Columnist Lee Schafer provides short takes on economic incentives and choices, business strategy and performance, market moves, what business leaders are saying and doing and other topics that pique his interest.

Yelp filtered me out -- a legit customer

Posted by: Lee Schafer Updated: April 18, 2014 - 4:24 PM

It’s now clear that Yelp really does take down legitimate customer reviews – or at least it did once.

The positive review of Lee S. of St. Paul on the Woodbury bakery Sugar Love has been “filtered” and it’s no longer on the bakery’s page on Yelp.

This process of filtering reviews, which business owners suspect happens to good reviews after they turn down a pitch from Yelp to advertise, is at the heart of the suspicion and anger toward Yelp that I wrote about.

My review of Sugar Love was written this week, after I made the drive to Woodbury to shop it. The purpose was to confirm that it was a high-quality bakery, so it was a “blind” visit. Only well after the visit was the owner contacted for a column.

After the visit, both as an experiment with Yelp and as a reflection of what I found, I opened an account on Yelp and posted a review. An accurate one.

As of Wednesday, the review was the top one on the Sugar Love page on Yelp, and it read “I knew to expect mostly sweets and desserts, but for breakfast they had a Cinnamon Brioche Twist, and it was terrific.”

Sometime on Thursday that review left the page. It’s still available, if consumers know to scroll down and click on the “22 reviews not currently recommended.”

The review had been filtered, the term that Yelp uses for its effort to screen reviews for legitimacy. Just how Yelp does that is a black box, not very well understood by business owners as Yelp doesn’t share that much about it.

What made Yelp think this review wasn't worth recommending?

Just guessing, but the review was written in an account opened just this week, and the review of Sugar Love Bakery was the first and only such review contributed by Lee S. The IP address was from a computer in Minneapolis, not St. Paul.

Yelp has said that it screens reviews that are assumed to be from real people, but that its software tends to recommend the reviews of people active in its community. That means a full profile, "friends" on Yelp and lots of reviews. I had none of those things. 

So my review is gone, but if anybody from the East Metro asks me, I will tell the truth. It’s a good bakery, well worth giving a try.

The Socially Responsible Employer of Mike McFadden

Posted by: Lee Schafer Updated: April 14, 2014 - 11:24 AM

The race for United States Senate in Minnesota is barely getting started but it’s already reached the point of silly.

The Associated Press reported last week that Sen. Al Franken, a Democrat, was going to have difficulty getting a charge to stick that Republican candidate and former investment banker Mike McFadden was nothing more than a ruthless corporate raider because Franken had invested in a mutual fund that owned shares of McFadden’s former employer, Lazard.

What was even worse politically for the senator was that his investment was held in a well-known, socially responsible mutual fund.

So how could McFadden have worked as an irresponsible, job-killing corporate raider when his employer was owned by a socially responsive fund that the senator himself owned?

For what’s silly about this, let’s start with the idea that Franken blundered by owning this investment. The thing is, it was a mutual fund investment that sparked the AP report, the Neuberger Berman Socially Responsive Fund. Individual investors, of course, don’t make investment choices in a mutual fund.

It’s doubtful that the senator himself read the annual report in sufficient detail to have picked up on the Lazard holding. It’s doubtful he’s ever read the annual report.

If Franken, or more likely Franken’s business manager, wanted to put money into a socially responsive fund, that’s fine. The concept of a fund like this, and Neuberger Berman was one of the first among mainstream fund managers to sponsor one, is that it won’t invest mutual fund owners’ money in companies whose operations, while legal, engage in socially irresponsible activities like selling cigarettes or running gambling operations.

And as of the most recent report, it owned $55 million of stock in Lazard Ltd., the corporate parent of Lazard Middle Market LLC in Minneapolis. McFadden was co-CEO of Lazard Middle Market prior to launching his campaign for the Senate.

In Neuberger Berman's marketing materials, it explains that "socially responsible investing... stems from the belief that responsibility is a hallmark of quality. SRI integrates environmental, social, governance criteria into sustainable impacts across the economy." 

