Nones

Immigration Nation: Northern Lights Edition

Phillip Nones Uncategorized , , , , , , , , , , ,
Hovsjo Estate, Sodertalje, Sweden
The “road to wherever” is paved with good intentions: Hovsjo Estate, Sweden.

As an adjunct to my recent blog post recounting the views of my expat brother, Nelson Nones, on immigration policy and its impact on national identity, here’s another interesting missive – this time from Sweden where my brother is currently working on a long-term consulting job.

What he writes is a cautionary tale on how not to deal with the tide of foreign nationals flooding in …

Background

I’m staying in Södertälje, a town of about 65,000 people located 22 miles southwest of Stockholm. Although Södertälje is today considered part of the greater Stockholm area, albeit on the fringe, it is an old factory town.

I’m here because Astra AB, which merged with Zeneca Group of the United Kingdom to form pharmaceuticals giant AstraZeneca, was founded here in 1919. Today AstraZeneca has two manufacturing sites in Södertälje, one of which is the largest tableting plant in the world.

One bit of trivia you’ll find out here: It’s the hometown of tennis star Björn Borg.

As most people know, Sweden is a very socialist market economy. The Swedes I know tell me that the only real difference between the Right (mainly represented by the “Moderate Party”) and Left (mainly represented by the “Swedish Social Democratic Party” which is Sweden’s largest political party) is their position on whether (Left) or not (Right) the government should run state-owned enterprises.

Sweden has a very generous public welfare system financed by the second-highest tax regime in the world, after Denmark. Personal income tax starts at 29%, but anyone earning over ~US$ 52,000 per year will pay between 49% and 60%.

Throw in the 25% value added tax (VAT) which is similar to sales tax in America, and you’ll get an idea of just how high the taxes are here.

Sweden is Europe’s fifth-largest country by area (not counting European Russia) but its population is only 9.5 million, so it is Europe’s third most sparsely populated country, after Norway and Finland (again, not counting European Russia and also excluding Iceland). Sweden is also relatively poorly endowed with natural resources.  For example, neighboring Norway has large North Sea oil reserves, but Sweden has none.

Recognizing this, the Swedish government aggressively pursued a policy of promoting large-scale industrial development after World War II, and this is one reason why Sweden has so many large industrial companies today. They include AstraZeneca, Volvo, Ericsson, Scania (also headquartered in Södertälje), Skanska, Saab and Alfa Laval.

To build these industries Sweden needed workers – lots of them. So it entered into a trade agreement with other Northern European countries back in 1952 which established a common labor market and free movement across borders. As a result, Sweden successfully attracted a large number of immigrants during the 1950s and 1960s from countries such as Finland, Germany, and even the Baltic States.

Another piece of important background information concerns greater Stockholm’s development since World War II. Unlike most big American cities, very few people in the Stockholm area (including Södertälje) live in single-family detached homes. Most of them live in apartments that were constructed in the 1960s and 1970s as part of Sweden’s Million Programme to build 1 million new dwellings in 10 years (for more information, see the Wikipedia article http://en.wikipedia.org/wiki/Million_Programme).

One of the main motivations of the Million Programme was to build affordable housing for the immigrant workers recruited to fuel Sweden’s industrial growth, and quite a few of those houses were built in Södertälje because it was already a well-established factory town.

To give an idea of how prevalent this sort of housing is, I had dinner recently with one of AstraZeneca’s senior executives and his family at their home, which is a flat in a small development on the outskirts of Södertälje consisting of two-story apartment blocks, four flats per block. It’s a beautiful home, but it still is … a flat.

How It Went Wrong

Partly because of its liberal immigration policy over the years, Sweden is also one of the world’s most accommodating countries for political refugees.  In recent years, many of them have come from the Middle East; specifically Christian Iraqis and Assyrians facing religious persecution, and also Muslims.

A very large number of these refugees settled in Södertälje. Today, approximately 40% of Södertälje’s population is foreign-born and, outside of Iraq, Södertälje is the largest enclave of Iraqis in the world.

Why Södertälje? Local opinions differ, but from what I can piece together it appears that:

  • Although Sweden’s industrial development policy proved very successful at first, employment in large industries is now in decline. As one example, AstraZeneca shut down its R&D center in Södertälje earlier this year in order to cut costs and consolidate R&D activities in the United Kingdom. (Previously, the Södertälje R&D center employed ~1,000 people.) Sweden’s automotive industries, especially Saab, have been hit hard by the global recession. It doesn’t help that Sweden is a very high-cost manufacturing locale today, so the country has lost many of the competitive advantages it possessed in prior years. As in America, industries have attempted to reduce high labor costs through automation, further reducing local employment.
  • Södertälje’s residential vacancy rate surged as job losses mounted and people moved away to find work elsewhere.
  • The Swedish government pays 100% of the housing cost for political refugees, who typically are unemployable because they lack the necessary language and/or job skills.
  • Södertälje is a convenient place to house these refugees, because vacant flats are readily available at (relatively) low cost, and because the town is on Stockholm’s urban fringe where the new arrivals are least likely to disrupt the area’s social fabric.

