business news in context, analysis with attitude

Published on: February 5, 2018

by Kevin Coupe

The Washington Times has a story about how as of July 1, Best Buy no longer will carry CDs in its stores.

It will, however, “continue carrying vinyl records, but will start selling albums alongside its turntables.” Recorded music no longer will have its own special section in its stores.

Some background from the Times piece:

“CD sales have been on the decline in the U.S. for years, however, and lately the business has only generated Best Buy about $40 million annually, Billboard reported — a far cry for what used to be one of the nation’s biggest music retailers.

“CD sales in the U.S. market dropped by 16.3 percent from 125 million copies in 2015 to 104.8 million in 2016, according to an annual end-of-year Nielsen report released in early 2017. Taking into consideration CDs, cassettes and vinyl records, physical album sales at mass-merchant retail chain stores decreased by 24.5 percent during that same span, the report said.

“Nielsen’s latest annual year report, report released last month, did not account for CD sales specifically but said that total physical album sales had dropped 16.5 percent since 2016, down to 102.9 million copies in 2017. About 14.3 million of those albums were vinyl, according to the latest report.”

Life spans end. New technology takes over. Old, improved technology gets a new life. And retailers have to adapt.

And I’m not just talking about Best Buy and CDs. This is a metaphor for a process with which every retailer must deal.

It is both the circle of life and an Eye-Opener.

Published on: February 5, 2018

The New York Times reports on how Amazon has benefitted from the the fact that Wall Street largely has been willing to cut it slack, evaluating its “performance not based on its quarter-to-quarter profits, but on its long-term potential … In a business environment that demands, and rewards, quarterly profits and short-term strategic thinking, Amazon showed extraordinary resolve in focusing on long-term goals, somehow convincing investors to go along.”

The story notes that “Amazon has inured itself to pressure from Wall Street by ignoring it. While many chief executives devote significant time to fielding questions from investors, Amazon’s founder and chief executive, Jeff Bezos, is famously stingy about the time he spends with major stockholders. He hasn’t appeared on an Amazon earnings calls in years.”

In the end, the Times writes, “investors have rewarded Amazon for plowing its profits back into growing its businesses, whether in online retail, cloud computing or, most recently, in grocery stores, with the acquisition of Whole Foods Market.”

The feelings about Amazon is not unanimous; some investors think it is wrong that Amazon has been held to a different standard than other companies, and suggest that there is some sort of “infatuation” with Amazon at work.

But Henry Blodget, a prominent former stock analyst, suggests that “if Wall Street would allow more companies to reinvest like Amazon, it would create great benefits for the economy.”

Published on: February 5, 2018

Media Post reports on a new study by BI Intelligence saying that “The number of smart home devices continues to rise and now it’s projected that there will be 800 million in the U.S. within four years.

“The size of the smart home market is being pushed along quite nicely by smart speaker adoption, with nearly 1 billion projected to ship globally, according to a new forecast.”

While “smart home devices still appeal more to tech-savvy consumers,” the story says, they “are starting to move to average users, according to the study.”

Media Post writes that “smart speakers will gradually transform into one of many peripheral devices around the central voice assistant, according to BI Intelligence. Smart speakers are also a driver for more smart home products, since they can relatively easily control other smart devices, such as lights and thermostats, and several at time.”

Published on: February 5, 2018

Thrillist has a story about chef Will Horowitz’s new cantaloupe burger, described as “voluptuously smoky, with the unmistakable mineral twang of dry-aging, it sends a river of juice down your chin each time you take a bite. It tugs at your teeth in the way you'd expect from animal muscle and feels like meat … It looks like meat, tastes like meat, and feels like meat, but is actually just a regular cantaloupe -- though to be fair, the cantaloupe has been halved, peeled, cured, fermented, smoked, slow-baked, dehydrated, and seared to order, in a two-day process that manages to transfigure the bulky fruit into a compact fillet the size and shape of a duck breast.”

But mostly, the story says, the cantaloupe burger is “proof of concept for a diet from the future (or a long time ago in a galaxy far, far away). And it makes you wonder: What if, instead of relying on conventional or lab-cultivated sources of animal protein, we transformed the fruits and vegetables we already have into something just as good?”

Fascinating piece, and you can read it here.

Published on: February 5, 2018

In evaluating the success and efficacy of Amazon Prime, the Washington Post writes that while some people “might not actually be saving much money with Prime anymore, it actually “has mastered something much more valuable: the psychology of being a consumer in an era of too many choices.”

“Fewer than 1 percent of Amazon Prime members even consider other sites in the same shopping session, according to market research consultancy Millward Brown Digital,” the story says. “It’s hard to argue with happy customers. Prime is expensive to run, and Amazon has an unusual willingness to forgo profits for growth. But its unparalleled ability to capture our loyalty increasingly means other retailers and producers of goods feel compelled to sell on Amazon. That’s fueled worries, voiced by the Open Markets Institute’s Lina Khan and others, that Amazon is gaining too much control over online commerce. (Amazon declined to comment.)”

