Clarence Saunders & The ‘Piggly Wiggly’ Revolution

Jerry Cianciolo: ” … Self-service was a game-changer when Clarence Saunders opened the first Piggly Wiggly in Memphis, Tenn., 100 years ago this month … The 35-year-old Saunders set out to ‘ the demon of high prices’ … He reasoned that shoppers would gladly hand-select their own merchandise, and pay upfront, in exchange for lower prices and faster shopping. Coin-operated cafeterias had demonstrated as much with self-service sandwiches and desserts.”

“King Piggly Wiggly … stocked 1,000 products, four times the variety of a typical market. Customers entered through a turnstile and, basket in hand, followed a path through the aisles. Goods were neatly arranged with clearly marked prices, something heretofore unseen. There were even scales for shoppers to weigh sugar and other staples. The grand opening was a spectacle, featuring a beauty contest … Each woman entering the store received a flower and every child a balloon. A brass band played.”

“By 1923 … more than 1,200 Piggly Wiggly stores across dozens of states were doing $100 million annually (about $1.4 billion in today’s dollars). The company hit 2,600 stores by 1932 … Saunders didn’t integrate circuits or sequence the human genome. An observer once noted that coming up with a self-service grocery was ‘as simple as looking out the window or scratching your ear.’ Still, it was Saunders who gambled on the unconventional approach, doggedly spread self-service across the nation and shaped the grocery industry we know today.”

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Hotels Scramble For Nickels & Dimes

The New York Times: “Unfortunately for travelers, fees and surcharges are a growing moneymaker for hotels and not likely to go away anytime soon. New research from the Jonathan M. Tisch Center for Hospitality and Tourism at New York University indicates that hotels in the United States will tack on $2.55 billion in fees this year — the highest amount since Bjorn Hanson, a professor at the center, began tracking them in 2000.”

“Hotels all over the country are adding fees for … late checkout or early check-in, or a request for a room on a high floor or one with a king-size bed. Some are adding bellhop charges for help with bags or for holding luggage — fees separate from the tips travelers already give the bell staff.” Resort fees “typically cover amenities like pool towels, beach chairs, fitness-center access and a daily newspaper — and guests are required to pay whether or not they actually use any of those things.”

“Although rates and fees at hotels have been rising for a number of years … hotels have been adding perks like upgraded breakfast offerings, free Wi-Fi and renovated bathrooms and lobbies … The problem now, though, is that prices are still rising, and hotels are running out of ways give guests more for their money.”

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Amazon: ‘Subscribe & Save’ or ‘Bait & Switch’?

The New York Times: What do subscriptions to a newspaper, magazine or Netflix account have in common? Once you sign up, you expect to pay the same rate every month. Yet that’s not the case at Amazon when you subscribe to its Subscribe & Save program, which automatically refills orders for household staples like instant coffee, napkins or trash bags.”

“Buried in the e-commerce company’s terms and conditions is that the Subscribe & Save discount is applied to the price of the item at the time that the order is placed. And on Amazon, prices change frequently — including sometimes rising.”

“In Amazon’s online forums, dozens of people posted about prices of Subscribe & Save items fluctuating, with some calling the program a ‘bait and switch’ subscription scheme. Amazon declined to comment. The company emails people 10 days before a recurring subscription delivery, when it informs customers of a new price of their item so they can change or skip the order. Any sticker shock, analysts said, may be the result of Amazon’s complex pricing system coming into conflict with consumer expectations of a traditional subscription.”

“Sucharita Mulpuru-Kodali, an analyst for Forrester Research who follows Amazon, said the retailer was probably pushing prices up to test how loyal customers are to products and how much more they are willing to pay for them. Yet the sharp price changes on Subscribe & Save items caught her by surprise.” She comments: “It doesn’t seem as customer-friendly as Amazon typically is. That’s what’s unusual.”

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Luke’s Lobsters: Rolls From ‘Trap to Table’

The New York Times: “Oil companies have long practiced a vertical integration strategy to track and control the flow of petroleum from the oil field to the gas pump … Now the practice is gaining momentum in the food industry.” Among this new breed of restauranteurs is Luke Holden, co-owner of “19 Luke’s Lobster restaurants, two food trucks and a lobster tail cart in the United States, and five shacks in Japan.”

Luke “holds an ownership stake in a co-op of Maine fishermen, which allows him to track where and how the lobsters are caught, and control the quality, freshness and pricing. He also owns the processing plant, Cape Seafood, that packages and prepares the lobsters for his restaurants.” He comments: “We’re able to trace every pound of seafood we serve back to the harbor where it was sustainably caught and to support fishermen we know and trust.”

“When Mr. Holden agreed to buy all of the co-op’s catches for his restaurants, support its sustainability practices and give the co-op 50 percent of the profits from a Luke’s Lobster restaurant that is attached to the wharf, the fishermen agreed … Mr. Holden is projecting sales of $25 million this year and $42 million in 2018. Plans are in the works to open six new restaurants this year and 40 more by 2020.”

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Airbnb ‘Keeps it 100’ for Hotels

Quartz: “Here is a very bad piece of news for hotels: Airbnb is hurting them on their most profitable nights. That’s per a recent report from UBS, which found that Airbnb is making it harder for hotels to charge through-the-roof rates on “compression nights”—i.e., nights where more than 95% of rooms are occupied. Hotels think about compression nights as a simple matter of supply and demand. When demand shoots up, usually because of a local event like a marathon or fashion show, hotels can raise their rates. Customers who wind up paying those rates often consider it price gouging.”

