Coyote Blog

Sears is opening an all-appliance store:

Sears, which has been struggling financially due to falling sales, is opening a store that will be dedicated solely to the sale of appliances.

The retailer says that the 10,000 square foot store opening in Ft. Collins, Colorado on May 19th will be its first solely featuring appliances, the product category that has been one of its core businesses.  .

“Appliances is one of our best categories,’’ said Leena Munjal. senior vice president, customer experience and integrated retail, for Sears Holdings.  “We’re trying to figure out how you take the physical store and complement it with the online capability to make it a really powerful experience for our customers.’’

I essentially predicted this here several years ago:

 I see the same thing now at Best Buy, with workout equipment and other oddball products.  I told my son on a visit a year ago to Best Buy to expect to see the a larger appliance selection next time we visit.  He asked why, and I said "because Wal-Mart does not generally sell them, and not a lot of people buy their large appliances at Amazon."  Sure enough, you see more appliances nowadays.

And here:

But it probably was no accident that the article was illustrated with this picture:

What don't you see there?  CD's, DVD's, speakers, DVD players, computer games and most of the other stuff that used to make up a lot of Best Buy's floor space.  Because they have already been demolished by online retailers in those categories.   The picture above is of appliances, one of the few high dollar categories that has not migrated to the web.   Go to Best Buy and you will see appliances, health equipment, and TV's, all categories where bricks and mortar stores have some advantages over online.

This makes perfect sense, but don't tell me Best Buy is ready to take on the online retailers.  They are bobbing and weaving, ducking this competition wherever they can.

I wrote specifically about the Sears appliance business here

The other day, Kevin Drum wrote a post wondering why we had so few doctors per capital in the United States and observing, reasonably, that this might be one reason to explain why physician compensation rates were higher here than in other countries.

He and Matt Yglesisus argued that this smaller number of doctors and higher compensation rates were due to a physician-operated cartel.  This is a proposition I and most libertarians would agree with.  In fact I, and many others apparently, wrote to him saying yes there is a cartel, but ironically it owed its existence to government interventionism in the economy and health care.  In a true free market, such a cartel would only have value so long as it added value to consumers.

Drum seems to have missed the point.  In this post, he reacts to themany commenters who said that government power was at the heart of the cartel by saying no, it's not the government because doctors control the nuts and bolts decisions of the cartel.  Look!  Doctors are in all the key positions in the key organizations that control the cartel!

Well, no sh*t.  Of course they are.   Just as lawyers occupy all the key slots in the ABA.  But neither the ABA nor these doctors cartels would have nearly the power that they have if it were not for government laws that give them that power (e.g. giving the ABA and AMA monopoly power over licensing and school credentialing).  I had never heard of the RUC before, which apparently controls internship slots, but its ability to exercise this control seems pretty tied to the billions in government money of which it controls the distribution.

Let's get out of medicine for a second.  I am sure Best Buy wishes it had some mechanism to control new entrants into its business.  Theoretically (and it may have even done this) it could form the Association of Bricks and Mortar Electronics Retailers (ABMER).  It could even stake a position that it did not think consumers should shop at upstarts who are not ABMER members.  Take that Amazon!  Of course, without any particular value proposition to do so, consumers are likely to ignore the ABMER and go buy at Amazon.com anyway.

Such cartel schemes are tried all the time, and generally fail (the one exception I wonder about is the Visa/Mastercard consortium, but that is for another post).  Anyway, the only way the ABMER would really work is if some sort of government licensing law were passed that required anyone selling consumer electronics to be ABMER members.  And my guess is that the ABMER might not invite Amazon.com to join.  All of a sudden, Amazon is out of the electronics business.  Or maybe it just gets forced to deliver all its product through Best Buy stores, for a fee of course.

Crazy stupid, huh?  The government would never write licensing laws to protect a small group of incumbent retailers, right?  Well, tell that to Elon Musk.  Tesla has been trying for years to bring its cars to consumers in innovative ways, but have time and again run up against state auto dealership laws that effectively force all cars to be sold through the state dealer cartel.  Or you can talk to California wine growers, who have tried for years to sell directly to consumers in other states but get forced into selling through the state liquor wholesaler cartels.

All these cartels are controlled and manned by the industry, but they are enforced -- they are given their teeth -- by the government.

Here are a few off-the-top-of-my-head examples of cartel actions in the medical field admittedly initiated and supported and administered by doctors, that are enforced by state and federal law:

• Certificate of need laws prevent hospitals from expanding or adding new equipment without government permission.  The boards in this process are usually stacked with the most powerful local hospitals, who use the law to prevent competition and keep prices high.  This is a great example where Drum could say that the decisions are essentially being made by hospitals.  Yes they are, but they only have the power to do so because the government that grants them this licensing power over competitive capacity.  Without this government backing, new hospitals would just laugh at them.
• Government licensing laws let the AMA effectively write the criteria for licencing doctors, which are kept really stringent to keep the supply low.  Even if I wanted to only put in stitches all day to busted up kids, I would still have to go through 8 years of medical school and residency. Drum and Yglesias focus on the the number of medical schools and residencies.  I do not know if these are an issue or not.  But what clearly is an issue is the fact that one has to endure 8 expensive years or more just to be able to hand out birth control or stitch up a skinned knee.
• Government licensing laws help doctors fight a constant rearguard action against nurse practitioners and other less expensively trained folks who could easily do half or more of what doctors do today.
• The FDA and prescription drug law not only helps pharma companies keep profits up, but also increases business to doctors as people have to have a prescription for certain drugs they could easily buy on their own (e.g birth control pills, antibiotics).
• The government limits immigration and thus labor mobility, reducing the ability of doctors from other countries to move here.

I am sure there are more.

There is no denying that in the middle of every industry cartel are insiders who are maneuvering to increase the rents of the incumbent players.  In fact, I am sure that every industry has participants who dream about getting off the competitive treadmill and creating a nice industry cartel, and would be the first to sign up.  But none of these dreams are ever going to happen unless they are enabled by the coercive power of government.

Of course, the consistent answer is, well, we just have the wrong guys running things.  If we had the right guys, it would work great.  But this kind of co-option always happens.   Look at taxis and liquor license holders and the entire banking sector.  Five years ago I would bet that progressives thought they finally had that right guy in the administration.  And look what has happened.  Banking cronyism is as strong as ever.  Obama's signature health legislation is full of crony giveaways.  In 6 months the health insurers are going to be running the entire PPACA infrastructure to their own benefit.

update:  This post is verging on the "is cronyism capitalism's fault" argument.  Rather than go into that again, it is here.

Update #2:  Related

Arkansas orthodontist Ben Burris was hauled in front of the state dental board in September after dentists in northeast Arkansas complained that he was offering dental cleanings to the general public in his Braces by Burris orthodontics clinics. The price for dental cleanings was $98 for an adult and $68 for a child, which Burris has said is about half of what dentists in northeast Arkansas typically charge.

Burris said most of the patients who need cleanings don’t have a dentist, but are checked by one of the three orthodontists in his clinic. Also, Burris said he offered the service because it was good for his business and good for the public. Some of his competitors “have gone absolutely ballistic” over the price and complained to the board, Burris said.

MP: Of course, the Arkansas dental cartel has no basis to complain directly about the low prices for dental cleaning at Braces by Burris clinics, so they are instead complaining that the clinic’s low-cost teeth cleaning services violate the states Dental Practice Act, which prohibits orthodontists and other specialists from practicing “outside their specialty.”

Best Buy says it is not afraid of showrooming, the practice of testing products at a physical retailer and then buying it online.  Best Buy says it is confident it can convert visitors into buyers, even if their intent was to buy online.

Well, that is a brave front.  And I wish them luck -- I certainly like having bricks and mortar retailers around when I need something fast and can't wait for the UPS truck.  But it probably was no accident that the article was illustrated with this picture:

What don't you see there?  CD's, DVD's, speakers, DVD players, computer games and most of the other stuff that used to make up a lot of Best Buy's floor space.  Because they have already been demolished by online retailers in those categories.   The picture above is of appliances, one of the few high dollar categories that has not migrated to the web.   Go to Best Buy and you will see appliances, health equipment, and TV's, all categories where bricks and mortar stores have some advantages over online.

This makes perfect sense, but don't tell me Best Buy is ready to take on the online retailers.  They are bobbing and weaving, ducking this competition wherever they can.

Postscript:  Best Buy is hoping that having "trained" sales people to help customers will garner business.  There are two problems with this.  One, the training of their sales staff has always been spotty, and likely will not get better as their financials go south.  And two, I find that Amazon.com reviews are far more helpful, and often more knowledgeable, than most in-store sales staff.   But on the positive side, who doesn't enjoy getting hassled for an extended warranty at checkout?

Well, that is not exactly what they said, but this confirms some earlier casual observations of their stores I have written lately:

Shoppers typically associate Best Buy with TVs and computers, but the retailer plans to dedicate more floor space to appliances in the coming months as the housing market continues to improve.

Here is my translation:  Half of our floor space has gone digital (DVD, CD, games) and the other half has items where Amazon and Walmart are killing us.  But we are locked into long-term leases we can't break for a bunch of freaking large stores so we need to put something out there.  So we will try appliances.  Next up, mattresses?

I visited B&N the other day -- tellingly not to buy anything but as a way to kill time while my daughter was shopping.    What I saw gave me a serious case of deja vu -- where the book store used to be all, you know, books, there were now large sections dedicated to toys and games and collectibles and other such stuff.

This totally reminded me of the last days at CompUSA, when floor space originally all dedicated to computers and software was being used for DVD players and appliances and all kinds of odd stuff.  I see the same thing now at Best Buy, with workout equipment and other oddball products.  I told my son on a visit a year ago to Best Buy to expect to see the a larger appliance selection next time we visit.  He asked why, and I said "because Wal-Mart does not generally sell them, and not a lot of people buy their large appliances at Amazon."  Sure enough, you see more appliances nowadays.

I don't think that converting your over-sized book store into an under-sized department store is going to work.  It is hard to shift a retail chain's positioning, though it is possible (anyone remember when the Gap was just a Levis store?)  But things like leases and locations are really sticky, making it hard to change fast if your new concept needs more or less space or different locations.

Apparently, the nose dive at Best Buy is accelerating.  Watching retail just as a consumer over the last few decades, it seems that whenever a retailer starts going down the drain, they never recover.  Calls are made for more visionary management to reposition the company, but I can't remember any such effort ever working.  The slide may be fast - Circuit City, CompUSA, Borders - or slow - Sears, A&P - but the nose dive never seems to reverse.  The only retailer I can possibly remember really executing a fairly large shift was maybe Gap from just being a Levi's outlet to whatever it is today.   And maybe Radio Shack, which is sort of this zombie you think has been outdated for like three decades but keeps hanging on.

Best Buy is apparently increasing its customer return window from 14 days to 30 days.

Why?  This certainly costs them money, not just from lost revenue but from the cost of restocking and returning to the manufacture (not to mention fraud).

Are they doing this because they are good guys?  Hah.  Do you really expect goodwill out of an electronic retailer?

They did it because they felt they had to.  As the top dog in dedicated electronics stores, they are constantly under competitive assault.  They are the reference point competitors start from.  Wal-mart attacks them on price.  Amazon.com attacks them on price and convenience.  Smaller retailers attack them on knowledge and integration services.  Everyone attacks them on the niche details like return policies.

Best Buy did this not because they wanted to, but because they felt they had to under competitive pressure.  The accountability enforced by the market works faster, on more relevant variables, and far more powerfully than government regulation.

When the government does regulate variables such as this, such regulation often actually blunts the full accountability of the market.  Retail laws in many European countries set maximum hours and discount levels, protecting large retailers like Best Buy from upstarts trying to provide a better of different service.

In my Forbes column this week, I publish an essay I wrote for an Americans for Prosperity event commemorating Milton Friedman's birthday.  A brief excerpt:

Having once been successful through excellence, leading businesses typically get lazy and senescent, and become vulnerable to more innovative, lower-cost or more nimble new competitors.  Sears lost its electronics sales to Circuit City, which in turn succumbed to Best Buy, which is now struggling to compete with Wal-Mart, who is being challenged by Amazon.com.

Unfortunately, businesses that were once successful can feel a sense of entitlement, believing that this new competition is somehow unfair, or that consumers are somehow misguided in taking their business elsewhere.  When they have money or political connections, these businesses may run to Congress and beg for special protections against competition, or even new subsidies, mandates, stimulus projects, and bailouts.

Where is the threat to capitalism and individual liberty coming from today?  Is it from some aggrieved proletariat, or is the threat from bailed out Wall Street firms, and AIG, and GM, and Chrysler, and ethanol manufacturers, and electric car makers, and windmill builders?

 

I am a bleeding edge guy when it comes to home theater, so I have had a Blu-Ray high-def disk player for over a year.  I am currently looking for a second player to replace the first, and I thought I might share a couple of thoughts.

The press has declared the high-def DVD format war over, with Toshiba pulling the plug on the HD-DVD format.  This makes it much easier to figure out what software to buy (though it is still really expensive -- some Blu-Ray disks are going for $40!)

However, the hardware issue is still a minefield.  This is related to how the Blu-ray standard is being run, which presents problems and opportunities.  Unlike your CD or DVD player, the Blu-ray standard continues to evolve.  A lot.  It is much more like a computer standard, and I suspect in fact that the computer guys (or at least the game console guys) are running the show here.  This means that new features continue to evolve and be added.  And these are not just add-on features, like additional hardware inputs, but software features that create compatibility issues between versions.   As a result, there are already at least 3 generations of players out there.  The original profile 1.0, and then profile 1.1, and now profile 2.0.  And even within these profiles, individual players may vary in their conformance to them.   Sometimes you can do a firmware upgrade to a newer spec, and sometimes you can't, but such upgrades are not a piece of cake, and involve burning a DVD from the Internet and running certain codes from the Blu-ray remote to make the firmware upload.

The net result is that the features on a certain disk may not work on your player, or the disk may not work in your player at all (Newer movies like Pirates of the Carib. III have multimedia title pages that won't load on my player, and when the title page won't load, there was no way to play the movie.)  My advice is if you have waited this long, hold out until this summer for the newer profile 2.0 machines.  Also, you should confirm the player supports HDMI 1.3, so it can take advantage of the wider color gamut of newer TV's.  Players of this spec will start showing up in the next months -- the Sony BDP-S350 will likely be a good choice available this summer.

By the way, good luck finding anything on the box or in a Best Buy store that says what profile the player conforms to.  Hardware makers have created a really compatibility mess with Blu-ray (its seems to be a very poorly run standard) but they want to hide this fact from consumers because the are only just now recovering from the format war with HD-DVD and don't want consumers to have another reason to wait to purchase.  So there is not way they are going to put the profile number on the box, I guess, so you need to do your research.

As a final thought, and maybe I am just old and out of step here, but I really find the insistence on multimedia content and bitchin-cool menu screens on Blu-ray disks to be tiresome.  I just want to watch the movie in beautiful high-resolution, and having my software not work right because the menu doesn't work is just stupid.  Further, the addition of all these features has caused most blu-ray players to have a boot up cycle longer than Windows.  It can take 45 seconds for a blu-ray player to boot up, and a similar amount of time to get the software to start playing.  Add in the time to plow through stupid menu screens, and it can take several minutes to get a movie started.

Tonight I watched Cloverfield on blu-ray and it was awesome.  I was surprised the reviews on Amazon were so bad for Cloverfield, because I really liked it.  Yea, its different, but unlike movies like Bourne Ultimatum, there is actually a explanable reason for the jerky (and sometimes nauseating, I will admit) camera work. I did not pay much attention to it when it came out in theaters -- is this one of those geek litmus-test videos that only a few of us hard-core nerds like (a la Serenity?)

I am a bleeding edge guy when it comes to home theater, so I have had a Blu-Ray high-def disk player for over a year.  I am currently looking for a second player to replace the first, and I thought I might share a couple of thoughts.

The press has declared the high-def DVD format war over, with Toshiba pulling the plug on the HD-DVD format.  This makes it much easier to figure out what software to buy (though it is still really expensive -- some Blu-Ray disks are going for $40!)

However, the hardware issue is still a minefield.  This is related to how the Blu-ray standard is being run, which presents problems and opportunities.  Unlike your CD or DVD player, the Blu-ray standard continues to evolve.  A lot.  It is much more like a computer standard, and I suspect in fact that the computer guys (or at least the game console guys) are running the show here.  This means that new features continue to evolve and be added.  And these are not just add-on features, like additional hardware inputs, but software features that create compatibility issues between versions.   As a result, there are already at least 3 generations of players out there.  The original profile 1.0, and then profile 1.1, and now profile 2.0.  And even within these profiles, individual players may vary in their conformance to them.   Sometimes you can do a firmware upgrade to a newer spec, and sometimes you can't, but such upgrades are not a piece of cake, and involve burning a DVD from the Internet and running certain codes from the Blu-ray remote to make the firmware upload.

The net result is that the features on a certain disk may not work on your player, or the disk may not work in your player at all (Newer movies like Pirates of the Carib. III have multimedia title pages that won't load on my player, and when the title page won't load, there was no way to play the movie.)  My advice is if you have waited this long, hold out until this summer for the newer profile 2.0 machines.  Also, you should confirm the player supports HDMI 1.3, so it can take advantage of the wider color gamut of newer TV's.  Players of this spec will start showing up in the next months -- the Sony BDP-S350 will likely be a good choice available this summer.

By the way, good luck finding anything on the box or in a Best Buy store that says what profile the player conforms to.  Hardware makers have created a really compatibility mess with Blu-ray (its seems to be a very poorly run standard) but they want to hide this fact from consumers because the are only just now recovering from the format war with HD-DVD and don't want consumers to have another reason to wait to purchase.  So there is not way they are going to put the profile number on the box, I guess, so you need to do your research.

As a final thought, and maybe I am just old and out of step here, but I really find the insistence on multimedia content and bitchin-cool menu screens on Blu-ray disks to be tiresome.  I just want to watch the movie in beautiful high-resolution, and having my software not work right because the menu doesn't work is just stupid.  Further, the addition of all these features has caused most blu-ray players to have a boot up cycle longer than Windows.  It can take 45 seconds for a blu-ray player to boot up, and a similar amount of time to get the software to start playing.  Add in the time to plow through stupid menu screens, and it can take several minutes to get a movie started.

Tonight I watched Cloverfield on blu-ray and it was awesome.  I was surprised the reviews on Amazon were so bad for Cloverfield, because I really liked it.  Yea, its different, but unlike movies like Bourne Ultimatum, there is actually a explanable reason for the jerky (and sometimes nauseating, I will admit) camera work. I did not pay much attention to it when it came out in theaters -- is this one of those geek litmus-test videos that only a few of us hard-core nerds like (a la Serenity?)

I am a bleeding edge guy when it comes to home theater, so I have had a Blu-Ray high-def disk player for over a year.  I am currently looking for a second player to replace the first, and I thought I might share a couple of thoughts.

The press has declared the high-def DVD format war over, with Toshiba pulling the plug on the HD-DVD format.  This makes it much easier to figure out what software to buy (though it is still really expensive -- some Blu-Ray disks are going for $40!)

However, the hardware issue is still a minefield.  This is related to how the Blu-ray standard is being run, which presents problems and opportunities.  Unlike your CD or DVD player, the Blu-ray standard continues to evolve.  A lot.  It is much more like a computer standard, and I suspect in fact that the computer guys (or at least the game console guys) are running the show here.  This means that new features continue to evolve and be added.  And these are not just add-on features, like additional hardware inputs, but software features that create compatibility issues between versions.   As a result, there are already at least 3 generations of players out there.  The original profile 1.0, and then profile 1.1, and now profile 2.0.  And even within these profiles, individual players may vary in their conformance to them.   Sometimes you can do a firmware upgrade to a newer spec, and sometimes you can't, but such upgrades are not a piece of cake, and involve burning a DVD from the Internet and running certain codes from the Blu-ray remote to make the firmware upload.

The net result is that the features on a certain disk may not work on your player, or the disk may not work in your player at all (Newer movies like Pirates of the Carib. III have multimedia title pages that won't load on my player, and when the title page won't load, there was no way to play the movie.)  My advice is if you have waited this long, hold out until this summer for the newer profile 2.0 machines.  Also, you should confirm the player supports HDMI 1.3, so it can take advantage of the wider color gamut of newer TV's.  Players of this spec will start showing up in the next months -- the Sony BDP-S350 will likely be a good choice available this summer.

