business news in context, analysis with attitude

Published on: March 7, 2016

by Kevin Coupe

Sometimes, even when Whole Foods tries to make things more convenient for its shoppers, it can't get a break.

Last week it happened when one of its stores offered pre-peeled oranges wrapped in plastic. That may sound convenient ... but one of its customers questioned the retailer's environmental priorities, tweeting a picture with the message, "If only nature would find a way to cover these oranges so we didn't need to waste so much plastic on them."

Boom.

Fortune notes that the tweet "was favorited and retweeted over 60,000 times and written about in various online publications. While many people agreed with her that it was a complete and unnecessary waste of plastic, and therefore environmentally irresponsible, others did argue that the pre-peeled product is necessary for certain consumers, particularly the elderly and disabled."

Regardless, the story says, the decision to peel oranges and wrap them in plastic seemed surprising, considering Whole Foods has "environmental stewardship" as a core value.

Whole Foods didn't even fight back. The same day, it tweeted, "Definitely our mistake. These have been pulled. We hear you, and we will leave them in their natural packaging: the peel."

Chalk it up to the persuasive power of social media.

It is an Eye-Opener.

Published on: March 7, 2016

Arkansas Online has a story about Walmart's e-commerce efforts, and how the company stresses that it is not measuring the performance of that division against online competition like Amazon, but rather on how it helps the company's broader omnichannel strategy.

"We're really focused on building the customer relationship with Wal-Mart -- whether it's on the app, the site or the store -- so that we can be there for the customer to grow with her as she wants and needs," says the company's Global e-Commerce CEO Neil Ashe. "That's why we're focused on expanding the digital relationship. ... And, so far, as indicated, the customer is reacting positively to that."

Eric Howerton, CEO of WhyteSpyder, a Fayetteville-based retail marketing firm., tells Arkansas Online that "dot-com is just one piece of a total strategy. If you look at the big picture, the omni-channel strategy, Wal-Mart is so far ahead of Amazon it's ridiculous. It all comes back to the shoppers. They're driving this thing. They're not going to shop only brick-and-mortar or only online.

"Wal-Mart has the brick-and-mortar infrastructure. They have distribution beyond what Amazon does. Wal-Mart has invested in dot-com significantly. Amazon has to invest in brick and mortar significantly. You tell me which one is more expensive and more logistically challenging."

Published on: March 7, 2016

The Associated Press reports that Amazon has decided to allow Fire tablet users to "resume encrypting locally stored data," in a reversal of a little-noticed policy decision that occurred last September.

According to the story, while Amazon has automatically encrypted data communicated from the Fire tablets to the Amazon Cloud, and all the data in the cloud, last fall it removed the ability of users to encrypt the data on their tablets; it said that customers weren't using the service.

However, the encryption issue has suddenly become top of mind with the legal battle taking place between Apple and the FBI over the encrypted data that may be on an iPhone used by the terrorist who, with his wife, killed 14 people in San Bernardino, California, last December. The FBI wants Apple to develop software that would allow it to circumvent the phone's encryption software, but Apple has resisted, saying that it would make other iPhones less secure and lead to violations of its users privacy.

Amazon has filed a court brief backing Apple's position in the case.

Published on: March 7, 2016

The Tampa Bay Business Journal has a story about why Kroger and Publix "are thriving in a tougher-than-ever grocery environment," even while Walmart is "struggling."

"A big part of Kroger's strength is that it 'understands the fact that shoppers come in all shapes and sizes,' said Carter Harrison, retail analyst at Conlumino. Publix, too, appeals to a broad swath of consumers. While Kroger competes on pricing more than Publix, Publix is able to compete with bundling deals like its buy one, get one offers. At the same time, both Publix and Kroger have been able to take market share from specialty grocers by adding upscale touches to their stores."

Walmart's problems, the analyst suggests, are "because the retail giant's business model is 'relatively one-dimensional' and it finds it 'hard to adapt to changing times'."

"All of this comes down to flexibility," the analyst says. "This, in our view, is now a watchword for retailers in a market that is polarized, complex and rapidly changing."

Published on: March 7, 2016

Ad Week has a story suggesting that retailers looking to overhaul loyalty marketing programs need to be careful how they proceed, lest they do "more harm than good."

Exhibit A in this discussion is Starbucks, which last month announced a major change in its highly successful program, putting more of an emphasis on dollars spent rather than the number of transactions.

Currently, program members get a free drink or food item for every 12 stars they earn; each transaction earns a star. But as of mid-April, members will get two stars for every dollar they spend, with 125 stars necessary to get a free item. In addition, Starbucks is changing how customers achieve gold status. In the past, it has been by earning 30 stars in a year, but the changed program will require 300 stars to reach that status, which gives people access to special offers.