It’s been a top-performing fund, but Neuberger Berman doesn’t provide enough detail in disclosure materials to know why it picked Lazard shares. It’s interesting to note that two of its top 10 holdings are U.S. Bancorp and 3M Co. While I admire both companies, I hadn’t previously thought of either as remarkably socially responsible.

What’s even sillier about the situation, of course, is that the senator’s reelection strategists were planning to manufacture a political issue out of McFadden’s employer.

McFadden was an investment banker at Lazard who tried to help his clients achieve their business goals by finding a buyer for their businesses. And the Neuberger Berman portfolio managers reached the right conclusion: there is nothing even remotely socially irresponsible about that business activity.

Perhaps the senator’s reelection staffers will be embarrassed enough to quietly drop this whole line of attack against McFadden.

Jeff Bezos makes his first move at Washington Post - into Twin Cities

Posted by: Lee Schafer Updated: March 24, 2014 - 5:32 PM

It did not get that much attention locally, but the Star Tribune is part of founder Jeff Bezos’s first real move as the principal owner of the Washington Post.

For those wondering how the Bezos intended to remake the business of selling news (and selling advertisers access to news readers’ eyeballs), the upshot is this: he plans to give content away.

The Post is offering free access to subscribers of the Star Tribune and news sites operated in other markets, including Dallas and Honolulu.

It’s not really a giveaway, of course, as Bezos did not direct Post’s management to mark a path around the Post’s subscription requirement.  It's more an exchange of value. 

Bezos hopes to latch on to the subscribers at other papers that, in a way, are offered more value by access to the Post. At the same time the Post is more highly valued as many of those subscribers click through to the Post site. 

It is significant shift in strategy for the Post, which had largely given up on the idea of having a national news website like the New York Times. Its management had tried to focus on its regional footprint in and around Washington DC and hang on to what it could of the Post’s traditional subscribers and advertisers.

The president of the Post was quoted in the Financial Times last week as reflecting on conversations with Bezos, who had been asking what the Post could do in 2014 to make sure it had a leading news website 10 or even 20 years from now.

The appeal to a partner like the Star Tribune is pretty clear, it’s just another product for paid online Star Tribune subscribers.

The Post, by the way, now charges $99 per year for unlimited access to its website, although it’s not fair to say access to the Post has the same value to readers here the Twin Cities who will get it for free.

As this is written, the second most popular piece on the Post’s website is about the chance of snow on Tuesday. That is, the chance of snow in Washington, DC. 

Here's an easy one, of what ought not be a law

Posted by: Lee Schafer Updated: March 7, 2014 - 12:40 PM

Senate File 1859 is only six lines long but it’s one of the more interesting business-related pieces of legislation tossed in the hopper this legislative session.

It is to amend Minnesota statutes to say that “a license for the off-sale of intoxicating liquor may only be issued to a person who is a Minnesota resident.”

The bill’s author is DFL state Sen. James Metzen of a northern Dakota County district.

The public policy goals here are not particularly clear. Have there been residents of Wisconsin who’ve been particularly irresponsible as license holders of a liquor retailer?

In searching the Star Tribune’s archives, no such cases have arisen that would suggest any threat to the public posed by out-of-staters.

What it’s about, of course, is the market entry into the Twin Cities of Total Wine & More, a wine and liquor superstore retailer based in Potomac, Maryland.  The company has had a store in Bloomington ready to open since before Christmas but can’t seem to get a license. It’s got another in Roseville that will open next week.

And the company is principally owned by David and Robert Trone, two brothers who appear to live in Maryland.

In the past week the company has put on the public relations push to get the word out that they operate good stores and treat the public responsibly.

In a brief conversation with David Trone this week, he said entering a new market sometimes does generate a little heat with retailers already there, but what he has seen in the Twin Cities so far is an “outlier,” although he seems to not be particularly aggravated.

He said he certainly hasn’t seen legislation banning him from a state before, and added, “The fact that somebody would go to that length is astounding.”

Based on the state’s website, it doesn’t look like the bill will get a hearing this year.

Big retail challenges not confined to a Target - Wal-Mart has them, too

Posted by: Lee Schafer Updated: February 28, 2014 - 4:34 PM

The news out of the big retailers headquartered in our region, Target and Best Buy, certainly reflects the kind of fundamental challenges each of them have in maintaining their traditional market position amid all sorts of competition including

It is important to understand, however, that other traditional retailers have these challenges, too. Consider Wal-Mart Stores. 

Wal-Mart is the largest retailer in the in the world, and one of the things that has always distinguished Target in the investment community is that until came along, it was the only major player to really compete effectively against Wal-Mart.

While it doesn’t have a massive data breach to deal with, it was easily apparent in Wal-Mart’s results for its fourth quarter that it has many of the challenges that Target has. 

In its fourth quarter, comparable store sales were down in the U.S., and store traffic was down even more. It was the fourth consecutive quarter of declining comparable-store sales in the fifth consecutive quarter of the lower store traffic.

Weakening store traffic is particularly worrisome, because Wal-Mart can't sell more merchandise if customers don't even come into the stores. 

One response to these trends is a plan by Wal-Mart to increase its development of smaller stores, while trying to drive prices for products even lower and take out expense in its traditional retailing operations.

The analysts who follow the company are generally cautious on this strategic approach, because it’s far from clear that building out smaller stores and improving its websites is a growth strategy or just a way to divert customers from its own bigger stores.

And if cutting costs means reducing staff or otherwise making the experience of coming into a big Walmart supercenter just a little less appealing, well, it’s hard to see how this would help with store traffic and sales trends.

The senior analyst at investment research boutique Wolfe Research, Scott Mushkin, summed up his views on Wal-Mart’s plans for 2014 with the simple headline “More of what is not working.”

Looking ahead, he suspects that what Wal-Mart is doing now will put pressure on earnings per share growth and lead to further declines in returns on invested capital.

This is not a one- or two-quarter set of problems, either. Looking back over the past five years, the stocks of both Wal-Mart and Target have dramatically underperformed the S&P 500. But over that time period, Target’s has actually done a lot better than Wal-Mart’s.

As Wal-Mart is proving, the challenges in big company retail have not been that easy to meet. 

Why I really want to buy some Allen Edmonds shoes

Posted by: Lee Schafer Updated: February 14, 2014 - 1:48 PM

Sometime in the past week the thought crossed my mind that the Allen Edmonds marketing budget for 2014 had to be nearly exhausted, with more than 10 months to go in the year.

Allen Edmonds, a premium shoe manufacturer and retailer based in Wisconsin, has been on an online advertising campaign so thorough that it seemed that every website open on the screen had a small Allen Edmonds shoes advertisement.

Just a moment ago, when checking the latest stock price for Ecolab on Google Finance, right there on the right-hand side of the screen was a small announcement of the Allen Edmonds winter clearance sale.

It was the only ad on the page.

Paul Grangaard, the CEO of Allen Edmonds and a well-known executive here in his hometown, explained Friday morning that there was something fundamental about online marketing that I didn’t get. The company isn’t really advertising every day on every website in North America.

I had apparently searched for Allen Edmonds at some point using the Google search box, and Google stuck a little piece of software on my personal computer to remind it of that. To get rid of Allen Edmonds ads I would have to cleanse my Google Chrome browser of cookies, although he added that his company's Google campaign was going to be dialed back a bit, anyway.

Ah, now I get it.

That explains also why I see Volvos advertised every day all over, too, usually in a rotation with Allen Edmonds shoes.  I had once “googled” Volvos here at work for news on the expected launch date in North America of a new Volvo plug-in hybrid station wagon, and now have long since forgotten why I once considered that something worth knowing.

I’m not sure Allen Edmonds and Volvo are getting their money’s worth repeatedly advertising at my workstation. On the other hand, I really want a new Volvo and I really want a new pair of Allen Edmonds Park Avenue shoes.

And I have budget for at least one of them in 2014.


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