Has Infratil become a dodgy investment?

No – I’m sure Infratil have not changed their excellent approach to infrastructure investing, but their advertising strategy sure makes you think.

I’ve been seeing their advertisements in Facebook.

They may be cheap ads, but we cannot help judging them by the company they keep. No – not the friends whose pages that I see the ads next to, but the advertisements that surround the Infratil ones.

In this case there is a rather dubious promise to double or triple your investment trading Gold, Oil and Forex, and a camera selling for $4.76 – with no strings attached really.

I’m not sure what the point is – but if I were Infratil I’d stop doing this – at least until there is better company.

Chanui Pure Ceylon 120 Value Pack

We’ve just launched a new range of tea at Chanui – and it is pretty interesting. (Well it is for me anyway.)


Chanui sells a range of premium teas across supermarkets in New Zealand. We have seen plenty of response from competitors when we came in above them in quality, but this time we decided to move into their territory.

We are launching the Chanui Pure Ceylon 120 pack of teabags – and we think it is a better quality tea bag for a lower price than out much larger competitors are providing.

It’s a 120 pack, which is 20 larger than the 100 packs of tea bags out there. It turns out tea drinkers like buying tea bags in bulk, and so that’s what we are delivering.

Next, for now at least, it is exclusive to Countdown, Woolworths and Foodtown. This is an unusual thing to do, but Progressive Enterprises approached us and asked for this.

Also – the quality is higher than the tea you get in competitor’s 100 tea-bag packs. Given what has happened in the rest of the tea market in response to us, I would not be surprised if some competitors lift their game in response. You can be sure we will be on to that.

Finally there is the price. We have delivered a quality product for a very sharp price on the shelf. We see great value in trying to be the lowest price provider in these tough times, and while it is tight on our margins it is simply the right thing to do. We can do this because ‘we’ are actually very lean. You won’t find a marketing manager, advertising agency or highly paid management team at Chanui. Come to think of it – I’ve never been paid. Doug?

A reskinning is not a panacea: Dick Smith

Dick Smith just reskinned their site. Well they have at least since the last time I went there. My summary is that this is nice but will add little to their site statistics. The look has changed slightly but the real work has yet to be done.

Here is the Australian one:

and the NZ one. We get another layer of tabs and a fern. Pretty.

 

So it’s a reskin. But there are still a lot of flaws.

The menus are across two columns and rows. This may be new or ot, but it is bloody confusing.

The phones menu is even more confusing – starting with CB radios, and including the category “new low price”

Searching for “cable” gives you far too many results. These are just the categories. They are a completely unusable mess.

Here’s a lesson in how to handle cables – courtesy of Ascent

The DVD categories could use some artwork

and some products:

 

Adding items to the cart briefly pops up a message. I’m not sure whether I like this or not – it was a long way away from the eye on my big screen.

The checkout message on the top of the screen is nice looking but the wording is strangely subdued. Maybe it is a test but “Visit Checkout” seems to be pretty soft versus, say “Checkout now.”

The cart is pretty ordinary, but functional.


But the next screen is an intimidating screen of online shopping death. You’d think a bit of work on this would see a big uptake in sold carts. Beyond this screen is a payment screen as well. Why not put all three (summary, address, payment) on to one page?

 

Woo Hoo I’m Gold – Thanks Virgin Blue

Excellent news from Virgin Blue in my email inbox just now.

It was a bit of a surprise, as I have not flown with them for a while, and I thought that my status would be expiring if anything.

and yes – turns out that was a bit of a mistake. A big mistake. I wonder how many people were affected. The emails were 2h:40m apart, so a relatively quick save.

Governance of tax issues for directors

I’ve just run across this nice cheat sheet by the ATO – a tax governance guide for directors of large companies. It’s got some handy hints for directors of smaller companies as well. I maintain that at least one person on each board needs to understand this stuff well, and that everyone on the board should be asking similar questions to those on the ATO’s list.

The first issue is how to ensure that your organisation has the accounting and control mechanisms needed to handle day to day tax and reporting requirements.

The second is about how to ensure tax is properly considered as part of board and corporate decision-making processes for major financial transactions, overall corporate strategies and when seeking or considering tax advice.

Never buy the Warranty: Repair it yourself

This is the second in a series on Warranties – the first was Never buy the Warranty – Repairing is cheap

So now let’s look at the option of self-repair.

These days most people have never learned how to take things to pieces and put them back together again. But that’s pretty much all the average service center does – run a diagnostic, remove and replace the affected module and test to make sure everything is ok.

The main logic board from my MacBook Pro in the previous post was replaced as a unit, rather than the removing and replacing the  handful of  affected chips. While the replacement chips may be very cheap, removing and replacing surface mounted devices on a modern printed circuit board is not easy. It is difficult to  ensure the quality is consistent across the service network, but most importantly it is much quicker for the service centers to simply swap out the board. So service centers take the more efficient but far less sustainable and cheap approach.

In the PC software world it is the equivalent of “delete everything and reinstall Windows” – it’s easy to do and takes very little time for the service center. In the automobile world it’s when they replace the entire lamp unit for $500 rather than plastic welding or replacing the cracked lens for $10.

This approach works well for the customer if they have little time and lots of money, or if the are covered by a warranty. That unfortunately is not always true – warranties often do not cover common reasons for failure (try driving your car into a tree and claiming on your warranty), they expire and they may apply to a different geography.

Let’s take some examples where there was lots of time, and little money – and no warranty.

I was motorcycling in Pakistan, and met up with a chap who I’d been chasing since Istanbul. It seemed we both liked traveling rather quickly, and it would be good to share a road. We met near the top of the Karakorum Highway, where Pakistan borders with China – that’s me on the while F650ST.

On the way back to Gilgit, my new friend’s gear change mechanism broke. This wasn’t the clutch – but a very complicated piece of metal that connected the lever that you use to change gear with your foot to the gearbox itself. It was a forged piece, beautifully designed and manufactured, and clearly very expensive to replace. We were also in the far reaches of Pakistan – a long long way from Germany.

We were not concerned – I suggested that we ride to Gilgit and there he could probably find someone to replicate the part – in function if not in quite the form. Luckily he was in 2nd gear and on a very capable 1100GS – and we were able to continue zooming back. When we got there he managed to not only find someone to make the part, but it was done within a day and for just a few dollars. It lasted for the remainder of his trip.

In South America I had a few similar experiences, though nothing so dramatic. Once again something broke – this time one of the not-so-structural but still very important frame bolts on my bike.

It was going to be tough to replace, but when I walked into Moto Pablo – I knew I was fine.

You may laugh – but that chaotic workshop was a sign that the folks that work there could do anything, and indeed they did. They won’t win any 5-S awards for work layout, and their HSEC standards were a little dubious:

But it got fixed – and it stayed fixed.

But let’s move on from the gratuitous motorcycling shots, and to a more topical example. While, err, motorcycling in South America, I carried a Dell Laptop. It was a reliable beast, even in the vibrating bike, but one time I placed it into the boxes the wrong way (next to the bolts), and next time I turned it on the screen was dark.

That meant I had to either connect to an external monitor or pretty much go off memorized keystrokes to save all my photos. After a little investigation online I determined that the Cold Cathode Tube that lights to screen had most likely broken. I took it all to bits, and sure enough that was the case. The normal approach when this happens is to replace the entire screen – a very expensive proposition, especially for a computer that was riding around in the back of a motorcycle for two years, and thus liable to break at any time.

So when I got to Mendoza, in Argentina, I ordered a replacement tube, and when I returned a bit later it had arrived. This time I got expert help from a local dealer – and he took it to pieces, replaced the tube (ok – I was hovering a bit) and voila – it all worked. He also replaced the hard disk drive, which, not surprisingly, was beginning to sound like a tractor.

Here we are after the event – me with the husband and wife team. They were amazing.

It cost a relatively trivial amount, but it did take a lot of time to sort out. The hardest part was finding someone to send the part to – and that was these guys.

I’m close now to an excuse to put in one of my favorite photos, so let me reiterate the overall point – if the warranty is expired, and the cost of repair is extraordinarily high, then do it yourself. If it’s too complicated for you (and you should really just try pulling it to pieces) then find someone unofficial that can do it for you.

