business news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: September 21, 2018

    by Kevin Coupe

    CNBC has a story about how Netflix, at the same time that it is spending $8 billion a year on more than 700 original shows and movies, also is experimenting with advertisements on its programming that promotes these shows to viewers.

    Viewers who, the story suggests, are not amused.

    The CNBC story says that a new study donE by an outside company concludes that 23 percent of Netflix customers would drop their subscriptions if suddenly commercials - even if just for other Netflix shows - started showing up on its content while only 41 percent said they would “definitely or probably” keep their subscriptions even with ads.

    The story goes on to say that “the study found that if Netflix offered a lower subscription price to offset ads, it might retain some subscribers who would otherwise leave the streaming service. If rates were lowered by $3 per month while including ads, the percentage who said they would cancel drops from 23 percent to 16 percent, while 50 percent said they would likely stay subscribed.”

    It is an interesting problem … because one of the things that Netflix wants to do, since it is spending all that money on programming, is keep people watching Netflix, and not shifting to Amazon Prime Video or some other service. And yet, because people are paying for Netflix, there is resistance to the idea of having to watch commercials.

    There’s also another question that Netflix has to consider - just because people say they’ll drop their subscriptions, does that mean they actually will? After all, the story notes that, for example, Amazon Prime Video programs contain ads for other Amazon shows; if you’re watching “The Marvelous Mrs. Maisel,” for example (and you should - it is terrific), an episode might be preceded by a brief commercial for “Bosch” (which you also should watch). And yet, there have been no reports of rampant Prime Video desertions.

    I might be a prime - no pun intended - example of this. Asked how I would react to commercials, I probably would be negative (though I would not go so far as to say I’d abandon Netflix); but I also use Amazon Prime Video all the time, and can’t remember being particularly annoyed by the trend there.

    I do believe that this is illustrative of decisions that a lot of businesses have to make, and questions they ask themselves. How far is too far? (It depends.) Is there a difference between what customers say and do? (Often.) Is there a point when a company’s self-interests conflict with the interests of its customers? (Sure.)

    The best answers to these questions, I believe, are the ones that customers ultimately perceive as being in their best interests, and that they see as being respectful of their time and attention. That doesn’t always mean not advertising … if I like one program, it may be in my best interests to know that there are others I would like as well. Just as, if there are products that I like in a store - whether it be fresh produce, a particular shirt, or a pair of running shoes - there are others that might appeal to me.

    In the end, I think, it is important to keep one’s Eyes Open … to be conscious of these conflicts, to be open about discussing them, and to make it culturally acceptable to walk away from certain opportunities when they seem more focused on the short-term than the long-term.
    KC's View:

    Published on: September 21, 2018

    Bloomberg has a story quoting Morgan Stanley analysts as predicting that Amazon’s plan to build 3,000 checkout-free Amazon Go stores by 2021 - reported by the media, though not confirmed by the company - could cost Amazon as much as $3 billion.

    “We see Amazon as having to invest between $0.5 billion and $3 billion in building these 3,000 stores,” the analysts said this week. “Given Amazon’s need to invest in in-store automation technologies, cameras and sensors, we would not be surprised to see the cost toward the higher end of this range.”

    However, considering that Amazon’s 2018 retail operating expenses came to $200 billion, the analysts said that this still would represent a “small investment.”
    KC's View:
    It seems to me that one of the things that all these analysts have to do is suspend their preconceptions about what these stores are going to be and how much they’re going to cost.

    For example, I’m not sure that they’ll all be freestanding stores. It is entirely possible that some of them could be attached to Whole Foods or 365 by Whole Foods stores, maybe even as retrofits where and when it makes sense. I wouldn’t even bet against the possibility that some of these stores might not be convenience stores with a food focus, but rather could apply Amazon Go technology to other categories.

    I guess what I’m saying is this. Don’t assume that Amazon is going to work in a straight, traditional line as it expands on its bricks-and-mortar ambitions. It is a better bet that there will be some surprises, detours, digressions and unexpected innovations along the way.

    Published on: September 21, 2018

    Amazon-owned Whole Foods has sued animal rights activist group Direct Action Everywhere on Wednesday, “alleging members of the group have been illegally trespassing at its stores,” according to a story from Eater.

    The story says that “Direct Action Everywhere, also known as DxE, is planning a week-long occupation of Whole Foods’ Berkeley stores starting on September 23, an action that the grocery chain is hoping to cut off at the pass. DxE’s very public targeting of Whole Foods goes back at least three years: In 2015, the activist group released a 19-minute video featuring footage of chickens at a farm that supplied eggs to Whole Foods, alleging inhumane treatment.”

    Since that time, the story says, “DxE has seemingly endeavored to disrupt Whole Foods at every possible opportunity, extensively documenting its protests and posting them on YouTube. Videos show activists clad in fake blood-spattered butcher’s coats interrupting a ribbon-cutting ceremony at the grand opening of a Silicon Valley Whole Foods, confronting CEO John Mackey during an event at Stanford, and bringing TVs inside a Whole Foods store to show customers video footage of factory farm practices.”

    Eater writes that “DxE says the company’s acquisition by Amazon has led it to a new strategy of ‘crushing activists through litigation,’ claiming to have obtained internal Whole Foods memos that ‘demonstrate the company’s intolerance of dissent’.”
    KC's View:
    This can’t be very good for Whole Foods’ image, especially at a time when there are those who suspect that its commitments and core values may be a little shaky under Amazon ownership. I’m not sure this is entirely fair, but image matters, and they have toi pay attention to this stuff.

    Published on: September 21, 2018

    In the UK, the Guardian reports that Tesco has opened its new Jack’s format, which is designed to blunt the growth and market share absorption of discounters Aldi and Lidl.

    The story says that Tesco CEO Dave Lewis has pledged that Jack’s will be the “cheapest in town.” While traditional Tesco stores have some 25,000 SKUs, Jack’s is said to have a limited assortment of just 2,600, and about two-thirds of the selection is private label.

    And, in what may be a bow to Brexit-era attitudes in the UK, some 80 percent of the food sold at Jack’s is from the UK, the Guardian writes.

    The story notes that “at 10am on Thursday, the formal opening time, 150 people were waiting to enter the new supermarket in Chatteris, Cambridgeshire,” even though it was rainy and windy. ““There’s clearly not much to do on a rainy day in Chatteris,” one customer told the paper.

    The Guardian goes on to note that “prices of Jack’s products almost exactly mirrored those in the nearby Aldi store,” and that “several shoppers said it reminded them of shopping 20 or 30 years ago. ‘I’m not sure how I feel about the packaging. It looks like it has come out of the 1950s. It looks a bit out of date to me,’ said one woman.”

    Reuters writes that “Jack’s is named after Jack Cohen, who in 1919 founded the business that became Tesco, and is a significant move by Lewis, who has rebuilt Tesco after a 2014 accounting scandal capped a dramatic downturn in trading.”

    Tesco is expected to open between 10 and 15 Jack’s over the next six months, with Lewis saying that more could be opened - or converted from existing Tesco stores - if the format proves to be a hit with shoppers.
    KC's View:
    Not being there, it is hard for me to be judgmental about this one way or the other. It is interesting that Tesco is looking to its “stack it high, price it cheap” roots for a little modern juice. Though, to be honest, “it looks like it has come out of the 1950s” doesn’t sound like it is necessarily a compliment. There’s retro, and there’s just old-looking.

    Published on: September 21, 2018

    The Los Angeles Times reports that California Gov. Jerry Brown yesterday signed “signed the nation’s first state law barring dine-in restaurants from giving customers plastic straws unless they are requested, saying discarded plastic is ‘choking our planet’ … The new law, which takes effect Jan. 1, exempts fast-food restaurants and provides full-service restaurants with a written warning on the first two violations and a fine of $25 a day for subsequent infractions.”