One of the Södertälje neighborhoods where the refugee population lives is Hovsjö (a tongue-twister pronounced something like “hoe-joo”). It was a Million Programme project put up between 1971 and 1975.

Unlike American ghetto neighborhoods, this one is on the far fringes of Södertälje, on top of a hill in the middle of a huge pine forest, and adjacent to a stunningly beautiful lake. It has 2,200 apartments, mostly in high-rise buildings, and is home to over 5,000 people.

You can view a documentary of Hovsjö at http://frankaschberg.com/sets/hovsjo/1296 and I can confirm from having driven up there once, just to see it, that the images paint an accurate picture.

Is this what comes to mind when one thinks of Sweden?  Most likely not!  With the help of Google Translate, shown below is a 2008 news article that says it all (you can find the original, in Swedish, here: http://lt.se/nyheter/1.47788-rasistdad-mot-nya-minoriteter-i-hovsjo).

New Racist Minorities in Hovsjö

“There are families who are prisoners in their own homes.”  Hovsjö Muslims, newly arrived refugees and people who stand out, are all becoming victims of harassment in Hovsjö. “I do not know why they harass me,” says Louris Kalo.

Hovsjö has become calmer for most people. But for a minority, it has become a living hell. Arriving refugees – especially Muslims – are particularly vulnerable.

“The problem must be taken seriously by politicians. There are families who are prisoners in their own homes, who take their children to kindergarten and then lock themselves inside out of fear,” says Hovsjö police chief Niclas Johansson.

One victim, who is neither Muslim nor Iraqi, is hairdresser Louris Kalo. She is Syrian but from Syria, not Turkey. “I do not know why they harass me, but the police and Securitas [the private security company] have been really kind to follow me home.”

For some reason, perhaps because she is a single woman and supports herself, she is met by taunts and she has repeatedly been forced to lock herself in her apartment after over 30 youths threw eggs at her salon and wrote bad words on the door. “Most of Hovsjö’s families are good and I do not want to move from here. But for the sake of the young people, I hope their parents do something about it before it is too late.”

Politicians know that in the past, Muslims were targeted by Christian immigrant groups. Now, however, even Iraqi Christians suffer hate crimes.

According to Mayor Anders Lago, the basic problem is that Södertälje is forced to accept too many applicants, creating segregated areas. “Södertälje has no agreement to accept any refugees at all. All those who come here do so because they have chosen to live here. But Sodertalje cannot shoulder this burden alone, so we want the government’s help to repeal the law that currently allows refugees to decide for themselves where they want to stay.”

Other news accounts point to a rising tide of violence between Christians and Muslims in Hovsjö, particularly between gangs of unemployed youths. All of the bad blood between Christians and Muslims is simply spreading over from the Middle East to bucolic Sweden.

[You can read more about Hovsjö’s litany of woe (in English) here: http://www.thelocal.se/tag/hovsj%F6.]

Hovsjö is not alone. There are at least two other areas that are nearly as bad in Södertälje, one of which is right up the hill from the house where I had my recent dinner (and I witnessed quite a bit of police activity then).

My dinner hosts, who are the stereotypically Swedish family and very nice people to boot, spent much of our evening together deploring the present situation in Södertälje.

I might add that, like most Swedes, they don’t mind paying high taxes, but they bitterly resent seeing their tax money given away to “hooligans,” as they would say.

The Moral of the Story

If you’re going to open the door to immigrants and refugees, then:

  • Don’t put the new arrivals on the dole.
  • Make sure they’re able to earn their own living after they arrive – not by offering “make work” jobs, but through the cumulative effects of fiscal and economic policies that stimulate domestic demand for workers having the skills, knowledge and abilities that the new arrivals possess.
  • Remove whatever incentives might cause the new arrivals to crowd into ghettoes (like the Mexican border zone in the U.S., or the dreary estates of Södertälje).  As an example of an alternative approach, America’s immigration policy in the 19th century was to give away rural (and widely dispersed) homesteads to immigrants.
  • Focus on attracting immigrants for economic or educational reasons, not on refugees for humanitarian reasons.  This may sound harsh, but it’s not as cruel as the social dysfunction (and even mayhem) that exists in places like Hovsjö. 

As people say, “The road to h*ll is paved with good intentions.”  I’m interested in hearing your thoughts and reaction to what Nelson is reporting from “bucolic Sweden.”  Could it be that the grass is not actually greener …?

No big deal after all: High-flying “Daily Deal” companies crash to earth.

Phillip Nones Uncategorized , , , , , , , , , , , ,

Groupon hits the skidsI’ve blogged before about the rapid rise of so-called “daily deal” online coupon companies. But from the get-go, there were nagging questions about the long-term viability of these social couponing programs. One particularly foreboding indication was how few vendors return after trying their first campaign.

… Something about making money (or not) on these deals and whether (or not) couponers would become repeat customers.

A bit more time has gone by since that blog post, and today the news about daily deal sites looks pretty grim. In fact, Groupon, the market leader, has just reported another quarter of poor earnings due to the stagnation of its core business activities.

Groupon also reported that the average revenue per “active” customer (one who has purchased a deal from Groupon within the past 12 months), declined more than 15% … to ~$64 from ~$76.50 a year earlier.

Groupon’s stock price is also way down; it’s now ~$2.75, nearly 90% below its share price when the company went public barely one year ago. Consequently, the company’s market value has shrunk to ~$1.8 billion, compared to ~$13 billion when it went public.

The situation is much the same over at Living Social, Groupon’s most significant competitor. Its part owner, Amazon, just reported a quarterly loss for the previous quarter after it wrote down its investment in Living Social.

What’s the reason for the dismal turn of events? Maybe it’s that the business model for these daily deal programs is … fundamentally flawed?

While at first blush, daily deals seem like a great way for smaller businesses to generate awareness, marketing buzz and attract new customers, it comes at a price: sacrificing the profit margin.

Indeed, the price promotion aspects of the business model are pretty problematic. In the “bad old days,” local and regional merchants used Yellow Pages advertising, perhaps supplemented by the occasional Valpak® coupon mailer.

But typically, Yellow Pages advertising doesn’t have a discounting component. Groupon and other daily deals do … in spades.

Because a daily deal doesn’t “take” until a sufficient number of people avail themselves of the offer, the deal needs to be lucrative enough to attract consumer volume … which is what makes this type of program a challenge for businesses to do over and over again.

And now, new research published by Raymond James & Associates proves the point. This consulting firm surveyed ~115 merchants that had participated in at least one daily deal promotion during fall 2012. It found that ~40% of the merchants would “not likely” run another such promotion over the next 2-3 years.

Why is this? The commission rates on these deals are high, for one thing. But also, merchants found a low incidence of return or repeat customers gained through the promotion. Conclusion: Daily deal customers come for the discount … and leave thereafter.

Other survey findings? How about these:

  • ~32% of the merchants lost money on their daily deal promotion.
  • ~40% feel that daily deal promotions are “less effective” than other forms of marketing.

Rakesh ‘Rocky’ Agrawal, a social media specialist and consultant, is blunt in his assessment of the situation: “I’ve always maintained that this is a hype-driven business built on an unsustainable business model – both for the merchants and for Groupon.”

So what’s the solution for Groupon and other social coupon programs? After all, it now seems clear that many merchants won’t be returning for new campaigns anytime soon. We can see the potential pie shriveling up before our very eyes.

In response, Groupon has begun expanding into a more traditional discount online retail operation (Groupon Goods). In fact, this endeavor now accounts for the bulk of the company’s recent revenue growth.

But there’s absolutely nothing new or extraordinary about this venture, as it just mirrors dozens of other sites that do the same thing.

One thing that does differentiate Groupon from other online merchant sites is its hefty sales force of “live people” interfacing with merchants and businesses – something only social networking and user review website Yelp! comes close to matching. For smaller businesses, the human touch is important when dealing with newfangled marketing concepts.

On the other hand, it’s also a costly differentiation that doesn’t tend to scale well – except with more human bodies. So there’s a palpable concern that Groupon will be unable to deliver these other services profitably compared to more technology-oriented competitors.

Returning to the daily deals component, Groupon and others are also facing the reality that they need to offer merchants a bigger cut of the promotion dollars. They’re also finding it more lucrative to push “perishable inventory” deals (e.g., at restaurants and hotels) where big discounts might make more sense for merchants compared to those for durable products.

All in all, Utpal Dholakia, a professor of management at Rice University’s Jones Graduate School of Business and a close observer of the segment, sees no easy answers. “The heyday for daily deals are behind us,” he concludes.

A view of the 2012 U.S. Presidential election results from halfway around the world …

Phillip Nones Uncategorized , , , , , , , , , , ,

Latinos with American FlagMy brother, Nelson Nones, has lived and worked outside the United States for years.  He wrote me the other day with his “take” on the 2012 Presidential Election results. 

I thought his observations are interesting and thought-provoking … and offer a somewhat different perspective from what we’ve been hearing in the local media.  Here’s some of what Nelson shared with me.

On the 2012 the economic messages of the political parties:

It looks like capturing as many “WASP” votes as possible is not enough to push a Republican Presidential candidate over the top anymore.  On matters of foreign trade (labeling China a “currency manipulator” on Day 1) and immigration policy (preach self-deportation and round ‘em up), the Republican Party seems to be falling into the perilous traps of protectionism and isolationism.

The Democratic Party fell into similar traps years ago because of their affinity with labor unions and anti-war activists, and they could win national elections only rarely for many years as a result. 

Now it’s the Republicans’ turn.  Hopefully, and unlike the Democrats years ago, the Republican Party will learn its lesson well enough – and early enough – to avoid the slippery slope towards irrelevance.

I think the ability to attract immigrants from many races and cultures is one of America’s competitive advantages over rising powers like China, which is a palpably racist, Han-supremacist society that does not tolerate the integration of foreigners (I know; I’ve lived there). The U.S. political party that demonstrates leadership winning the economic race against China is the party that will dominate in the coming years.

By rights, Hispanics and other immigrants ought to be Republicans, not Democrats. They tend to be more traditional, more religious and hold stronger “family values” than many whites these days.  The majority are naturally hard-working and self-supporting, so even if they’re poorer than most people, they aren’t “47 percenters.” Another Republican majority will never emerge without them.

Not only that, in time the Republicans will lose strongholds like Texas and Florida which have substantial Hispanic populations – and they will never have a prayer in states like California and New Mexico.

On immigration policy and its impact on voting behavior:

I think the idea that Republicans should oppose immigration reform because it will welcome “millions of new Democrat voters” is incredibly short-sighted thinking.  It is also fundamentally flawed because it presumes that all those new citizens will vote Democrat.

From what I’ve read, Governor Romney (who lost) got 25% of the Latino vote, while President George W. Bush (who won) got 35% in both 2000 and 2004. However, if Republican lawmakers continue to obstinately oppose immigration reform, or if the Republican brand continues to be linked to harsh enforcement of existing laws (whether or not such linkage is fair), it’s a very safe bet that Republicans will never capture more than 25% of the Latino vote for a long time to come.

Let’s not forget that distinct racial and ethnic groups always reward the hand that enfranchises them — often for generations.

The history of Southern blacks proves this point. At first the blacks were Republicans, because Lincoln (a Republican) freed the slaves. But they were also disenfranchised by Southern whites, who were Democrats because Lincoln and Republicans had won the Civil War.

When the northern Democrats put civil rights on their agenda, everyone switched sides:  The Republicans successfully courted Southern whites (and now can bank on winning most of the South), while blacks overwhelmingly shifted their allegiance to the Democrats (and Romney apparently got way less than 10% of the black vote).

Hispanics or Latinos constitute over 16% of America’s population now; this demographic group is about 30% larger than the black population, but in recent times is roughly five times more likely than blacks to vote Republican.

Bottom line: the number of potential Republican votes cast by Hispanics and Latinos is seven times larger than the number of potential Republican votes cast by blacks.

To retain a strong presence on the national political scene, the Republican Party must focus on doing what it takes to hold the Hispanic/Latino bloc of votes, and then enlarge it. Pushing an agenda that Hispanics and Latinos perceive as disenfranchisement cannot possibly work.

Actions … consequences:

This isn’t just about attracting votes. It’s about exploiting one of America’s biggest competitive advantages to stay ahead of China in the economic race. There is no reason why Republicans can’t, or shouldn’t, transform their brand and take leadership of the economic race.

The best example I can think of to prove this point is President Richard Nixon’s rapprochement with China. Nixon, the diehard Commie fighter and leader of a political party that utterly detested China, took leadership and received credit for what is arguably one of the biggest transformational events of the 20th century.

Not coincidentally, the Chinese admire Nixon and mention his legacy to me all the time. Why? Because ordinary Chinese believe he (and not his counterpart, Chou En Lai) enfranchised them by opening the door to reform in their country.

On language:

Are some Americans obsessing too much over the issue of English as the national language?  Here’s my take on this: 

I have personally delivered services on location in the following countries over the past five years: Australia, Brunei, China, Egypt, Germany, Hong Kong, India, Japan, Malaysia, the Netherlands, Philippines, Poland, Singapore, South Korea, Sweden, Thailand, the United Kingdom and the United States.

English, my native tongue of course, is the common national language in just six of these countries: Australia, Hong Kong, India, Singapore, the United Kingdom and the United States.  I am somewhat fluent in Thai and struggle to communicate in Bahasa, (Mandarin) Chinese and German.  Arabic, Dutch, Japanese, Korean, Polish (utterly incomprehensible), Swedish and Tagalog?  No way.

Yet I’ve delivered my services and my clients are evidently happy, because they’ve paid their bills. How could I do this? Because they all use English, including the Chinese.  (The Japanese are worst at it, by the way, but routinely employ translators, headsets and microphones to overcome the language barrier).

You might counter that I deal with educated professionals and couldn’t pull this off with working-class people. Not so.  Most of my clients are manufacturers, so I deal with factory workers as well as managers and professionals.

Also, in the course of all my travels, I have to engage with plenty of local taxi drivers and McDonald’s clerks. Naturally not all of them know English, and when they do, their English skills are usually pretty dodgy, but nevertheless we are able to communicate well enough to get the job done.

So it seems that the world has also learned to speak English. This being the case, wouldn’t most of the new people arriving in the U.S. as a result of immigration reform continue to use English, as they now do when necessary in their native countries?

Having said this, even if the new arrivals abandon their current habits and insist on using their native languages, as a person with conservative political viewpoints, I would steadfastly oppose any attempt to make English mandatory.

Moreover, any attempt to do so would be clearly unconstitutional, because Article I of the U.S. Constitution declares, “Congress shall make no law … abridging the freedom of speech” (the Constitution does not state “English speech”).

Simply put, all Americans, whether immigrants or not, have the absolute right to use any language they wish, whether or not their choice is rational. Conservatives ought to be passionate about protecting this right, not undermining it.

Of course it’s conceivable that English evolves to become America’s sole de facto language if the country does everything in its (legal) power to keep foreigners out. But protecting a single national language by targeting and blocking Latino immigration (thus preventing the spread of Spanish) isn’t conservativism in the classic liberal sense; it’s isolationism.  And you can’t convince me that America would be better off pursuing an isolationist course in today’s world.

Are there some countries that try to keep their languages and cultures “pure”?  Sure … but usually with laughable results.

France, currently mired in recession and hardly a bastion of American-style conservativism, comes to mind.

Back in 2003, according to the Associated Press, the French government mandated the use of courriel instead of e-mail as the term for electronic mail: 

“The Culture Ministry has announced a ban on the use of ‘e-mail’ in all government ministries, documents, publications or websites, the latest step to stem an incursion of English words into the French lexicon,” the AP reported.

All the French people I know acknowledge that this policy is utterly ridiculous. And they continue to use the term “e-mail.”

Like France, Thailand has linguistic and cultural sensitivities as well. Just last month, The Nation, an English-language Bangkok newspaper, reported:  

“The debate surrounding the Royal Institute’s plan to change the spelling of 176 words ‘borrowed’ from the English language should focus the public’s attention on the use of Thai language in today’s fast-changing world. The Royal Institute revealed its aim to change the written form of 176 words borrowed from English, such as ‘computer,’ ‘nightclub’ and ‘kilometre,’ by adding tone marks. The Institute reasoned that the additions would be a guide to correct pronunciation.”

Yet all the Thais I know think this plan is a total waste of public time and money – and if you don’t believe me, just ask my wife!

What to do?

It’s clear to me that the 2012 Presidential Election results weren’t a one-off event, but rather the result of inexorable demographic change.

Now, the Republican Party could circle the wagons and collectively moan about the erosion of cultural values, like using one language.  But this way forward carries great risk: ceding permanent political power to the Left, whose agenda is certain to deal our fragile economy even more devastating blows.

Alternatively, the Republican Party could take a pragmatic approach to enlarge its diverse coalition of citizens who hold common views of political freedom, limited government, the rule of law and economic freedom.  I think that taking leadership on immigration reform is one way to do this.

Happily, it would also strengthen our economy by leveraging one of America’s most potent competitive advantages against China, today’s rising economic superpower and the most significant threat to U.S. economic hegemony.

As if on cue, I found this Wall Street Journal article on Yahoo! News today: http://finance.yahoo.com/news/heartland-draws-hispanics-help-revive-040400742.html and it reinforces my points on why America should be leveraging its appeal to new arrivals through immigration reform.

The WSJ article also illustrates the challenges of fear and mistrust that need to be overcome. That’s where political leadership comes in – and if the Republican Party were to start exerting the right kind of leadership, I’d bet it could win many hearts (and future votes).

And now your take:

What are your thoughts?  Do you think my brother is on target with his observations … or would you offer a different point of view?  Please share your comments — let’s get some discussion going!

The Millennial generation: Are they redefining the concept of “news consumption”?

Phillip Nones Uncategorized , , , , , , , , , ,

News consumption habits (millennials)Recently, I read an interesting column written by Emily Anatole that addresses how the Millennial generation is reshaping the concept of “news” and how it is consumed.

Anatole notes that Millennials are criticized for not being news consumers, but she argues against this point. 

In her view, the younger generation is simply getting their news in a different way.  She writes:  “Milleninials’ approach to consumer news reflects how they differ … they perceive the ‘power of the pack’ – or Facebook updates, tweets and trending topics as we know them – as more valuable than the fact-checked, overly polished POV of one reporter.”

Anatole’s company, research firm Youth Pulse, Inc. (YPulse), conducted a survey in October 2012 of ~1,800 people aged 14-34, which found that television remains the top way in which this age group gets the news, with more than 70% reporting that they turn to TV to stay informed.

However, two-thirds of the respondents also reported that they get their news from Facebook, while approximately one-third get news from Twitter.

If these stats seem a bit unusual for those of us in the over-40 or -50 set, consider this:  Today’s 17-year-old was barely twelve when the iPhone first came out. 

So an environment in which comments, updates and opinions aren’t part of the “standard media mix” isn’t just a quaint memory; for Millennials, it never existed!

For the younger generation, becoming part-and parcel of “journalism” in its broadest sense is an integral part of the equation.  Uploading or sharing videos, tweeting a comment, updating a social status … it’s all part of a “co-created experience” where the lines are blurred between the media industry and consumers of the news.

Impatience has always been a trait of the young — as far back as the Children’s Crusade or even before.  So it shouldn’t come as much surprise that Millennials would tend to go for “immediacy” over “credibility.” 

Given the choice of learning something “first” — even if the details or veracity of the story are sketchy — versus waiting around for a well-curated 5:00 pm news broadcast … well, it’s not even a fair fight anymore.

And here’s another important point to consider:  Whereas we older generation-types were trained to seek out news by buying the daily paper or tuning in to a radio or TV broadcast, today’s younger generation can afford to be less perspicacious.  The news comes to them without barely lifting a finger because of friends and others in their social sphere sharing stories, leaving comments, and tweeting.

Some believe it’s yet another “e-volution” that’s turning out to be more “re-volutionary” than we could have imagined. 

What’s your take?

Storm Clouds on the Horizon for National Food Brands?

Phillip Nones Uncategorized , , , , , , , , ,
Archer Farms store brand (Target)
Archer Farms store brand (Target)

Generic Food BrandsAre we seeing the beginning of an upheaval when it comes to national food brands?

Over the past 30 years or so, the United States has faced its share of recessions and sharp economic cycles, with the resulting stresses on consumer budgets.

Through it all, so-called “store” and generic food brands have continued to represent only about 15% to 20% of all retail food dollar sales.

National food brands have done their part to promote themselves as the “quality” choice over store brands, as well as to promote product sales through couponing and various other attempts to beat back the “value” alternatives.

Their success has been pretty decent, all things considered … up to now. But that might be about to change.

Rabobank’s Food & Agribusiness Research and Advisory Group has just issued a report predicting that private-label food brands are poised to jump to a 25%-30% share of the market over the next ten years.

That would make the U.S. similar to what has happened in Europe, where one in three products purchased today is a retailer-branded product.

What’s behind the anticipated rise in store brands? The Rabobank report cites several contributing causes:

  • Food retailers have more sales reach and sales clout than ever. It’s not just traditional supermarkets but also warehouse clubs, drugstore chains and dollar stores.
  • Retailers are expanding their private-label initiatives into more than simply “low cost/high value” lines.
  • Stores are putting greater marketing muscle behind their own store brands – witness Target and its Market Pantry, Archer Farms and Up & Up product families.

Nicholas Fereday of Rabobank sums it up this way:

“Retailer brands have matured from their original positioning as ‘cheap and cheerless’ generic products into a more diverse range of national brand equivalents, and more recently, highly innovative premium products … On grocery shelves around the U.S., from convenience stores to upscale supermarkets, retail brands now complete successfully and often win against national brands, earning consumer trust in terms of pricing, quality, image and value.”

What are the ways the national brands can fight back against the store-brand trend? Rabobank suggests one good approach is to develop completely new products that address unmet needs.

Otherwise, they’ll end up being on the losing end of the equation, since the marketing efforts as well as attractive pricing of the store brands will ultimately prove irresistible to the majority of consumers.

The ad-supported web: Will it fall under its own weight?

Phillip Nones Uncategorized , , , , , , , , ,

Banner advertisingFor the past (nearly) 20 years, the biggest thing that’s kept the Internet free for users is advertising – banner display advertising in particular.

Bloggers and other online publishers large and small rely on revenue from web banner ads to fund their activities. That’s because the vast majority of them don’t have pay walls … nor do they sell much in the way of products and services.

Because of this, the temptation is for publishers to serve up as many display ads as possible on each page.

It’s not unusual to see web pages that tile ten or more ads in the right-hand column. Usually the content of these ads has no relevance to readers, and the overall appearance isn’t conducive at all to reader engagement, either.

And that’s the problem.

Because of conditioning, people don’t even “see” these ads anymore. The advertising space has become one big blur – as easy to gloss over as if the ads weren’t even there to begin with.  (When’s the last time you clicked on a banner ad?)

Attempts to come up with other display advertising types – pop-ups and pop-unders, animations and other rich media, skycrapers and so forth – haven’t done much to change the picture. Indeed, they’re so ubiquitous – and so predictable – we don’t even consider the ads to be annoying anymore; they’re just part of the “décor.”

I’ve blogged before about how clickthrough rates on banner advertising are bouncing along in the basement, making them less and less valuable for advertisers to consider placing. And ads that are priced on a pay-per-click basis can’t be giving advertisers much in the way of revenue either, since relevance and engagement rates are so abysmally low.

The bottom line is that we now have a “lose-lose-lose” situation in online advertising:

  • Advertisers lose because of near-zero user engagement, thereby limiting their potential to drive business.
  • Publishers lose because ad revenues aren’t sufficient to bankroll their activities.
  • Readers lose because of lack of relevance and an incredible degree of page clutter.

So it seems that the ad-supported online publishing model is in a bit of a fix – and the question is how things can evolve to create a more satisfying result for all parties.

I’d be interested in hearing your thoughts on this issue:  What will online publishing look like in another five or ten years?  Anyone willing to hazard a guess?

Google Gone Wild: Has its AdWords pay-per-click program become too costly for businesses?

Phillip Nones Uncategorized , , , , , , , , , ,

Google advertisingNo one should be surprised by the huge success of Google’s AdWords pay-per-click advertising program. Almost single-handedly, that service has vaulted the company into the top ranks of U.S. corporations.

And why not? As an advertising concept, pay-per-click has no peer. Capturing the attention of customers when they’re in the midst of searching for specific goods and services is the ultimate in effective targeting.

What’s more, Google’s pioneering advertising model, where advertisers set their own bid pricing and pay only when someone clicks on a link to their web landing pages, made the program affordable for everyone – from the biggest national brands down to the neighborhood store.

Google also offered all sorts of geographic and time-of-day filters to make it easier for businesses to target people at the right time and the right place … yet another boon to smaller businesses that otherwise couldn’t hope to compete against the big national players.

Many advertisers were able to participate in pay-per-click programs at a fraction of the cost of traditional display advertising, where advertisers pay significant fees up-front for “wait and wish for” customer engagement.

A few years back, it wasn’t unusual to be able to conduct a lucrative AdWords program bidding, with clickthrough pricing running well below $1 per click.

Because Google continues to possess the lion’s share of search activity (two-thirds or more of all search volume despite the best efforts of Bing/Yahoo and others to chip away at it), it was only natural for more and more advertisers to gravitate to Google’s AdWords program as the best venue for pay-per-click advertising.

But the temptation to get in the game has had the predictable result: pay-per-click bid rates have been climbing steadily.

Whereas before, an advertiser could expect to get good exposure on search results pages with a modest bid, it’s not possible to accomplish that anymore without bidding $5, $10, $15 or even more per click.

That’s beginning to drive some businesses away – particularly smaller ones without the deep pockets of the big firms.  For for many of them, it’s simply not sustainable to pay that much money just to get someone to visit their website.

AdGooroo, a search intelligence database firm that studies the pay-per-click market, reports that ~96% of pay-per-click advertisers spend less than $10,000 per month on such programs. That compares to millions of dollars spent by the largest companies.

Richard Stokes, AdGooroo’s founder, states this: “The only way for smaller advertisers to get an edge is to spend a lot of time improving the quality and relevance of their ads. The problem is that everyone else is doing that as well.”

So where does this leave us now? We’re beginning to get some hints that Google may have tapped out on advertiser demand. Some companies are dropping pay-per-click programs altogether, while others are scaling back while redirecting resources to other forms of promotion – traditional and social.

We have additional proof of this in the earnings report filed by Google just last week. The company reported that advertising sales continue to grow, but at a slowing rate.

And even more interestingly, average cost-per-click rates have declined by ~15%. That’s the first-ever decline since the AdWords program was launched.

Here’s another development:  heightened interest and focus on obtaining better natural search rankings by optimizing websites for content relevance.

Imagine that:  companies looking for ways to make their websites more relevant to viewers as well as search engine bots!

The heightened SEO emphasis has worked for many companies – at least up until now. Google may want to increase advertising revenues, but it also wants to ensure that its search functionality continues to deliver the most relevant and quality results so that users don’t begin to migrate to other search platforms.

But some advertisers may be wondering if the “Chinese wall” between advertising and natural search is as high or as airtight as it once was. They contend that their natural search rankings seem to perform better when they’re also actively engaged in pay-per-click advertising campaigns … and perform less well when they’re not.

Whether there’s any actual proof of this happening is mere conjecture. After all, the same company that runs AdWords is also running the search algorithms. So there’s really no way to prove this from the outside looking in.

Golfers’ Paradise: Portland? Seattle?? Rochester???

Phillip Nones Uncategorized , , , , , , , , ,
Golfing at Stone Creek Golf Course, with view of Mt. Hood
Keeping your eye on the ball is a bit more challenging at Stone Creek Golf Course, with dramatic views of Mt. Hood ready to distract at every turn …

I live in the Mid-Atlantic region of the country. And around these parts, a vacation often takes golf lovers to North Carolina, or maybe to Florida or Scottsdale in the winter months. (Scotland is the “Holy Grail” of golf destinations, of course.)

So I was somewhat surprised to read that Golf magazine has come up with some pretty big surprises in its listing of the “Top 10 U.S. Cities” for golf, published in August.

The list was developed in conjunction with the National Golf Foundation, so presumably it was compiled with the input of the “leading authorities” in the sport.

Some of the cities on the Top Ten list come as little surprise:

  • #3:  Las Vegas, NV
  • #5:  Orlando, FL
  • #7:  San José, CA

A few others wouldn’t necessarily be ones I would have thought of initially, but they do make sense:

  • #2: Columbus, OH  (the birthplace of Jack Nicklaus)
  • #4: Dallas, TX  (more than 100 golf courses are open to the public)
  • #8: Atlanta, GA  (the Sugarloaf course is here, along with two PGA Tour sites)

That leaves four other cities that I was surprised to see listed at all:

#10 is Rochester, NY  –  This city might have ranked higher for golf in my book than Buffalo or Cleveland, but to make the “Ten Best” list is … remarkable. It was included because there are ~65 golf courses, and median green fees are a huge bargain at just ~$30.

#9 is Portland, OR  –  I would have thought “weather issues” would make this city a non-contender, but Golf magazine found otherwise. Moreover, there are ~50 courses including Stone Creek Golf Club with its dramatic views of Mount Hood.

#6 is Seattle, WA  –  Wouldn’t the (rainy/cloudy) weather be even more of an issue here than in Portland? Evidently not, as Golf magazine ranked it among the top six cities, noting 60+ courses and median green fees of around $45.

And #1 is … Austin, TX —  This city was so-named because it “has the nation’s best combination of weather, name [course] designs, and affordable, accessible golf.”

It looks like the golf lovers among us will need to start expanding our horizons when it comes to vacation destinations.

Hmm, I wonder what our spouses will think of spending an exciting week in Austin, Columbus or Rochester …?

“Corporate Speak”: Updating the Buzzword Baedeker

Phillip Nones Uncategorized , , , , , , , , ,
Corporate buzzwords
Corporate buzzwords: Meaningless blather, signifying nothing.

All of us are familiar with them: jargon words and phrases that have become so overused, they’re nothing more than meaningless noise.

These are the so-called “descriptive” terms that are meant to add flavor and emphasis to a particular subject, but are more likely to make you want to roll your eyes – or maybe even reach for the nearest comfort bag.

Traditionally, the worst offenders have been high technology companies and other B-to-B firms when it comes buzzwords. But we’ve been seeing the phenomenon leech into consumer categories as well, such as automobiles and healthcare services.

Even worse, we’re now seeing a new generation of buzzwords coming to light, joining the veteran terms that have been plaguing us for years now.

Some of the old standbys are still overused today, unfortunately.  They include terms like:

  • Cutting-edge
  • Flexible
  • Next generation (or the too-cute variation NextGen)
  • Out-of-the-box
  • Partnering
  • Robust
  • Seamless
  • Solutions provider
  • Synergies
  • Toolbox
  • Turnkey
  • Value-added
  • World-class

Today, one may be more likely to encounter a crop of more contemporary-sounding – but equally obnoxious – phrases such as these:

  • Best-of-breed
  • Best practices
  • Core competency
  • Groundbreaking
  • Integrated
  • Mission-critical
  • Scalable
  • Thought leader

Much as we’d like for these buzzwords to just go away quietly, that’s hardly likely. And there’ll be plenty more new ones to come along in the future.

In fact, marketing strategist David Meerman Scott and others are already taking a stab at predicting tomorrow’s new buzz terms. You can view one such prediction here.

Unfortunately, there aren’t any buzz-cuts in the offing when it comes to lowering the level of “corporate noise” out there, however welcome that might be …

So if you can’t beat ’em … join ’em.  Are there any particularly irritating buzz terms you encounber that aren’t noted above?  Post a comment and let’s see what we can add to the list.