Predictably, the story says, "the idea of having to spend $62.50 to earn a free item, instead of as little as $24, didn't thrill regulars, who reacted negatively and vocally on social media. Starbucks' brand perception plummeted as a result, dropping by 50 percent, according to YouGov. Starbucks' 'buzz' score, which asks respondents whether they've heard positive or negative statements about the brand, dropped from 60 to 29 in the week following the change."

The analysis suggests that what Starbucks claimed was an enhancement to the program actually could serve to dissuade people from going to Starbucks when faced with a choice. "The shift is also opening up an opportunity for Dunkin Donuts, which is already moving to intercept wavering Starbucks loyalists by offering a $5 gift card and a free drink when you sign up for the doughnut chain's rewards program," Ad Week writes. "While the competitor isn't naming Starbucks, it's not hard to spot the motivation behind the new offer."

Katie Hooper, managing director and vice president of strategy at HZDG, tells Ad Week that "as soon as you say you're changing your loyalty program, an instant skepticism emerges. When you make the reward harder to realize, it feels like something that's just helping the companies improve their revenue streams. We recommend telling customers how this is going to improve their daily life. Before, Starbucks was doing it really well by rewarding them based on frequency. It said they valued the customer no matter what."

Published on: March 7, 2016

The New York Times had a piece over the weekend about the cost of low prices. Here's how it frames the story:

"As traditional retailing falters, shutting stores and shedding workers, online merchants are reaping the rewards. People like the convenience of e-commerce, and they love the feeling that they are getting a deal.

"The perception of a bargain is fostered by online retailers’ use of something variously labeled list price, suggested price, reference price or manufacturer’s suggested retail price. Whatever its name, the implication is that people are paying much more somewhere else.

"But with many products online, you could not pay the list price even if you wanted to. That is because hardly anyone is actually charging it. It is a sales tactic that is drawing legal scrutiny, as well as prompting questions about the integrity of e-commerce. If everyone is getting a deal, is anyone really getting a deal?"

You can read the entire story here.

Published on: March 7, 2016

The Atlantic has some analysis of Costco's announcement last week that it plans to increase the minimum pay for employees for the first time in almost a decade, raising base pay by $1.50, to between $13 and $13.50 per hour.

The decision, the story suggests, may indicate "that, as the economy adds jobs, retailers will have to start paying their frontline workers more in order to hold onto them." And, it reflects some broader economic good news:

"The fact that both Costco and Walmart are raising wages for their workers is evidence that the U.S. labor market might be tightening," The Atlantic writes. "The last two jobs reports have seen the unemployment rate below 5 percent—as the U.S. economy improves and job opportunities become more abundant, it’s expected that workers will have options to jump from job to job. Many businesses are now reporting that it’s harder to find employees to fill vacant positions, and the competition for low-wage workers is growing as well.

"As wage growth still remains tepid for most workers in America, Costco workers’ raise is hopefully not just a move consistent with the company’s past treatment of workers, but an encouraging sign that wages will start to rise more generally."

Published on: March 7, 2016

Reuters has a story about how Tesco in the UK is grappling both with the nation's growing online sales numbers and competition from discounters such as Aldi and Lidl, which threaten to make its bricks-and-mortar stores less relevant than they used to be. "In a shift in strategy aimed at making the space profitable and avoiding store closures, retailers such as Tesco have also started experimenting with gyms and children’s play areas to entertain customers ... Tesco has also struck deals for third party outlets with firms such as Sports Direct, Mothercare, Claire's Accessories and Sock Shop" as it looks to use square footage that was becoming less profitable and productive with virtually every passing day.

The story notes that competitors Sainsbury and Walmart-owned Asda are making similar moves.

And, Reuters notes, the choices are stark: "If retailers can't make stores profitable the alternative is closure."

Published on: March 7, 2016

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

• Kroger-owned Fry's Food Stores announced last week that "it is expanding its presence in Arizona and plans to add seven new stores in 2016. Fry's will invest $260 million in Arizona to build six new Marketplace Stores and to add one new store in Tucson along with multiple fuel centers at the properties. This funding also will be used to build additional fuel centers and complete expansion projects and remodels."


• The New York Times reports on the creation of a new trade association/lobbying group in Washington, DC - the the Plant Based Foods Association, which "has been established to represent makers of proteins derived from peas, soybeans and other nonmeat sources." Michele Simon, the founder of the group who is described as "a public health lawyer and food policy advocate," describes the move as "joining the barnyard."

Be careful where you step. The barnyard is lettered with all sorts of surprises.

Published on: March 7, 2016

Last Friday, commenting on a story about In-N-Out, I said that I was heartened to learn that the iconic burger chain is coming to Oregon. I misspoke ... a number of folks pointed out to me, In-N-Out already has one location there, in Medford ... 274 miles from Portland, and just 27 miles north of the California border.

The original story mentioned that In-N-Out plans to expand its Oregon presence, though it is keeping its precise cards close to the vest.

Apologies for the mistake.

Published on: March 7, 2016

Ray Tomlinson, credited as the inventor of modern email - he enabled a system in which electronic messages could be sent to specific people at specific addresses, and chose the "@" symbol to facilitate it - has passed away. He was 74, and reports are that he suffered a heart attack.

Published on: March 7, 2016

Following up on last week's story about Costco raising its base minimum salary by $1.50, one MNB user wrote:

Yes we love Costco, my wife would probably leave me before her Costco membership.

However, I feel like Costco has become somewhat arrogant lately. What part of getting rid of the American Express card is good for their members who accumulate free air miles with Amex? Eliminating Coke from their Food Courts, in favor of Pepsi, even in Atlanta ?

Pushing Kirkland wine extensively reducing space for other wines?




Last week, on the subject of the national trend toward increased minimum wages, I responded to a reader who suggested that nobody wants an increase in the minimum wage other than politicians pandering for votes by suggesting that "there are a lot of actual citizens out there who are working hard yet having trouble making ends meet, and they're very much in favor of it."

Another MNB user responded:

Most of these people are not aware of the unintended consequences of a mandated minimum wage increase.  With a minimum wage increase, many companies will need to adjust for added costs.  This will typically result in a reduction in force.  Many of those that keep their jobs may find that their hours are cut, and they make little or no increase.

If more citizens understood what the likely outcomes would be, it's arguable that many less would be in support of this.

You're all about full transparency.  Why don't you insist that every time someone praises a government mandated minimum wage they attach a warning label to help educate those who only listen the what sounds great, but seldom delivers?

Again, not every agrees. Not even every economist. There is a school of thought suggesting that employees who feel more invested in a company because they are making more money actually will be more productive, and make companies more successful, which will actually add jobs rather than lose them.




That's the approach pointed to by this MNB user, who was actually writing about another story:

Walmart blames tough competition which is true, but they should not be complaining about wage increases. I see the wage increase as an opportunity to seek better talent. If the wages were $10 or $15/hr and I had a pool base of 300 employees then I would expand that workforce to 600 employees. Still keep the core base at PT with the exception of key leaders, and take advantage of a better pool of skilled and educated labor force. But then again, it made be that pot of coffee I drank this morning that has my mind pinging from one end to another.

Got another email from another reader about Walmart's issues:

The issue with Walmart is not big or small data.  The issue is what is going on in their stores.  The first issue is to resolve the out of stocks and the store conditions.  The fact of the matter is that the first thing that gets cut is labor.  Next, when labor is cut, they do not have enough labor hours to stock the shelves, but the product that did not get stocked is in the back room.  The appearance of store conditions is what the consumer sees when they cannot find the product they want.

The second issue is store management, in  a lot of instances, are ill prepared on how to motivate and handle people.  If the Walmart workers are not given the expectations on how to engage and interact with the customer, this does not make for a good shopping experience with the consumer. Having been in a lot of Walmart stores over the years, in many locales, the difference, perception wise, is the condition of the store and do the employees I see and talk with seem to like their jobs. I see a lot of Walmart people who really like what they do and they care about their departments and the conditions of their shelves. I also see a lot of stores where it is just the opposite.  It all comes down to having the right people in the right place with the right training, and the right people skills. It is human nature to do a good job and be respected and rewarded for doing a good job.
 
Having started my career in the grocery business 50+ years ago, I remember going from a box boy, to a stocker, to a checker, and then becoming an assistant manager, etc. I was motivated by the mentors that I had that showed me the basics of working in a store, with the most important skill learned was people skills.  I do not believe Walmart’s problems are big or small data, but it is a people issue.

Published on: March 7, 2016

• ESPN reports that Peyton Manning, one of the best quarterbacks every to play professional football, will announce his retirement later today. Manning played for 18 years and took two different teams - the Indianapolis Colts and, just last month, the Denver Broncos - to Super Bowl victories.

The ESPN story notes that Manning "will retire as the NFL's all-time leader in passing touchdowns (539), passing yards (71,940) and quarterback wins (186, tied with Brett Favre)." He is a lock to be elected on the first-ballot to the football Hall of Fame.