business news in context, analysis with attitude

I may have been off for the past couple of weeks, but that doesn't mean I wasn't paying attention to the news. Here are just some of the stories that caught my attention, with appropriate and italicized commentary…

• The Wall Street Journal reported that AMC, the nation's second largest movie theater chain, actually is in the process of "spending hundreds of millions of dollars outfitting a number of theaters with La-Z-Boy-type seats that fully recline—a conversion that removes up to two-thirds of a given auditorium's seating capacity. It's a less-is-more approach to a business that has long thought bigger was better."

The story quotes AMC CEO Gerry Lopez as saying that he is "banking on quality over quantity." So far, the effort seems to be working: "Attendance in renovated AMC auditoriums has leapt 80%, on average, despite the drastic reduction in capacity to sometimes fewer than 70 seats. The company declined to say what the average before-and-after attendance numbers were, though Mr. Lopez acknowledged that the biggest attendance boosts would come in theaters that were weak performers, some of which were losing money."

AMC is not making the switch in places like New York and Los Angeles, where attendance already is strong, but rather reserving it for smaller markets that have been underperforming. And it is not raising ticket prices for one year after a remodel, but concedes that prices will go up in the long run.

I know Gerry Lopez a bit, and I am probably one of his bigger customers since I go to 30-40 movies a year, which I think has to be on the high end for someone not actually in the film/TV business. I know just from going to the movies that one the industry's biggest challenges is that so many of us have big screens and decent sound systems at home, not to mention all the other entertainment options that prevent us from dropping ten bucks or more on a first run feature.

I think that AMC has done an excellent job making its theaters more attractive overall, and the only problem I have with the La-Z-Boy-type seat concept is that I'd be afraid that I'd spend the money and then fall asleep halfway through the movie. And I have to wonder where price resistance will set in.

Still, I think this is a fascinating idea. In the end, though, I suspect Gerry Lopez and his brethren would agree that there's nothing like great movies to fill a movie theater. Content, in the end, is the most important thing.

• Walmart last week held its first "Made in the USA" open to call, at which more than 500 American manufacturers were able to meet with the retailer's senior leaders and buyers in order to pitch their products to be sold at Walmart stores, Sam's Clubs, or on the company's website. The company also held breakout educational sessions for potential suppliers, as part of its broader commitment to spend an additional $250 billion on made-in-USA products over the coming decade.

Sure, there's plenty of skepticism about Walmart's motives and implementation around this issue, but I still think this is very smart. I also think that it won't be long before you'll be able to select "only certified American products" from a drop-down menu on Walmart's and Amazon's sites, which will give the "Made in the USA" even greater currency in the marketplace.

Interesting piece in the New York Times about restaurant chains that "deliberately pay well above the federal minimum wage. In-N-Out Burger, the chain based in California, pays all its employees at least $10.50 an hour, while Shake Shack, the trendy, lines-out-the-door burger emporium, has minimum pay of $9.50. Moo Cluck Moo, a fledgling company with two hamburger joints in Michigan, starts everyone at $15."

The reason? "These companies’ founders were intent on paying their workers more than the going rate partly because they wanted to do the right thing, they said, and partly because they thought this would help their companies thrive long term … When fast-food executives offer above-average compensation, it is good not only for employees, but also for the brand. Starbucks, which also pays its employees above minimum wage and offers several benefits, received a public relations lift recently in announcing a program that would provide online college educations for thousands of its baristas."

Hey, I've made my position on this clear. And I think it is illustrated by the fact that when you go to any In-N-Out Burger or Shake Shack, the people almost always are friendlier and the experience is far more customer-oriented than at a McDonald's or Burger King or Wendy's. Some will say this doesn't matter … but I think it always matters to have employees engaged in the customer-service experience. And that doesn't even address how important it is to have people feeling like they are being treated like an asset and not a cost.

• The Wall Street Journal reported that Kroger is acquiring Vitacost, described as "an online seller of vitamins and other health-related products," for $280 million. While the deal may be small in financial terms - Kroger, after all, is a $100 billion company - it also is described as important since it will give Kroger "a stronger presence in Internet retailing … Kroger expects the acquisition to enhance its technology expertise and give it a platform for fulfilling home delivery of online orders - an area of increasing importance for grocery chains amid burgeoning competition from companies like Inc. and FreshDirect."

There's no question that Kroger understands the potential threat from online competitors, and that it is using a variety of means to test different concepts and see what makes sense. Would it surprise anyone to learn that Kroger has a facility somewhere where it is developing some big ideas for the e-commerce space…?

• The Chicago Tribune reported that Whole Foods has begun construction on a new store in one of Chicago's "most downtrodden neighborhoods … The groundbreaking at 63rd and Halsted streets marks a $22 million bet on the notion that the high-end grocer’s presence in one of the city’s poorest and violent areas will ignite its renaissance."

According to the story, Whole Foods co-CEO Walter Robb pledged that the store would be accessible to low income customers. "It’d be stupid to come here and not provide products at prices that people want. That’d just be dumb,” Robb tells the paper. “Talk is cheap, but we will be accessible and affordable for people. Otherwise, we’re not going to succeed.”

Robb described the project as “one of the most meaningful things we’ve done as a company.”

It almost sounds like Whole Foods plans to open its version of a Sprouts in Chicago.

If Whole Foods develops a store where low income customers can afford to shop, I have a suspicion that this neighborhood could see a lot of traffic from outside the neighborhood. Short of that, maybe Whole Foods has some sort of completely different format in mind that will expand its footprint while expanding the nutritional consciousness of a new customer base….?

Bloomberg featured an interesting video in which Stew Leonard Jr. talked with Gary Vaynerchuk, the social media expert, about the challenges of being a traditional bricks-and-mortar retailer in an increasingly digital world. I posted this on Facebook over the break, noting that it talks about the tension that traditional grocers feel as they face the future of online grocery. I give Stew Leonard a lot of credit for capturing the antipathy he feels pretty succinctly...he explains the bet he's making, but acknowledges that it could be the wrong bet.

Check it out here.

• And finally, the Christian Science Monitor reported that the French Parliament has passed a law, described as the "anti-Amazon law," that "would ban online websites from offering free shipping in combination with a five percent discount to customers in France." The law is expected to be signed into law by President Francois Hollande within the next two weeks, and is consistent with a long tradition in France of passing protectionist legislation that helps small independent bookstore survive in the face of larger competition.

This is insanity. And the French politicians who think that somehow they can stop the evolution of e-commerce through legislation ought to go watch "Jurassic Park." I'm thinking of the scene when the humans who thought they were in control discover that the lab-created dinosaurs, which were all supposed to be one gender so they could not reproduce, have somehow managed to make little baby dinosaurs. "Life will find a way."


By the way…it is ironic that in the NYT story I referenced in this morning's Eye-Opener, there is a passage suggesting that US publishers doing battle with Amazon view the French approach with a certain amount of longing. They should be careful what they wish for …

KC's View: