Dynamic Duo: Edwin the Duck Creators Named 2016 Dynamic Leaders of the Year

If it looks like a duck, walks like a duck … it’s likely a duck – as the idiom conveys. However, if it syncs with mobile apps, teaches life lessons and takes the Internet of Things to a whole new level, it might be better described as a groundbreaking, transformational gadget the likes of which the children’s toy industry has never seen.

That was the hope when Don Inmon and Matt MacBeth, two innovators with minds for engineering and a collective desire to navigate the turbulent skies of the tech spectrum, developed pi lab and its flagship product – Edwin the Duck.

Edwin is a rubber duck that includes a Bluetooth speaker, a thermometer that gauges bath water, a night light that works in tandem with apps and much more, allowing children to follow along with interactive stories, play games and enjoy sing-alongs.

Tens of thousands of units have been sold (via online and brick and mortar stores like Amazon, Apple Store, Best Buy, Target and Toys ‘R Us) and are already in the hands of children around the globe.

Read the full story in BizVoice.

pi-lab

Apple Reaches Settlement in E-Book Pricing War

Step into my room at home and you’ll find a row of book-lined shelves, stacked atop one another and overflowing onto my desk. When I was younger, summers meant days filled with devouring books. And yes, I was that kid who brought books to school and read whenever a spare moment presented itself, only occasionally hiding them beneath my teacher’s line of sight so I could read during class (but only if it was a book I absolutely couldn’t put down).

As a book nerd, I’ve kept up a bit with the raging paper versus e-book war. Personally, my loyalty remains with paperback books. I enjoy physically turning the pages and have felt a sort of cold detachment whenever trying to read an e-book. On the other hand, I have nothing against e-books and believe the two forms can co-exist peacefully—someday.

But for that day to come, publishers and booksellers need to straighten out e-book pricing issues. In April 2012, the U.S. government sued Apple and five of the biggest publishers for contracts Apple made with the publishers that raised e-book prices. The agreement in these contracts involved the publishers establishing book prices and Apple receiving 30%. The purpose was to force Amazon, who often sold below cost, to raise e-book prices.

Apple has now reached a settlement in this e-book pricing lawsuit, in which it faced up to $840 million in claims. The terms of the agreement have not been made public.

This is only one example of the controversies e-books have caused in the publishing world, but hopefully this is a step in settling pricing issues.

In the meantime, as a stubborn paperback-enthusiast who has not been personally affected by this problem, my biggest hope is simply for the industry to thrive as a whole, whatever that takes.

Should CEOs Send Mass Responses to Criticism?

The question in the headline makes me think of the recent Netflix flap, in which its CEO emailed the company’s customers basically apologizing for some unsuccessful moves. As Best Buy now battles online retail giants like Amazon and faces criticism about annoying upselling and not meeting order demands around Christmas, company CEO Brian Dunn offered the following response on his blog. Here’s the post in its entirety (below). From a PR perspective, was this the right move?

Best Buy has been taking some criticism lately. As CEO, I know that criticism goes with the job, and I’m well aware we have some challenges. I also know that errors we make often translate into a poor experience for our customers, and that is simply unacceptable.

Still, while I agree with some of the commentary on areas we need to improve, I feel it’s important to set the record straight on statements about our company that are, in my opinion, not completely grounded in fact. And I feel the need to do so, in part, to make sure our 180,000 hard-working employees understand the whole story – and have the full context that allows them to develop their own opinion about what’s written and said about Best Buy.

Let’s start with a couple of examples where I think the critics got it right.

The cancellation of some internet orders just before Christmas was our fault, and it’s not representative of how we EVER want to treat our customers. I’ll spare you the technical explanation of how and why it happened, but we know we did not deliver a good experience and we’re truly sorry. We’ve worked to make amends with customers whose holidays were made less happy because of our mistake, and we’re working diligently to make sure it doesn’t happen again.

Another area where we have received fair criticism is the overall speed of the transformation of our business model – something we are working hard to address. We’ve accelerated changes to key elements of our model already (the significant expansion in the number of products available on Bestbuy.com and the launch of our online Marketplace are two recent examples), but we need to move even faster, particularly in creating a more seamless experience between our stores, web sites, call centers and services teams. We recognize people can and do shop from anywhere, and they expect thoughtful, helpful interactions from us every step of the way. We continue to invest in a number of areas – from employee training, to critical system enhancements – to ensure our customers always receive the kind of experience they deserve and expect from us, wherever and whenever they choose. But, simply put, that work needs to happen faster – and we’re taking significant steps to accelerate the pace.

Now, onto a couple of topics where I disagree with the critics.

First, some believe the internet has made physical retailing (i.e., stores) irrelevant. There’s no doubt that the internet, and the mobile web in particular, have changed the way people shop, but there is strong evidence that consumers continue to value the experience of shopping in stores. A recent study by the NPD Group, a leading market research company, notes that nearly 80% of consumer electronics revenue still moves through physical stores. Additionally, approximately 40% of customer purchases made through Bestbuy.com are picked up in one of our stores. And the truth is, traffic in our physical stores increased in our third quarter and has been trending positively for most of the year.

Finally, there are those who question the validity of Best Buy’s business model. This misguided perspective is especially troubling for me, because it blatantly and recklessly ignores overwhelming evidence to the contrary. Best Buy is a financially strong and profitable company that has generated more than $2.6 billion in cash flows from operating activities in the first three quarters of the fiscal year. We also delivered positive operating income in each of the first three quarters of fiscal 2012. We grew total market share in the third quarter according to the most recent public data available. We have closed down certain operations that were not profitable, which we expect to have a positive impact on our earnings going forward. And we are focusing the company on areas where we see the greatest opportunities for growth and profit: mobile devices and connection plans; enhanced digital and e-commerce strategies; growth in our services business; and expansion of our established business in China.

As I mentioned earlier, we fully expect to receive our share of criticism – we’re a big company and we don’t always get everything right. But this is one of those times when I felt it was necessary not only to acknowledge our shortcomings, but to set the record straight on issues where facts are being obscured by rhetoric.

Brian J. Dunn
CEO
Best Buy Co., Inc.

Sales Tax Battles Growing Nastier

The call is growing louder (from the Indiana Chamber and others) for a federal solution to the online sales tax dilemma. But while that fight continues to be waged, Governing magazine looks at the individual state battles with Amazon. They only seem to add more fuel to the fire for a comprehensive national strategy.

States have been coming up with a variety of ploys — some conservative, others more radical — to get Internet retailers to collect the tax. Their efforts range from a handful of states claiming nexus via in-state affiliates that sell on the big-name websites to a 24-state compact to streamline sales tax systems. At the same time, states that levy sales taxes have come up with new allies in the fight to get the U.S. Congress to redress the collection issue and undo Quill. These allies include not just small mom-and-pop stores on Main Street but also giant retailers such as Target and Wal-Mart — retailers with robust Internet sites that do collect the sales tax because they have nexus in almost all states.

At every turn, Amazon has gone to great lengths to block state collection efforts. In states that claimed nexus because Amazon affiliates were located there, Amazon ended relationships with those businesses and, in turn, pursued litigation in the state. In states where it had facilities, it threatened to pull them out, thereby raising the specter of eliminating jobs. And where Amazon wanted to open facilities, it insisted on a free pass on tax collection. Amazon declined interview requests for this story.

Its pugnacious ways have paid off in some states, where the company was given the green light not to collect sales taxes for years — so long as it kept or built a facility in the state. But those ways have left bruised feelings, especially among legislators. In Tennessee, where legislators have been rethinking a deal Amazon struck last year to build distribution warehouses in return for not collecting the tax on goods shipped from those facilities, state Sen. Randy McNally likens Amazon lobbyists to take-your-lunch-money bullies. “They are making demands on the states that if a smaller business came in and tried to do, we’d laugh at ’em.”

This fall, however, there was what may be the biggest breakthrough on the Amazon tax front: California’s settlement with the company. After fighting legislation that would require out-of-state online retailers to collect sales taxes if they had affiliates, offices, workers or other ties to the state, the company ponied up millions of dollars to put the issue to taxpayers via a ballot referendum. It also cleansed its website of California-based affiliates. Then, the company suddenly backed down — in part because the damage to its reputation was growing. The online retailer struck a deal with the state that will require it to begin collecting sales taxes in California after a one-year grace period. In September, Gov. Jerry Brown signed the agreement into law.

The California deal suggests that Amazon may be changing its game plan. If that’s so, it would probably bring the rest of the Internet retailers into the fold as well. (Amazon recently made a similar deal with Tennessee.) Meanwhile, the states battle on, with legislators contending with the lobbying power of a giant — juggling the need for revenue versus promises to bring a few jobs to the state.

Online vs. Main Street Tax Debate Continues

The dispute over collection of online sales taxes is not a new one. The Alliance for Main Street Fairness argues that online-only retailers have a distinct advantage, but the author offers that convenience (not avoiding sales taxes) drives the buying decisions for many. TechJournal South offers analysis:

Federal law currently requires retailers to collect sales taxes in states where they have a nexus (a physical presence such as a store, warehouse or other facilities). Since Internet-only retailers do not have a nexus in most states, they are not currently required to collect the taxes.

Other states wrestling with the problem include Arkansas, California, Florida, Illinois, Indiana, Minnesota, New Jersey, Pennsylvania, Tennessee and Texas. The National Conference of State Legislatures says states lost about $8.6 billion in 2010 in failing to collect sales tax from online and catalog sales. The number is projected to be approximately $37 billion from 2009 to 2012.

Personally, we can see how buying a big ticket item from an online retailer might save a significant pieces of change, but even there, we doubt that most people buy online just so they won’t have to pay sales taxes. We buy online because it is convenient. We can do our shopping from our desks, which has inherent advantages that will not disappear when online retailers collect sales taxes.

We shop online because we often find a much wider selection available at the lowest possible prices online, whether we are looking for a book, a camera, or a refrigerator. We save gas and wear and tear on our vehicles and ourselves. But we have never bought an item online to avoid paying a sales tax.

Sooner or later, we suspect, this problem will be resolved through legal means that require online retailers to collect state sales taxes. That’s fine with us, although we think states threatening to collect years of back taxes are certainly wrong-headed as well as on legally shaky ground.

In the meantime, the way states and the online retailers are going about dealing with the problem is just causing more problems: such as Amazon dismissing its associates in North Carolina and other states attempting to use their status to say the reatailer has the physical presence in the state to create a nexus.

That move causes grief for many online startup businesses. Some larger ones actually left North Carolina when Amazon fired its state associates, and others complain it makes it harder to get that early revenue necessary to achieve outside growth funding.

Amazon is not helping matters by negotiating not to pay sales taxes even in states such as Texas, Indiana, Nevada and Tennessee where they have distribution centers.

The whole mess will likely require action on the part of the US Congress.  “The Main Street Fairness Act,” H.R. 5660 was introduced in the US House in July 2010, and it would behoove Congress to vote on the bill.

Tax News: Good to Be Tied to Arkansas in This Case

Interesting numbers from the Tax Foundation, which is in the business of analyzing interesting (tax) numbers. Its annual review of what states did with their tax policies included some strong praise for Indiana. A few excerpts from the release and a link to the full study, which takes some to task for targeted tax hikes and accounting gimmicks (instead of reducing spending).

Nine states increased individual income tax rates (five states reduced their rates), six states raised general sales tax rates, 17 states increased excise taxes on cigarettes and five states increased rates of alcohol excise taxes.
 
“Two states – Arkansas and Indiana – managed to roll back spending growth commitments and take actions to limit spending, but other states have either kicked the budget can down the road or increased taxes,” said Tax Foundation Director of State Projects Joseph Henchman, who authored Tax Foundation Fiscal Fact No. 204, “A Review of Significant State Tax Changes During 2009.”  

“With state revenues declining due to the tough economic situation, most state leaders in 2009 have tapped high-income earners, smokers, out-of-state business transactions, or other targeted groups, those being the only people that politicians feel safe raising taxes on,” Henchman notes. 

California, Connecticut, Delaware, Hawaii, New Jersey, New York, North Carolina, Oregon and Wisconsin increased individual income tax rates. States that increased sales taxes include California, Massachusetts, Minnesota, Nevada, North Carolina and the District of Columbia.
 
Other miscellaneous tax changes in 2009 include obesity and soda taxes, excise taxes on plastic bags (often mischaracterized as “fees”) and “Amazon” taxes, which force out-of-state retailers to collect sales taxes from customers if the companies have affiliate and advertising relationships with in-state businesses.