Here’s round the worlder Tiffany doing some running repairs to her bike Thelma – a frighteningly common occurrence. The bolts that hold on the cover in her hands eventually ripped away from the bike, and so she subsequently had to get a grizzly old man in Cordoba to make more permanent repairs, but she kept the bike going for thousands of miles before that.

You don’t have to have a fancy workshop – Tiffany is on the street in the above shot, and Mamasita (as we called her) on the Salar de Uyuni trip I followed on my bike managed to feed about 15 of us each night with delicious 3 course meals – and this was her kitchen.

I have no excuse for this photographic journey through prior travels while discussing warranties. It’s just that I was sorting through old photos today. However the examples are salient, and the points are clear:

1: First try to fix it yourself – the internet is a remarkable source of answers to almost all breakdowns, and taking things to bit is fun.

2: If you fail to fix it then go to a dealer. Ask them to look at it, but don’t spend too much, and walk away if their quote is too high.

3: If the dealer quote is high, then find the cheap unofficial alternative. If you are lucky enough to be in a third world country then this will be easy. If not then look for young and old people that like tinkerng – they have plenty of time and curious minds.

4: Most of the time the repair can be cheap. If it isn’t then you are probably doing something wrong, or it’s just beyond fixing and time to buy again. If you cannot repair it then at least list it on Trade Me or eBay  – there may be someone out there making a business of buying broken widgets, fixing them and selling them on again.

In the process of getting a product fixed we should always keep in mind the replacement cost. If the unit is cheap then you may skip one or more steps, and just replace and move on. It’s not the most sustainable thing to do, and you miss out on the fun of trying to fix it yourself. But do make sure you give someone else a shot at repair by selling or placing it in a recycle facility.

In the next Never buy the Warranty piece I’ll discuss the cost of those warranties. I think you know how that will turn out.

Never buy the warranty: Repairing is cheap

Well done Magnum Mac Wellington

My MacBook Pro 17 died on Friday.

It failed to restart after running the software upgrade for the magic mouse. I tried the usual tricks (Apple has a good knowledgebase) and then twittered the failure and headed for Magnum Mac, Mac in hand.

I’ve been there plenty of times, but never to the service department. The wait was short, but painful – any wait when you have a broken computer in hand is painful. Meanwhile the lazyweb (Twitter) was responding, and I not only did I have a likely diagnosis (thanks @johnclegg – dead main logic board) but also a pointer to someone that could replace it for cheaper than the apparently $2,000 I was up for (thanks to @gnat).

I paid Magnum Mac $60 for the mac to be looked at, and another total of $120 (all +GST) for priority service. I fully support the ability to jump the queue by paying more – it’s a simple way to both price discriminate and to differentiate those customers that really are in a hurry from those who can make do. It’s also under-used by everyone. Why can’t I pay more through an 0900 number to get an immediate and local answer to my customer service calls to Telecom or Vodafone?

Priority service meant my mac would get looked at within the hour – important on a Friday at 12:56pm. The tech suspected it was a stuffed board, and put me onto their text service, whatever that was.

I soon found out – with the first text at 1:19pm – the repair status was “in Progress” apparently. That was good.

At 14:25 the next text came in – the repair status was now “waiting on parts”. I called immediately – not wanting to drop $2,000 on parts.

It was great news – as it turns out that my computer was one of those affected by the NVIDIA graphics chipset issues, and the replacement main logic board would be for free. Even better, the part would arrive on Monday.

At 10:57 today, Monday,  I received another text – “in Progress”, and at 12:00 I got the “Completed” text. I picked it up and was up and running immediately.

Total elapsed time was less than a working day. That is simply stunning, and a huge turnaround from the service levels of the past.

Total cost – $202.50 – less than the Applecare cost, of which more shortly.

Lessons for service providers

Offer a premium service to customers in a hurry and/or with more money. Why can’t I pay more through an 0900 number to get an immediate and local answer to my customer service calls to Telecom or Vodafone?

Deal with repairs quickly – get your systems and processes right and you’ll get the fixed products back to customers within the day. That makes your costs low, customers happy and for a happy work environment.

Find a way to make it free – or at least cheap. That means working the claims for the customer, sourcing better parts for cheaper and employing technical staff that are great at what they do so they can do it efficiently.

Lessons for customers

Go to the professionals. Just as with my BMW motorcycles I went to a service center that specialises in the products. For BMW that might mean an aging guy in a tiny garage in Mendoza, Argentina, or the Auckland’s Experience BMW. For Apple it meant first trying the local dealer.

Know your rights. In New Zealand it is simple – the Consumer Guarantees Act states:

Goods must be:

  • fit for the purpose they are made for
  • safe
  • durable – last for a reasonable time
  • have no minor defects
  • acceptable in look and finish.

It was well past the purchase date, but it turns out that Apple sold a product that was not fit for purpose or durable  – it didn’t do what it said it would on the box for long enough. That meant they were liable under New Zealand law, and under the US system of lawsuits, and that customers would not have to pay for a fix.

Check the manufacturer warranty. Apple covers all of their computers for a year – for free. For me, and from what I observe, for others, computers either work out of the box or they fail fast. If they work for the first month or two then, viruses and dropping accidents aside, they are likely to keep going forever. (This does not apply to media drives, but then you should be replacing those regularly anyway.) So you can take your computer home with confidence, knowing that under NZ law and probably the standard, free, warranty you can return it for repair.

Make noises. The NVIDIA issue was ignored by Apple for a while, but eventually the sheer weight of dissatisfied customers forced their hand, and they settled with NVIDIA and offered the free replacement program. Similarly you can make noise – either by adding your voice to the others, by twittering, blogging and doing wharever people do on Facebook, or by getting a little more personal in store. Be reasonable and polite, and give the vendor the chance to make amends.

So I was lucky – the main logic board was covered by the settlement and replacement was free. As a mac fanboi I’m obliged to say that it was only the high quality of Apple’s product that kept it going for so long in spite of NVIDIA’s flaw, but then that would be asking for another failure. So instead I’ll mention that I did have an alternative, non-official, service provider. I didn’t use him, so my next Never buy the warranty post will be about another experience that I had – in Mendoza, Argentina.

Be good and be different – but do it the right way

I’m reading Zag – a little book with the thesis that to succeed you not only need to be good – but you need to be different from everyone else that is good. It’s a nice way to look at things.

Unfortunately for author Marty Neumeier he picked one bad example – a hazard when you write any business book to be sure:

So when my local bank bought a fifty foot outdoor poster emblazoned with the tagline “Nice. Since 1878,” they’d have been better off putting their money in a savings account.

…Citibank positioned their bank as the anti-bank with the tagline “Live Richly,” and headlines such as “For a guaranteed return on investment, try buying flowers”

Ouch. Citibank has since hit the wall hard, and a “nice” bank is very hard to find these days – especially in the USA.

Citi’s greed-oriented slogan was always bad – not just now, but when the book was published in 2007. Who wants to bank with someone that is encouraging its customers to blow money? It’s not a good look, and it was a pointer to gaps in the values of Citibank – gaps that ultimately resulted in the collapse.

It’s a lesson we can all learn from – being different and being good is not nearly as important as doing business in the right way and for the right reasons.

Incidentally – the Zagbook website is well worth a look – a great example of book promotion. It’s missing the vital component though – the ability to interact with the author.

A lesson in volatility

This year to date my US-based stock portfolio is up 44%, well above the benchmark S&P500:

Yippee!

Actually – not so fast.

Last year my highly levered (lots of options) portfolio went down a stunning 66%. I got caught out selling my shorts too early (I was short Citibank amongst others) and bet on the market turning around – and it didn’t.

Now I did withdraw money along the way, so things were not so bad,  and I’ve always looked at this particular portfolio as play money. But that last quarter hurt – no doubt about that.

What really hurts is how much effort it will take to get that back. Even after the excellent performance year to date, $100 invested in my portfolio at the beginning of 2008 would be worth only $49.

Money I have with Gareth Morgan investments in the meantime has lost 13.6% since September 2006 – or 4.4% per annum. That’s a lost better return than the S&P500 and my own portfolio. My instructions to them were for a growth portfolio, and while they lost a bit initially they have toed a very conservative line since. I’d like to see a bit more Berkshire Hathaway in there though.