    Brown said that “it is a very small step to make a customer who wants a plastic straw ask for it. And it might make them pause and think again about an alternative. But one thing is clear, we must find ways to reduce and eventually eliminate single-use plastic products.”
    KC's View:
    I love California … the willingness there to demonstrate leadership on environmental issues strikes me as heartening.

    Published on: September 21, 2018

    There was an interesting story the other day in the New York Times about a small, two-decades old Brooklyn school supplies store, Teachers Choice, that apparently is part of a dying breed - there used to be 3,000 such stores around the country, and now there are fewer than 300.

    The Times makes the point that while pretty much everything available in the store probably could be bought online, teachers who go into the store are captivated by “a head-spinning selection of learning charts, themed name plates, achievement certificates and novelty pencil-top erasers, among other items,” especially bulletin board sets.

    Vickie Sellick, who manages the store, tells the Times that she “prides herself on knowing her regular customers on a first-name basis. And she makes sure to listen to their requests to keep the store’s inventory up to date,” especially those bulletin board sets.
    KC's View:
    Teachers Choice has a couple of other advantages - the guy who owns the business also owns the building, and he has a thriving dance school upstairs that helps to support the teachers’ store.

    It’d be pretty to think that this model is sustainable. But it isn’t where I would place my bets.

    Published on: September 21, 2018

    TechCrunch has a story about as new report issued by researchers at the University of London in the UK, saying that the government there ought to institute “new privacy measures to safeguard kids and make sure age appropriate design code is included with home automation technologies.”

    The recommendation reflects concerns raised in the report “about how in-home smart devices such as AI virtual voice assistants, smart appliances, and security and monitoring technologies could be gathering and sharing children’s data.”

    The author of the report, Dr Veronica Barassi, “wants the UK’s data protection agency to launch a review of what she terms ‘home life data’ — meaning the information harvested by smart in-home devices that can end up messily mixing adult data with kids’ information - to consider its impact on children’s privacy, and ‘put this concept at the heart of future debates about children’s data protection’.”

    • Earlier this week we reported on Amazon’s plan to add to its Alexa ecosystem by releasing at least eight new voice-controlled devices in time for the end-of-year holiday shopping season, including a microwave oven, a wall clock, an amplifier, a receiver, a subwoofer, and an in-car gadget. All can be controlled via the Alexa system, and some will have Alexa built into them.

    In addition, Amazon yesterday announced a new series of Echo devices, including some new versions of existing devices, designed to offer improved sound quality and accessibility.

    The goal, the Seattle Times writes, is “to make its voice-activated interface an essential tool at the center of modern consumer electronics,” with greater appeal to audiophiles.

    The Times goes on: “A hallmark of the company’s devices push, analysts say, has been its relatively low prices, a classic Amazon bet that getting more devices into people’s hands now will pay dividends in the strength of the Alexa ecosystem down the line.

    “The company also extended its efforts to offer its software’s capabilities as building blocks to other companies.

    “New or updated tool kits were announced for makers of streaming services, smart televisions and home-security systems to link their products to Alexa. Skype, the voice and video chat service owned by Microsoft, will be the first partner to use a new protocol to integrate communications software.”
    KC's View:

    Published on: September 21, 2018

    TechCrunch reports that Walmart is planning to send Oculus Go virtual reality headsets to each of its almost 5,000 stores to be used in employee training. Four headsets will be sent to each of its supercenters, and two to each Neighborhood Market.

    According to the story, “The move is the evolution of an announcement that the company made last year that it was working with STRIVR Labs to bring virtual reality training to its 200 ‘Walmart Academy’ training centers. Those training sessions were done on PC-tethered Oculus Rifts, the move to Oculus Go headsets really showcases how much more simple standalone headset hardware is to set up and operate. Just being able to send a few of these to each store and expect that people will be able to navigate them easily is a win for Oculus and Facebook as most early VR hardware has taken a healthy bit of troubleshooting in order to engage with anything.”
    KC's View:

    Published on: September 21, 2018

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

    • Wegmans this weekend is scheduled to open its 98th store … in Lancaster, Pennsylvania.