“Hotels have worried about Airbnb’s impact on their sold-out nights before. In July 2015, Pebblebrook Hotel Trust CEO Jon Bortz admitted during an earnings call that Airbnb was limiting what the company could charge for rooms during ‘leisure-driven’ conventions and events.”

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Brand Promises: Final Sale? Just Kidding!

The Wall Street Journal: “The phrase used to mean a last-ditch promotion, with steep price reductions on end-of-season castoffs and no chance of returns. But lately some brands are using a different sort of ‘final sale,’ strategically discounting slow-moving merchandise in mid-season, even though future discounts may still be possible. The new tactic still means no returns or exchanges … Fickle shoppers, hungry for discounts but accustomed to changing their minds, aren’t pleased.”

“Lauren Taylor Baker, a 31-year-old digital entrepreneur in Atlanta, says she used to get a thrill from finding a great bargain marked final sale … But after several final-sale purchases she regretted, Ms. Baker says she feels burned and no longer believes a final-sale price is the lowest it will go. Now, she says, when shopping for something marked final sale, she ignores the original full price and evaluates it based on quality and fit.”

“Katie Amato, of Buffalo, N.Y., does most of her shopping online. While she likes a sale, she tends to avoid final sale items. ‘Things might not fit, or the quality might not be as expected, and then you are stuck with it,’ says the 30-year-old postdoctoral researcher. Final sales make her feel ‘trapped or manipulated,’ she says.”

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Dollar Shave & The Digitally Native Vertical Brand

The New York Times: “The same forces that drove Dollar Shave’s rise are altering a wide variety of consumer product categories. Together, they add up to something huge — a new slate of companies that are exploring novel ways of making and marketing some of the most lucrative products we buy today. These firms have become so common that they have acquired a jargony label: the digitally native vertical brand.”

“By cutting out the inefficiencies of retail space and the marketing expense of TV, the new companies can offer better products at lower prices. We will get a wider range of products — if companies don’t have to market a single brand to everyone on TV, they can create a variety of items aimed at blocs of consumers who were previously left behind. And because these companies were born online, where reputations live and die on word of mouth, they are likely to offer friendlier, more responsive customer service than their faceless offline counterparts.”

“It’s striking how few of these online companies could have taken off in the presocial age. At the very least, they would have been sunk by the inability to target ads to the demographics they’re aiming to serve.”

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The Sweet Science of Designer Deodorant

The Wall Street Journal: “Brooklyn, N.Y.-based Soapwalla charges $14 for a 2-ounce jar of deodorant cream. It has the consistency of buttercream frosting … male customers have said they prefer it over a waxy stick, which snags and pulls hair. Cream also makes it easier to apply to other places on the body, such as the feet.”

“Prices for these offerings are reaching new heights, well beyond the old standard of two or three dollars a stick. Sprays and stronger stick offerings, known as clinical strength, come with $5 to $10 price tags. Natural deodorant often costs $15 or more. Tom Ford has two sticks, from his Oud Wood and Neroli Portofino fragrance lines, priced at $52 a piece … … A spokeswoman for Tom Ford Beauty … says the brand’s $52-per-stick price tag reflects the effort it takes to translate a complex, premium fragrance into a deodorant.”

Meanwhile: “Thirty percent of women reapply their deodorant during the day, according to Procter & Gamble Co., maker of Secret, Old Spice and Gillette; 20% of women say they keep it in their car, 25% in a purse and 30% at work. It all stems from a sneaking suspicion that deodorant could work better or has failed altogether. Executives at personal-care companies acknowledge that could be the case, but say many times a shopper has bought the wrong product or is mistaking a weak fragrance for an ineffective deodorant.

“Now more women buy Old Spice, a line typically targeting men, because of how strong its scent is … It is especially popular with women headed for the gym.”

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Direct Disruption: The Tide Wash Club

The Wall Street Journal: “Blindsided by the success of the upstart Dollar Shave Club, an online subscription service that chipped away at the dominance of Gillette razors, P&G executives say they are focusing not only on what consumers buy but on how they buy … P&G is experimenting with … the Tide Wash Club, an online subscription service for the dissolvable Tide Pods capsules that are the company’s highest-priced laundry detergent. The company offers free shipping at regular intervals.”

“Another new offering: Tide Spin, an undertaking P&G is calling the ‘uberization of laundry,’ in which customers in parts of Chicago can use a smartphone app to order laundry pickup and delivery from Tide-branded couriers. With the ventures, P&G is delving deeper into the business of connecting consumers directly with the products it makes, especially a new generation less loyal to the company’s big brands.”

“Privately, P&G executives acknowledge the company was caught off guard by the success of Dollar Shave Club, which started in 2011 and says it now has 3.2 million subscribers. ‘It was probably on the radar but we weren’t necessarily having the right conversation around what might disrupt us,’ said a person familiar with the company’s thinking.”

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Amazon Is Dropping List Prices

The New York Times: Amazon “built a reputation and hit $100 billion in annual revenue by offering deals. The first thing a potential customer saw was a bargain: how much an item was reduced from its list price. Now, in many cases, Amazon has dropped any mention of a list price. There is just one price. Take it or leave it.”

Larry Compeau, of Clarkson University comments: “They are trying to figure out what product categories have customers who are so tied into the Amazon ecosystem that list prices are no longer necessary.”

“In some categories, like groceries, Amazon seems to be using just one price, the buy-it-now price. If Amazon brings the milk and music into your house, not to mention videos and e-books and the devices to consume them on, as well as a hot dinner and just about any other object you could want, that presents a pricing challenge of a different sort. Untangling what those deals are worth — as opposed to what they cost — is probably impossible.”

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