By the way, good luck finding anything on the box or in a Best Buy store that says what profile the player conforms to.  Hardware makers have created a really compatibility mess with Blu-ray (its seems to be a very poorly run standard) but they want to hide this fact from consumers because the are only just now recovering from the format war with HD-DVD and don't want consumers to have another reason to wait to purchase.  So there is not way they are going to put the profile number on the box, I guess, so you need to do your research.

As a final thought, and maybe I am just old and out of step here, but I really find the insistence on multimedia content and bitchin-cool menu screens on Blu-ray disks to be tiresome.  I just want to watch the movie in beautiful high-resolution, and having my software not work right because the menu doesn't work is just stupid.  Further, the addition of all these features has caused most blu-ray players to have a boot up cycle longer than Windows.  It can take 45 seconds for a blu-ray player to boot up, and a similar amount of time to get the software to start playing.  Add in the time to plow through stupid menu screens, and it can take several minutes to get a movie started.

Tonight I watched Cloverfield on blu-ray and it was awesome.  I was surprised the reviews on Amazon were so bad for Cloverfield, because I really liked it.  Yea, its different, but unlike movies like Bourne Ultimatum, there is actually a explanable reason for the jerky (and sometimes nauseating, I will admit) camera work. I did not pay much attention to it when it came out in theaters -- is this one of those geek litmus-test videos that only a few of us hard-core nerds like (a la Serenity?)

It looks like Blu-Ray will soon defeat HD-DVD. 

Fans of Toshiba's HD DVD format have been kicked while they're down, this time by Wal-Mart's decision to ditch the format,
and sell Blu-ray players and media exclusively. Effective June, the
move is the result of customer feedback, and an attempt to "simplify"
patron's decisions. This news closely follows Best Buy's decision to
also give the format the boot. Speculation has already surfaced that
suggests Toshiba will abandon their own format "in the coming weeks"...

So file all that HD-DVD software next to your Betamax tapes.  I actually preferred the HD-DVD format, but thought from the beginning that Blu-Ray's position in home gaming machines, which immediately gave them a huge installed based before any of us started buying High Def. movie players for our home theaters, might give it a lead that could not be overcome. 

Most consumers have just wanted the format wars to be over so they could pick the right player and software (I partially avoided this problem by buying a combo player).  This is an interesting consumer-friendly role for Wal-Mart that I have never seen discussed, that of standards-setter.

So here is a message to Blu-Ray:  Now that you are on the verge of victory, you need to clean up your own house.  The creeping standards problem you have had, which has caused early players to be unable to play newer disks, has got to end.  In particular, it is irritating not to be able to play a newer disk because the fancy multimedia menu won't work.  When when you learn that we aren't interested in all that crap and just want the movie to start?  Just because the technology says you can do that stuff does not mean that you should.

Update: Reuters with the same news, and a rumor that Toshiba has already shut down production line.

A couple of posts ago, I wondered how Radio Shack still survives when CompUSA is now dead.  Thanks to a reader, I find that the Onion has already plowed this ground:

Despite having been on the job for nine months, RadioShack CEO Julian
Day said Monday that he still has "no idea" how the home electronics
store manages to stay open.

"There must be some sort of business model that enables this company
to make money, but I'll be damned if I know what it is," Day said. "You
wouldn't think that people still buy enough strobe lights and extension
cords to support an entire nationwide chain, but I guess they must, or
I wouldn't have this desk to sit behind all day."

The retail outlet boasts more than 6,000 locations in the United
States, and is known best for its wall-sized displays of
obscure-looking analog electronics components and its notoriously
desperate, high-pressure sales staff. Nevertheless, it ranks as a
Fortune 500 company, with gross revenues of over $4.5 billion and
fiscal quarter earnings averaging tens of millions of dollars.

"Have you even been inside of a RadioShack recently?" Day asked.
"Just walking into the place makes you feel vaguely depressed and
alienated. Maybe our customers are at the mall anyway and don't feel
like driving to Best Buy? I suppose that's possible, but still, it's
just...weird."

I give up.  But the whole Onion article is very funny and worth reading.

CompUSA is apparently closing shop, something that is not too surprising observing the follies at my local store.  I can understand how CompUSA was killed by the likes of Best Buy and Fry's Electronics  (not to mention Newegg.com, which is my favorite source).  What I cannot understand is how Radio Shack continues to plod along and survive.  I buy a couple of things a year there (usually something like a transformer replacement or some kind of oddball splitter) but I am always kind of surprised to still find them there -- its like finding a Woolworth's in the local mall.  Though it still seems to make money, with a TTM after-tax margin of about 5%, which is not bad for a retailer.

Update:  here

As readers may know, I was initially very disapointed in the new gen 6 iPod classic I test drove at Best Buy, but I was very happy with the version I tested several weeks later at the Apple Store.  I hypothesized that maybe there was an initial software issue that had been patched, but that Best Buy had not gotten its demo models up to date.  An engineer associated with Apple wrote me the following:

Regarding the iPod Classic, that sucker was rushed into production.
The hardware was/is just fine.  However, the firmware was NOT ready for
prime time.  Software resources are very limited at Apple, believe it
or not.  If you remember, Apple introduced 3 new models of iPods in
September (Nano, Touch, Classic), which stretched those resources very
thin.  Too thin.  The Classic firmware is what lagged most.  The
sluggishness you noticed was all software, and nothing more.  In an
ideal world, the Classic's firmware would have been delayed 2-3 weeks.
However, with Steve Jobs, a scheduled introduction is a scheduled
introduction, so out it went.  To Apple's credit, it didn't take long
for a firmware update to correct it.  One thing Apple does VERY well is
to issue timely firmware updates.