    • The St. Louis Post-Dispatch reports that Supervalu has informed more than 900 employees at its Shop ’n Save chain that they are about to lose their jobs, unless someone comes along to buy the 10 stores in which they work, as well as a distribution center.

    The announcement comes the same week as Supervalu sold 19 Shop ’n Save units to Schnucks, which is going to convert the stores to its own banner.

    Several stores are not yet included in the layoffs, according to the paper.

    The Post-Dispatch writes that “Supervalu, which in July agreed to be acquired by United Natural Foods for $2.9 billion, had been shopping its Shop ‘n Save brand since April as it looked to double-down on its more lucrative wholesale business.”

    • The Associated Press reports that Cargill Meat Solutions in Fort Morgan, Colorado, has recalled more that 132,000 pounds of ground beef - all produced, packaged and shipped on June 21 - “after a suspected E. coli outbreak killed one person and sickened 17 … The products include 3-, 10- and 20-pound (1.3-, 4.5- and 9-kilogram) packages of ground beef under the Our Certified, Excel, Sterling Silver, Certified and Fire River Farms brands with July 11 use or freeze by dates.”

    • About a week ago, the US Food and Drug Administration (FDA) released a report saying that teenagers’ use of electronic cigarettes had become “epidemic,” and put various manufacturers on notice that they have 60 days to prove they can keep their products away from minors … or potentially see their products pulled from the marketplace. Of particular note were flavored vaping products, which some believe are designed to appeal to young people.

    Now comes a story in the Wall Street Journal saying that a new study reveals that “teen use of e-cigarettes has soared this year,” and that “the number of high-school students who used e-cigarettes in the past 30 days has risen roughly 75% since last year … That would equate to about three million, or about 20% of high-school students, up from 1.73 million, or 11.7% of high-school students in the most recently published federal numbers from 2017.”

    According to the story, “Most of the teens who vape said they are doing it for reasons other than to quit smoking, according to the Journal’s survey conducted in 49 states in May. More than half said they do it because they like the flavors that e-cigarette liquids come in and they think vaping is fun. More than two-thirds said they believe vaping can be part of a ‘healthy life’.”

    It sounds to me like these manufacturers are well on their way to accomplishing their goal - get people addicted to this crap. A “healthy life?” Really? Sounds a lot like how the tobacco companies used to promote their products back in the day, when they’d even pay doctors to say so. These companies can say what they want about not wanting teen customers … I don’t believe them, and I suspect everything they say and do.
    KC's View:

    Published on: September 21, 2018

    Got the following email from MNB reader Tom Kroupa:

    The juxtaposition of today's two top MNB stories about your personal experience with Barnes and Noble vs Amazon's plans to expand to 3,000 bricks and mortar Amazon Go stores by 2021 could not have been more insightful in contrasting their two approaches to retail. 

    We observe that Barnes and Noble is not using its creativity to be more competitive in either retail or online platforms. Then there is Amazon, a behemoth in the online platform, who may conquer the bricks and mortar model in an innovative way. One of them has been and continues to re-write the rules while the other has slipped into mediocrity, or worse into irrelevancy. 
    Thank you, as always for your good analysis of the state of the industry.

    From another MNB reader:

    Good for Amazon, but I think 3,000 is a very ambitious number to reach by 2021 - that's 3 a day for the next 2 1/2 to 3 years. Unless they build some of them in a Target, for example, now that would be intriguing!  Notice how all the retail stocks tanked on this news?

    Yesterday’s Eye-Opener was about how a New York Times story said that ranch dressing, described as “the one true American dressing,” is by far the most popular dressing in the US, with 40 percent of Americans saying it is their favorite.

    Here’s something else I didn’t know: Ranch, the Times writes, “has spread far beyond salad. It is a routine dip for chicken wings, baby carrots, French fries, tortilla chips and mozzarella sticks. It is incorporated into American classics like macaroni and cheese, fried chicken, potato salad and Thanksgiving-turkey stuffing. And it is drizzled over tacos, Tater Tots, casseroles and — perhaps most controversially — pizza.”