Published on: February 5, 2018

• The New York Times reports that Amazon has secured two patents for a wristband that tracks an employee’s every move and can use vibrations to alert the wearer when he or she is doing something incorrectly. It could, the story says, “identify every time you paused to scratch or fidget, and for how long you took a bathroom break.”

While Amazon has not said whether it plans to actually make the device and require employees to wear it, “the patent disclosure goes to the heart about a global debate about privacy and security. Amazon already has a reputation for a workplace culture that thrives on a hard-hitting management style, and has experimented with how far it can push white-collar workers in order to reach its delivery targets.”

Published on: February 5, 2018

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

• CNBC reports that Sears Holdings “has secured loans totaling $210 million through CEO Eddie Lampert's fund ESL Investments and other parties.” The story notes that “the parent company of Sears and Kmart stores said in January it was in talks with lenders about transactions that would strengthen its balance sheet and improve the terms on more than $1 billion of debt. It said it would consider ‘all options’ if efforts to refinance its debt fail.”

”All” options? Or just “remaining options”? Because there aren’t a lot left, I would imagine.

Published on: February 5, 2018

• Tesco announced that Charles Wilson, CEO of the Booker Group - which Tesco has acquired for $5.2 billion (US) - has been named to run its British and Irish businesses.

Bloomberg reports that the appointment “creates a strong No. 2 to CEO Dave Lewis,” who has been rumored to be a candidate to succeed Paul Polman, the departing CEO of Unilever.

According to the story, “Wilson will succeed Matt Davies … who joined Tesco from auto-parts and bicycle seller Halfords Group Plc just three years ago, when the supermarket operator was near rock bottom after a 2014 accounting scandal. Davies, who will leave in April, has been at the center of Tesco’s efforts to improve its image with British shoppers, and has helped oversee a recovery in U.K. sales growth.”

Published on: February 5, 2018

• In a story headlined “The CEO Who Called Trump a Racist (and Sold a Lot of Spice Mix),” The New Yorker, looks at Bill Penzey of Penzeys Spices, who long has used “the brand’s official communiques as a megaphone, devoting the first and last pages of his catalog to personal notes and op-eds. Over the years, Penzey expressed his dismay at, among other things, urban white flight, low teacher pay, and the use of Native American iconography in sports. With the advent of social media, he expanded his platform to include the e-mail newsletter and a company Facebook page. And with the election of Trump, he found an issue that nearly everyone took personally.”

Interestingly, sales actually have been improved by Penzey’s willingness to take positions on issues that have the potential for alienating half his customer base (or at least the roughly one-third of the country that is identified as Donald Trump’s base). However, the approach has brought him into conflict with his sister, Patty Erd, who owns a competing company called Spice House and was public about her company’s non-political stance.

It is a very interesting piece, and you can read it here.

Published on: February 5, 2018

Regarding the possibility that Amazon’s Alexa-powered smart speakers might soon start carrying advertising, MNB reader Stephanie Steiner wrote:

I finally succumbed. Sonos had a great deal on the purchase of two Echo-enabled speakers last week, and I jumped: one for the bathroom counter and one for the kitchen counter. I can use a voice command instead of wet hands straight from the shower or wet from the sink to adjust volume or change the station? I have been in heaven. But the first time I get an audible ad through a device and service that costs me money? I’m done. I’ll switch. I bought a digital assistant to create ease, not to create another interruption. I paid for a Pandora subscription was to eliminate the ads. Would we continue with Netflix if we were stuck with the same commercials as network television.

Imagine if your assistant (who I assume you pay) walked in and started every conversation with a fifteen second commercial. “Kevin, before we discuss how many spaces you utilize at the end of each sentence, let’s begin with the three thousand miles you have left on your rear tires.  Did you know that Jaime’s Tire’s and More has a special: if you buy before February tenth, you can take advantage of a buy three get one free deal? Take advantage now!” Kind of messes with your groove, now doesn’t it?
 
What’s next?  Amazon starts shipping us stuff we don’t need, didn’t order, and if we send it back they’ll process a refund?

Wait. I have an assistant? 




Last week, we took note that at a recent shareholders meeting, Costco CEO Craig Jelinek said that he hoped that as millennials age, they will embrace the warehouse club concept as a shopping option. “We’re hopeful that as boy meets girl, buys house, that will continue to go through their life cycle,” he said.

I commented, in part:

In today’s world, it seems limiting when you say “boy meets girl.” It also can be “boy meets boy,” or “girl meets girl.” I’m not trying to be politically correct, but just trying to acknowledge that America looks different today than it used to.

One MNB reader responded:

Thanks for calling out the odd heteronormative line by Jelinek. As soon as I read it, I had the same thoughts as you… but you explained it better than I ever could have. Good to see forward progressive thinkers in our industry.




And, responding to my Friday OffBeat review of “The Good Place,” MNB reader Mike Overschmidt wrote:

Agreed, “The Good Place” is really forking funny.

Side note: my wife is convinced we're living in the Bad Place. But enough about politics.

Published on: February 5, 2018

The underdog Philadelphia Eagles defeated the New England Patriots 41-33 last night in Super Bowl LII, led by second-year coach Doug Pederson and quarterback Nick Foles, who started the year as a reserve and just a couple of years ago was contemplating retirement.