You may indeed be right in pointing out that store displays are
usually not properly updated, which is the reason that stores like Best
Buy are bad representatives for Apple.  If possible in the future,
visit an Apple store for your research.  I'm pretty sure they
faithfully do their updates.  Apple stores are quite impressively up to
date on everything.

I have reason to believe that this person knows what she or he is talking about, and this explanation certainly matches the facts as I know them.  The bottom line is that I can now wholeheartedly recommend the new gen 6 classic iPods. I have had mine for a week and love it, and, contrary to my earlier experience, if anything the menu responsiveness is now better than past generations.  By the way, my iPod Touch was amazing on the flight to NY.  I played movies for hours and had plenty of battery life.  I had brought along this battery pack as a backup, but did not need it.

I am always amazed by the stupid mistakes electronics stores make in demoing products.  This iPod mistake at Best Buy is really boneheaded, but even more commonly I see stores making huge mistakes in demoing TVs.  I can't tell you how many times I see TV's either 1) displaying a really low quality source on an expensive TV or 2) not adjusting the TV correctly to the source (e.g. stretching a 4:3 image to fit a widescreen TV so that everything looks bloated).

Postscript:  I visited the Apple store in Midtown Manhattan, at about 5th and 59th  (right by the FAO Schwartz for all you parents out there).  First, it was really cool.  An all glass cube on the plaza where you enter a glass elevator or glass spiral stairs down to the store itself.  Second, the store was an absolute zoo (this was Thanksgiving weekend) with lines just to demo the products.  From the looks of it, Apple will have a very nice Christmas.  Their entire iPod line is awesome, and for the first time in years they have a desktop that I really like at a nice price point.

In a couple of posts, I warned readers that I thought there might be problems with the new 80meg and 160meg iPod classics  (generation 6).  On two occasions, I tested units at Best Buy stores (two different cities) and found the menu and scrolling performance to be terrible.  The controls were laggy and slow.

An Apple person wrote me to say that my experience was not universal.  I also noted that people were split on the message boards -- some loved their new iPod and couldn't understand the problem, and others couldn't understand how anyone could miss the scrolling problems.

From this and other evidence, I am now convinced that there were either two different batches with different performance, or there was some early software patch that fixed the problem but stores like Best Buy were not applying the patch to their demo models.  The other day I tried the new iPod Classics at the Apple store and was thrilled with the performance.  The menu scrolled beautifully, perhaps better than generation 5. 

So, I still advise folks to try before they buy, but I now am convinced that the new Classic is a great product.  I bought an 80gig over the weekend.

By the way, I have never been anything but enthusiastic (except perhaps to wish for more memory) about the iPod Touch.

1. I really like my new iPod touch as a movie player for trips.  With an add-on double-A battery for extra life, it beats the hell out of portable DVD players.  It is a decent Internet surfer over WiFi though I am still looking for something a bit larger.
2. Anyone who fetishizes Apple's design capability has never tried to sync two iPods from one computer.  It can be done, with a klugey shift-click open to iTunes that brings up a "pick library" menu, but it really blows.  Also, they obviously have not had to endure QuickTime popups 415 times a day that say "Some of your Quick Time software is out of date.  You can fix this problem by updating the the latest version."  When one clicks "Do it now," one invariably gets the error message that the servers are busy (if the system does not crash entirely.
3. The new iPod classics still suck.  I tried them again at Best Buy.  The menu is laggy as hell and very hard to make selections or browse.  It is no accident that new-in-box generation 5.5 iPods are selling for more on eBay than new generation 6 iPods with the same or more memory.

A few days ago I wrote that there were a lot of bad reviews of the new iPod Classics.  The form factor and increased storage seem enticing, but people complained about the user interface.

Today I went to Best Buy and tried them out.  Yuk!!  Scrolling through the menu, even with the album cover flip thing off, is really bad.  All sense of precision is lost, and the speed is much slower.  Just to get "artist" in the top menu was hard -- I kept scrolling past it.  There is just no sense of precise control.

I urge all of you to go try one before you buy, particularly if you are like me and are upgrading from a gen 5.5 classic.  Do not just buy it online sight unseen assuming it is just like the 5.5 but with more storage and a thinner form factor.  I am also told, but can't attest to the fact, that it is much harder to get video out to a TV, say in a hotel room, and takes new adapters and cradles to do so. 

This may get fixed in a software patch, but I an not entirely sure.  I have heard that new hardware on the touchpad is partially to blame, and there is no patch for that.  I can confirm that it did not feel like the old touch pad. 