    MNB reader Kelsey Cease wrote:

    Really? I’m from the Midwest (where Ranch is king) and I can remember people putting Ranch on all of these foods, especially pizza, for at least the last 12 years. If you haven’t tried it yet, you’re missing out.

    One MNB reader wrote:

    Dipping pizza, especially plain cheese or pepperoni, in ranch dressing is delicious. Don’t knock it till you try it!

    Didn’t knock it. And I intend to try it.

    Thank goodness for the MNB reader who wrote:

    Very nice article, Kevin. I did know any of this either.

    The Times piece took note of a notes that “a successful pop-up restaurant in Portland, Ore., called Ranch, became a permanent restaurant entirely dedicated to pizza with ranch.”

    I spend a lot of time in Portland, but haven’t been there. Yet.

    And then the Times quoted a Brooklyn, New York, pizza expert who seems to be a little skeptical. “This is what happens when you legalize cannabis,” he said

    One MNB reader wrote:

    The pizza expert in N.Y. wouldn't know - there are no ranches there.

    And MNB reader Paul Durrenberger wrote:

    Best laugh I’ve had all week!
    KC's View:

    Published on: September 21, 2018

    With an 11-7 defeat of the New York Yankees at Yankee Stadium, the Boston Red Sox clinched the American League East, posting an awesome to-date record of 104-49.

    In Thursday Night Football, Cleveland Browns defeated the New York Jets 21-17.
    KC's View:

    Published on: September 21, 2018

    I have a couple of unusual entertainments to recommend to you this week … both a little off-kilter, but I found myself intrigued by both of them.

    A Simple Favor is a very funny, often raunchy story about an unlikely female friendship pairs Anna Kendrick, playing an uptight, widowed suburban mom whose only real connection with people other than her son seems to be via her vlog, with Blake Lively, a glamorous publicist with a taste for martinis, anti-depressants and vicious put downs for pretty much everybody who lives in the Connecticut town in which she resides. Kendrick’s Stephanie finds herself intrigued, even attracted to Lively’s Emily …. it is as if Emily represents some sort of release from her repression that she didn’t even know she craved.

    The two are very funny together, right up until the moment when Emily asks Stephanie for “a simple favor” - pick her son up after school. That’s when Emily disappears, and Stephanie turns Nancy Drew in order to figure out what happened to her. It hardly is a conventional mystery, however, as Stephanie is able to use her vlog to generate clues and leads, and Kendrick shows us a woman who emerges more during her search for Emily than she did while in her shadow.

    This is definitely R-rated, with terrific performances by Kendrick and Lively, as well as by Henry Golding as Emily’s husband. Some of the denouement you can see coming, but some you can’t … and the movie, directed by Paul Feig (Bridesmaids) is never less than enormously entertaining.

    There’s a new eight-episode series called “Forever” on Amazon Prime Video, featuring Fred Armisen and Maya Rudolph as a long-married couple, which plays like it was co-written by Harold Pinter, Edward Albee and Rod Serling. All I will tell you is this - it starts with them deciding to break with tradition and go on a ski vacation instead of to their lake house … and from there it spirals into all sorts of unexpected directions, but always focusing on and rotating around the nature of love and commitment.

    Half the time I was shaking my head in wonderment, and the other half I was applauding the series’ audacity. I suspect you’ll either love it or hate it … I loved it, and was totally awed by Rudolph’s performance.

    Finally, I am happy to tell you about a new addition to the Coupe household, some five months after we lost our beloved yellow lab, Buffett. My daughter has a new lab puppy, which you can see below … her name is Zazu, or “Z,” and I’m told she is an utter charmer with just a little bit of devil in her. I say “I’m told” because right after that picture of Z and me was taken, I went on a week-long trip to the Pacific Northwest, so we never had a real chance to get acquainted. But, as you read this, I’m back home, and I’m looking forward to hanging out with Z.

    (I love “Z” as a nickname since there were a movie by that name, and it also happens to be the name of a character from Robert B. Parker’s Spenser novels. That pretty much covers it for me…)

    That’s it for this week. Have a great weekend, and I’ll see you Monday.


    KC's View: