business news in context, analysis with attitude

We reported yesterday that a new consumer survey from suggests that eight out of ten Americans believe that McDonald’s is not responsible for America’s overweight problem. Which prompted the following email from MNB user Bill Duncan:

“The fact that 20% of the people surveyed were dumb enough to think McDonalds is culpable is interesting. Last time I checked there weren't people with guns outside of McD's forcing you to come and eat Big Macs.

Some people will never take responsibility for their own actions.”

There we were, thinking that the glass was half-full…only to find out that it in fact is half-empty.

We also reported yesterday that there are Wall Street analysts concerned that the wholesale club business in general, and Costco in particular, may be “running out of steam” because the niche may be approaching the saturation point. MNB disagrees with that perception, believing that by experimenting with other formats, such as a membership furniture warehouse and a membership gourmet store, Costco is doing its best to remain both relevant and viable.

One MNB user wrote:

“Sometimes I really worry about these analysts and really wonder if they know what they are talking about. Costco is so well run and has so much to offer it is absolutely scary. Even Wal-Mart is conceding that Costco does much better than Sam's Club. These guys are great merchants, great product selection, they offer service, take credit cards, and just do things right. They have standards that are extremely high and one last point i would like to make is how i think they treat their employees. I made it a point of sneaking into their employee break room and if you know what you are doing, you can get a feel how a company's employees are being treated. As i looked around i saw photos of the Christmas party they obviously had, their were nice chairs, a TV, company announcements etc. Just a nice atmosphere.

So, let’s recap, they have price, sufficient variety in all categories, stores are spotless, high standards, take credit cards, offer coupon discounts, and treat their employees well but the Analysts cast doubts on their future. Hmmmmm”

Maybe we should start speculating about the relevance and viability of Wall Street analysts…

Of course, not everyone agrees:

“I've always been amazed by the apparent success of the warehouse club store business model of charging customers an annual fee to shop in their stores, while other retailers have to pay customers to shop via discount coupons etc. Many one or two person households like senior citizens are not likely to envision spending enough at a club store to justify that fee and are essentially eliminated from their customer base. When I factor in paying a membership fee, driving 10 miles to the nearest location, limited merchandise selection, long check out lines, no acceptance of manufacturer coupons, acceptance of only one credit card (Discover), and pricing that I perceive to be creeping nearer to "regular" stores, I no longer find Sam's Club that attractive. You don't have to be a high paid Wall Street analyst to predict that wholesale clubs are running out of steam.”

Okay, but…MNB user Larkin Toler offered the following counter-point:

“Independent merchants get ready for a more bumpy ride! Costco and the other Mega-Big Boy-Jumbo Wholesale 'Sell All Cheaper' Clubs' "running out of steam" will be like the old Iron Horse steam engine train being replaced by the faster and stronger diesel powered trains. Trains conquered the Wild West, and the Wal-Marts & Costcos are conquering the "niche" with no saturation point. . . 'Always Lowest Price.' The thinning herds of small town independent merchants are like the buffalo of old, helplessly playing defense and soon endangered.

“Unless the independent merchants unite together, build better customer relationships and bring quality service focused on rewarding their best customers, one by one they will be picked off. It has been happening in every town across the nation after the Biggest Boxes lay their new track.”

That’s a little heavy on the train metaphors, but we get the point. And agree.

We have continuing discussion of our report that Delta Air Lines is breaking with the traditional approach to frequent flyer programs and moving from mileage-based rewards to a system that also will reward customers based on the fares they pay. We suggested that this is an interesting shift, and that perhaps retailer loyalty programs ought to consider coming at the strategy from a different angle.

Not everyone agrees. One MNB user writes:

“I believe that Delta has not created a "better" program with this new philosophy. Let's take a look at this. With the past program, flyers were rewarded for Frequent Flying, which is the philosophy that the program was founded on years ago. Now, flyers are being rewarded for Profitable Flying and I do not mean for the flyers.

“Why should a person which has to fly to smaller cities, get on a plane a minimum of two times to arrive (usually through Atlanta) receive LESS miles than someone who boards a plane once in Atlanta and flies to LA? As a current Delta GOLD Frequent Flyer, I have done the math, and I will now have to fly a minimum of 25 flights (4 segments/flight) to the smaller cities, in which I do business, just to reach SILVER status with Delta. In the past, this would have made me a PLATINUM flyer with Delta. Are you telling me that 25 flights are costing my company (and Delta) less than 12 cross-country flights to reach the same status?

“Simply put, this is just another way for the airline industry to make up for poor profits by cutting costs. In my eyes, if I were to treat my customers in this manner, I would not be in business very long. But, I guess the airlines are slowly working their way towards this anyway.”

We still think there is an argument to be made for rethinking the way loyalty marketing programs work, especially in supermarkets. MNB user Beth S. Agejew had a great idea:

“You mentioned rethinking how loyal customers are rewarded, for example, giving extra rewards to those who shop in perimeter departments. Why not use this concept to work on America's obesity problem - give extra reward to consumers who purchase healthy products such as fruit and vegetables? Just a thought.”

Combined with other healthy eating/anti-obesity marketing programs, this could be a winner.

In response to yesterday’s story about Safeway’s Dominick’s division laying off 500 employees in a “belt tightening move” required because “staffing needs changed,” one MNB user wrote:

“Before we begin to question whether the UFCW members voted wisely, let's recognize that the layoffs are the result of a decline in business, not anything having to do with the new contract proposals. They would likely have occurred anyway.”


Finally, we had a brief piece yesterday about how Tesco, the UK’s top food retailer, has struck a deal with a travel agency to allow consumers using to book hotels, air travel, rental cars and vacation packages. Discounts are being offered to members of Tesco’s frequent shopper program.

One MNB user wrote in to note that Wal-Mart and Sam’s Club announced similar deals – some 18 months ago.

Luckily for us, we never suggested that Tesco was first…
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