textbooks, replacement Apple chargers and the like directly to my daughter’s dorm, at a price less expensive than her school bookstore, usually with 2 day Prime delivery.  I have a friend who similarly uses Amazon Prime to ship presents to relatives in Europe.
 
An Amazon Prime membership also provides free online movies, television series and other content similar to what Netflix provides.  At $7.99 per month, Netflix costs just a bit less than Amazon Prime.  Compared to Netflix Standard Service at $9.99 per month, or Premium Service at $11.99 per month, Amazon Prime is much less expensive.

You are preaching to the converted.




On another subject, the new SmartLabel technology, one MNB reader wrote:

You are correct. Food manufacturers needed to communicate with consumers from the beginning on several issues, not just artificial ingredients. If more had built relationships from the beginning they would be in a more understanding place now. Here is the product you requested with the trade-offs. If you want natural, shelf life is compromised. If you want shelf life, this is the ingredient list it takes to get there. Artificial does not have to be bad, but it does have to be explained in a non-combative way. It isn’t pushing back, it is communicating. Too many food companies thought they were exempt from some of the issues because you have to eat. They seem to have forgot, that the consumer can choose what to eat and who makes the food. As you are fond of saying, tell a compelling story with transparency and honesty and you can create a loyal consumer.

And from another reader:

High-value consumers are demanding more transparency from the products they purchase and the companies producing them. If brands were truly interested in providing consumers what they want and respond to the consumer’s request for more transparency, they would simply put the nutritional information on the label for all to access and not bury it in a code, placing the onus on the retailer and consumer to hunt for the information they seek. At the end of the day, the winners will continue to provide nutritional values on the label and the shoppers will continue to drive the market with their dollars. SmartLabel Technology may have won the battle, but it will certainly lose the war for the brands seeking success in the marketplace.

Published on: December 7, 2015

In Week Thirteen of National Football League action...

Texans 21
Bills 30

Ravens 13
Dolphins 15

Bengals 37
Browns 3

49ers 26
Bears 20

Jaguars 39
Titans 42

Seahawks 38
Vikings 7

Jets 23
Giants 20

Cardinals 27
Rams 3

Falcons 19
Buccaneers 23

Broncos 17
Chargers 3

Chiefs 34
Raiders 20

Panthers 41
Saints 38

Eagles 35
Patriots 28

Colts 10
Steelers 45