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Patently unfair

BY Ken Clark

Last month Upfront defended the Marketplace Fairness Act.

Some of you sent kind notes indicating appreciation for remarks in support of a level tax-playing field for online and brick-and-mortar retailers. In doing so, you revealed your fair-minded nature.

Not everyone agreed with every bullet point, however.

"I feel your Upfront piece in the May 2013 issue dismissed the complex issue with a toss-off answer," wrote one reader.

Upfront welcomes opposing viewpoints, and the reader above offers a legitimate and valid criticism. (Check out the full item at Homechannelnews.com.)

But let’s see if anyone disagrees with round two of Upfront’s crusade for common sense when we attack the patently unfair rules governing arcane, frivolous, disruptive and expensive patent lawsuits.

By anyone, we mean to exclude patent trolls. (More on them in a moment.)

One of my favorite examples of patent exuberance at retail involves a patent for lenticular optical display used in conjunction with stored value cards (gift cards). I have no beef with lenticular optical display — an amazing invention that allows for all kinds of sight gags. When looked at from one angle, the image is of a kitty cat. From another angle, the magic of L.O.D. converts the scene to a lunging tiger.

The inventor of such a technology deserves protection for and profits from his innovation. But a specific patent for L.O.D. on gift cards? Your honor, that’s just an excuse to try to sue somebody.

There are thousands of patents governing thousands of "inventions" even more arcane — buried deep in the products on the retailer’s shelves, maybe their packaging, or embedded in the technology at the checkout and store website.

This is the age of patent trolls. These are firms that make a living by acquiring obscure patents and threatening to sue legitimate companies — often retailers — who didn’t know there was such a thing as a patent for including a mobile link to a privacy policy posted on a website (an actual example).

Here’s how the National Retail Federation explains it: "Of cases that make it to trial, patent trolls lose 92% of the time. But the cost of defending a company against the claims is so high — the average case costs $2 million and can take 18 months — that many victims settle out of court."

By the NRF’s estimate, the activity cost legitimate businesses about $30 billion a year.

The tide appears to be turning. Earlier this month, the White House announced five executive actions and seven legislative recommendations to stem the tide of "high-tech patent issues."

One recommendation is to provide district courts with more discretion to award attorney’s fees for abusive court filings. That’s a concept that this column has promoted in the past for all kinds of lawsuits. It’s a patently simple approach to tort reform that can be boiled down to five words: If you lose, you pay.

The White House effort was quickly applauded by the NRF and the Retail Industry Leaders Association.

Upfront adds its voice to the chorus.

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The Lone Star State remains strong

BY HBSDEALER Staff

While housing markets deflated and subsequently bumped along a trough for several years, how many times did you hear that Texas appeared unscathed by the housing downturn? While significant lumber volumes continued to enter Texas, sales in other markets, such as those in Georgia and particularly the Atlanta market, were so scarce that empty and closed lumberyards in those markets became the norm.

Apparently, not much in Texas has changed. The state is still building new homes and selling them at a strong pace. In fact, four of the top 10 new-home sales markets in the country over the past year reside there, according to recent analysis from CoreLogic. Those markets are Houston (1), Dallas (3), San Antonio (5) and Austin (6). Furthermore, out of all homes sold, El Paso has the highest percentage of new-home sales in the country.

Another region of the country where a high rate of new homes versus existing homes is occurring is the Carolinas, where Columbia, S.C. (2); Charleston, S.C. (4); Charlotte, N.C. (6); Raleigh, N.C. (7) and Greenville, S.C. (9) rank in the top 10.

Six of the 10 markets rebounding the fastest are found in the West, particularly in California. According to CoreLogic, much of this is due to "the fact that the recovery there is from a very low base, so moderate increases in new-home sales can be magnified relative to markets that did not experience a large decline during the bust."

What is the difference between the fastest-growing markets and those that remained relatively strong throughout the housing downturn? According to CoreLogic, the decline in distressed inventory (foreclosed or short sale properties) is key to markets, such as those in California, rebounding the fastest. Sound fundamentals, such as increased population, job growth and affordability, have made markets in Texas and the Carolinas strong.

This article was provided by Crow’s Market and Price Service/RISI. For a free trial of this service, visit RISI.com/crowsfree.

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Brand and price battle for attention

BY HBSDEALER Staff

It’s a question as old as the cash register: What’s the key purchase motivator for the consumer — brand or price?

Everyone has his or her opinion. On top of it comes new research from Media, Pa.-based ICR, the international research and consulting firm, conducted on behalf of HCN, investigating how consumers are currently shopping various home improvement categories.

Short answer: It all depends on the category.

One thousand homeowners were interviewed and asked whether brand or price was more important when shopping various categories (see chart). The nationally representative sample yielded some interesting results. From a high-level perspective, brand was the winner in many categories with some exceptions. As usual however, the devil is in the details, and in some cases the overall results clouded some of the more specific insights when results were examined in more detail.

"One of the things this research pointed out was even in still challenging economic times, the home is considered an investment and consumers want to use the best brands they can afford," said Mark Delaney, VP client service at ICR. "Marketers should pay particular attention to how that sentiment varies by category and by demographics, such as age and income."

In categories such as kitchen appliances and power tools, brand was the clear winner as shown in the chart. However, in categories such as roofing materials and carpeting, price was the clear motivator.

There was little surprise in the roofing category. (Most homeowners would be hard-pressed to name roofing brands.) But the carpeting results were curious, according to Delaney.

"We had thought carpeting would score higher for brand than it did," he said. "This is perhaps illustrating the very cost-focused advertising by flooring retailers."

Age plays a significant role, according to the results. For example, the older the consumer, the more likely he or she will buy based on brand. In the case of exterior paint, 65-plus-year-old consumers bought based on brand 69% of the time — a full 10 percentage points higher than any other age group. In the case of carpeting, 43% of those in the 65-plus-age group bought based on brand — a full 13 percentage points higher than the next highest scoring age group of 35- to 44-year-olds.

"One theory certainly is that older consumers have more experience purchasing these categories," Delaney said, adding that buying a trusted brand is an age-old strategy of saving money in the long run.

Of course, gender roles weigh heavily on purchase decisions.

In the case of power tools, men are from planet "Brand," at 71% — and 57% for females. In the case of major kitchen appliances, however, men and women march in lock step, with 61% saying they favor brand over price, according to the data.

"This makes sense, given that kitchen appliances are one of the most widely advertised of the categories we examined — at least in terms of a mainstream audience. Apparently males and females both enjoy showing off their updated appliances to friends and neighbors," Delaney said.

ICR is an international consulting firm based in Media, Pa. It specializes in sectors, including home and home remodeling, and consumer package goods.

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