Goodbye Trade and Exchange

Michael Carney picks up that Trade and Exchange has finally given up on publishing in print. They ceased to be relevant a number of years ago, and will not be missed today.

However Trade and Exchange were the Trade Me of their day. They seized an opportunity to grab and extend the classifieds market away from newspapers, and in doing so created a large business and a headache for the papers.

Then Trade Me then seized the opportunity to grab and extend T&E’s business, and finally Fairfax completed the circle when they purchased Trade Me to get their old line of business back.

On the way through T&E and Trade Me the classified’s business grew tremendously in size and usefulness, to become the e-commerce engine of New Zealand.

There are a number of lessons to be learned:

  1. Don’t be afraid of destroying your own business by launching a new one. If you don’t then someone else will.
  2. If you accept that you are not capable of destroying your own business, then pull out your check book when it looks like someone else will. Once you have purchased them then leave them alone and let them grow independently of your own systems and processes.
  3. Know when to lose – exit a market when you stop making money, and not a moment before of after.\


(disclosure – I’ve consulted Trade Me, Fairfax and WAN’s Quokka)

Guest Post: Glen Wiggs on Minimum Pricing of Alcohol

Another post by my father Glen Wiggs. In this one he refers to a Scottish study where imposing a minimum price of alcohol did nothing to reduce sales of ready to drink products (sold to younger folk), but did reduce spirits, wine and beer sales. So the older voters get to drink less while the newbie votrers still drink the same

More on Minimum Pricing of Alcohol

The Scottish Government is determined to introduce minimum pricing of alcohol where there would be a minimum price per standard drink unit of alcohol There have been two significant studies by The University of Sheffield. The United Kingdom Department of Health commissioned the first and the Scottish Government commissioned the second. These studies are being used by the Scottish Government to justify the introduction of minimum pricing. The Scottish Government is also keen on a discount ban. The New Zealand Law Commission are giving strong consideration to both minimum pricing and discount bans in their review if the liquor laws.

The second University of Sheffield study, which was released a month ago, http://www.scotland.gov.uk/Publications/2009/09/24131201/0 assessed both the impact of discount bans and minimum price on consumption. The study used epidemiological and econometric models and therefore in the formulation of the models made a number of assumptions. The conclusions are therefore theoretical and it would it would be risky to base policy on the study.

The study claims that there would be a reduction in consumption in different types of drink in different proportions. Page 76 has a graph with examples, which is reproduced.

U sheffield

A 70p (about $1.60, which would make the minimum price for a bottle of Heineken $2.08) per unit minimum price with or without a discount ban is estimated to reduce spirits consumption by 40%, beer by 10%, wine without a discount ban by 17% and with a discount ban by 20%. But note that there would be virtually no reduction in consumption of RTDs. We question whether this is a desired social outcome as RTDs are popular with younger drinkers.

In the 2007-08 ALAC Alcohol Monitor 35% of drink types consumed by youth 12-17 were RTDs, but of youth Binge Drinkers 51% drank RTDs. A minimum price policy is likely to incentivise young drinkers to drink greater numbers of RTDs. Clearly a minimum price policy in New Zealand is likely to increase inappropriate drinking by youth rather than curtailing it.

Glen Wiggs

Director

Foundation for Advertising Research

Adjunct Professor of Advertising Regulation

University of the Sunshine Coast, Queensland

Excess pay and excess bloat

A nice juxtaposition – this Sydney Morning Herald article reporting complaints about former Fairfax senior execs earning too much in payouts is accompanied by a video ad.

I think Sankar and David’s payouts were justified – and that shareholders should be questioning why they were pushed out. They were the people behind the Trade Me deal and understood the transformative power of the internet. The current regime has a ery old media flavour to it, which will help streamline the newspapers, but what will happen to the digital assets?

A warning sign for those digital assets could be the video advertisement on the smh.co.au website. Video ads may pay a bit more, but they are a great way to put folks off your site. Use them with care or preferably not at all.

So is the video ad a sign of usability taking a backward place versus demands for revenue?

Perhaps not – this particular ad was for MyCareer.com.au – another Fairfax property.

It’s all wrong.