I was pretty frustrated after my negotiations with Florida State Parks on Friday.  We were apparently the winning bidders for one of their park concessions, but their process requires a "negotiation" after the winner is accepted, something that is very unusual in these situations.  Typically, these Request for Proposals (RFPs) for these projects include all the minimum requirements the bidders must accept.  The RFP then lays out a point system that will be used for scoring the submissions (e.g. 20% of score on bid rent, 20% on financial stability of bidder, 30% on experience, etc).  Usually, the relevant agency reviews proposals to see if they meet all the minimum requirements, throwing out proposals not meeting these minimums, and then choose a winner from the remaining proposals based on the scores.

In this case, in the Florida State Park RFP, there was no minimum rent payment set (rent is usually bid as a percentage of concession sales).  Also, in the scoring, of the 800 total potential points, only 20 or 2.5% were assigned to the size of the bid rent payment.  The other 97.5% of the points were allocated to experience and services offered, etc.

Well, after spending a lot of time and money on the bid response itself, I was called to Tallahassee as the winning bidder to "negotiate".  After we sat down, the first thing they said was "your bid of x% is too low -- we won't accept anything less than twice that".

This is a classic bait and switch.  I assume it is legal under Florida government contracting law but it is illegal for federal contracts and in most other states.  They caused me to spend a lot of time and effort bidding and then flying to Florida on the assumption that there was no minimum rent amount and that the rent amount was a trivial requirement, as compared to quality and experience.  In their negotiations, the revealed the opposite.  They are hoping that now that I have gone through all this time and effort, I will agree to up the $ given my sunk costs.  What they don't know is that I am the world's number one believer in "sunk costs are sunk and therefor irrelevant".

If Best Buy issued an ad in the paper saying they were selling Sony plasma TV's for $500, and I rushed to the store only to find no $500 Sony's for sale but instead a pushy salesman trying to sell me up to the $2500 model that is on hand, they would be breaking the law in most states.  What Florida is trying to do is no different.

I am going to tell Florida that I need a few more days to respond to their hijack demands concerns.  I was taught long ago not to get emotional in a negotiation, and right now I am emotional.  When I calm down, I will sit down and try to calmly evaluate if it is still a good deal at twice the rent.  I will also call up some other concessionaires in Florida to see if this is an isolated incident or see if it is representative of ongoing arbitrary behavior I can expect in the future.

I HATE most new loyalty programs at stores.  When loyalty programs really came in vogue with airlines, they made sense.  Airlines gave their best customers bonuses for spending lots of money with them.  Today, though, every store I go into has a loyalty program.  I have a Fry's card, an Albertson's card, and a Safeway card (grocery stores);  I have a Borders and a Barnes and Noble card;  I have an Ace Hardware card and a Best Buy card;  For god sakes,  I have a TGI Friday's card.  Not to mention the cards from American, America West, Southwest, Hilton, Hyatt, Marriott, National, Hertz and probably 20 others I can't remember off-hand.  I carry a stack of the travel related ones in a big rubber band in the bottom of my briefcase.  The rest bulge my wallet up to about an inch thick, even when it is (all too often) devoid of cash.

Did I mention I hate all these programs?  Most of them have no real reward for purchase volume, you just have to have their card in your pocket to qualify for the best deal.  What is the point of this --its not like they are rewarding purchase volume (in fact, grocery stores do just the opposite, by rewarding the people who buy the least with better service via the express lane).  Why do I need to fatten up my wallet to unmanageable proportions just to get a store's best price? 

This analogy will date me, but its kind of like all those women who used to carry eggs and live chickens in their purses on Let's Make a Deal in the hopes that Monty Hall will ask for that item to qualify for some prize.   When I check out in the grocery store, they even put little asterisks by certain items to remind me that I am not getting their best price because I have not shown them their plastic card.  Come to think of it, my Monty Hall analogy may be flawed.  It is more like the pagan gods refusing to provide rain until their hapless subjects had sacrificed the right kind of goat.  Now how would that be for a loyalty program -- "I am sorry Mr. Meyer, but you sacrificed a goat, and Best Buy requires that you sacrifice an ox to get 10% off that DVD player".

Well, the revolt (or, if you accept the pagan religion analogy, the reformation) begins today.  I chucked everything in a drawer except the travel cards.  The book store cards are easy - its Amazon all the way now.  I used to drop in and buy some impulse items at my local Borders, but with free 2-day shipping for the rest of the year at Amazon (I signed up for the offer) there is no reason to buy anywhere else.  Amazon always gives me their best price without a piece of plastic in my pocket or an animal sacrifice and I don't have to deal with that irritating reminder from the cashier at Borders that without their card, I'm not going to get their best price.

Time will tell whether I can live with the increased grocery prices that will come from not having their card, but I am going to give it a shot on principle.  The revolt begins -- anyone want to join me?

PS - should I name this effort my loyalty pogrom?

UPDATE:  Thanks David, I fixed "principle".

UPDATE #2:  Per the comments, I do indeed understand that  one of the major goals of  well-structured loyalty programs is to gather data about the customer.  However, I would argue that out of 100 companies gathering customer purchase data, maybe 3 know what they are doing with it - meaning that they do more than just make nice powerpoint slides for the bosses with the data.

Take an example of my grocery store, Fry's.  Fry's has a loyalty card you must present at the register to get the best pricing.  Once you present the card, the checkout person will tell you at the end of the transaction how much you saved by using the card.  But half the time the people around me forget their cards, and the checkout person asks other people in line to lend their card, so the hapless customer who forgot theirs can still get the better pricing.  In other words, if the data is really being used, it is corrupted.

But how do they use the data?  Certainly bricks and mortar stores have limited options - they can't do like Amazon does and present me with a custom selection of goods when I first walk into the store.  They might send me a customized coupon package, but I have found no evidence that any loyalty program I have used has ever done this.  My guess is that most of the data just feeds the voracious appetite of the bosses to see data.  At best, the data might be used in vendor negotiations, but I doubt this too.

By the way, to provide a customized customer experience

UPDATE #3:  One of my friends who used to work with me in the pricing practice at McKinsey & Co. suggested that the cards may be a way of maintaining multiple pricing levels for different customers, much like airlines have done for years with business and leisure travelers.  The theory goes that the most price sensitive will get and use such a card, while the busier, perhaps wealthier and less price-sensitive shoppers won't bother.   This is certainly possible, but if this is the strategy, they certainly need to train their register people not to shout all over the store to find a card for shoppers that don't have one.  Since I put my Fry's card in the drawer last week, I have visited the store three times and every time the register clerk, without my asking, has borrowed a card from someone else so I could get the discount.

I know that flat screen Plasma and LCD TV's are very popular right now, especially as prices are falling.  They provide a good platform for viewing HDTV and widescreen DVDs.  As a longtime fan of widescreen, even before DVD's and HDTV, I understand the attraction well (and yes, you could get widescreen format movies on VHS and Laserdisc, but it was a pain in the butt and DVD is great).

If you are looking at a plasma TV for your main viewing or home theater room, I would like to encourage you to look at front projection before you make a purchase.  No, I don't have any financial interest in the technology, and no, it is not right for everyone.  For some applications, though, front projection can offer a dramatically better movie experience than plasma for the same money.  Why?  Two words:  110" Diagonal  (OK, thats sort of more than two words when you say it rather than write it, but you get the idea).

A projection system can be almost as big as you have space for.  You have never, never experienced the Superbowl until you have seen it on a 95" wide widescreen in HDTV.  If you get one, do not tell the neighbors unless you want them in your house every Sunday.  We almost never go to theaters any more - we have a great experience in our own house.  I have practically paid for this installation just from birthday party savings, as my kids now prefer to have movie parties at home. 

The installation in the picture above is my 95" wide 16x9 screen, and I took the photo so you could also see the projector hanging on the ceiling (the photo overemphasises the projector - it is actually not so prominent).  The screen is actually a special acoustically perforated kind, and the speakers are behind it (this is more expensive and hides the speakers but is not at all required).

OK, there are some downsides to this installation, which is why you do not see them everywhere:

• The wiring is tougher, since the projector usually is a long way from your video equipment - I had to get an electrician to run some wires for me
• The room has to be dark -- either with few windows or, in my case, with blackout shades on all the windows -- to be able to watch during the day.  If you look carefully in the picture above you can see the shade above the windows.
• They are harder to find -- Best Buy type stores do not sell these systems
• They are different esthetically than you are used to.  They take up less space than a big box rear-projection, but more space than a plasma. Yes, you can put in mechanisms to roll up the screen into the ceiling or even pull the projector up out of site when not being used, but these add a lot to the cost.
• Good systems are not at all cheap, and cost about as much as a good plasma - about $4000 for the projector and $1000 for the screen.  Really good systems go for crazy amounts of money - as much as $60,000 and more.  Don't be scared off - there are many good inexpensive projectors made today.

We have loved this system and have gotten more prolonged enjoyment out of it than anything else in our house.  It is not for everyone, and I don't expect everyone to choose to do the same thing I did, but I do think it is worth your time to take a peak at one when you are out shopping for that plasma TV.

Courtesy of Business Pundit, this article on customer loyalty programs and whether they actually increase profits.

To me, you can make a good case for them in commodity undifferentiated products like commercial airline service, but now it seems like every store, from Best Buy to Barnes and Noble have them. It strikes me that stores like these should have plenty to differentiate them without a loyalty program.

I'm no psychic, but I can probably guess what's in your wallet. Chances are it's stuffed with loyalty cards from this airline and that hotel, not to mention a handful of point-accruing credit cards. And your key chain probably has a few hanging versions of the same"”video store tag, gas station "quick pass," grocery store card. You probably belong to more loyalty groups than you can count.

Do you really think your customers are any different? It's hard to expect your affinity program to inspire loyalty when all of its members carry your competitors' cards as well.

Face it: Loyalty programs have reached the saturation stage. The first-mover advantage gained by the pioneers in this field is long past. Now as common as kudzu, affinity programs have lost their distinction and, as a result, much of their value.

I am actually sick of these programs. It increasingly irritates me to have to carry 354 pieces of plastic in my wallet to get the best prices every where I shop. I am old enough to remember when you had to have every stores proprietary charge card to shop there - so you had to have a bunch of department store cards and gas cards, etc etc. I am thrilled nowadays to shed all that crap in my wallet and just use my Visa card everywhere. Now, though, we are rolling back the clock to plastic proliferation. I find myself actually growling at the poor Borders Books checkout person when they ask me if I have (or want) a Borders loyalty card.

Coming soon, I hope, is the backlash, with stores competing with a saying like "you don't have to have a special card to get our best price".