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Sept. 23 2016 11:00 AM

Chipotle Gave Away Tons of Free Food to Fix Its Battered Image. It Didn’t Work.

This article originally appeared on Business Insider.

As Chipotle's summer rewards program comes to a close, the results are looking less than positive.

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In July, the chain launched Chiptopia, a three-month promotion tied to the number of times customers visit Chipotle.

The program had some of the best rewards in the restaurant business, with tons of opportunities for customers to get free food.

By late July, the program had more than 3.6 million participants and accounted for 30 percent of all transactions.

Today, Chipotle says more than 3.1 million customers have registered and used their Chiptopia cards. According to the company, 1.2 million users signing up in August and 85,000 participants are on track to earn the catering reward, meaning they visited at least 11 times each month for the last three months.

More than 3 million participants means spending a lot of money on free burritos, especially after the company gave away roughly $70 million in free-food coupons from February to May. Free food has been key to Chipotle's game plan to win back customers after E. coli outbreaks helped drive away business, with the chain's same-store sales dropping 30 percent in the first quarter of 2016.

However, as September ends and the program comes to a close, it seems it has failed to address one of Chipotle's biggest problems: customer perception.

The chain has hit a wall in terms of brand perception, according to YouGov BrandIndex data. On July 1, the day Chiptopia launched, consumer perception of the brand's quality was 9.4, on a scale of -100 to 100. On September 20, that rating had dropped to 6.8, after almost three months of staying roughly the same.

Earlier this week, Chipotle marketing director Mark Crumpacker said in an interview that the chain was losing customers to fast-food giant McDonald's. On Wednesday, the chain launched a new campaign attempting to convince customers the food is safe to eat, after the E. coli outbreaks that drove away customers.

"Chiptopia was not a perception tool, though other programs have been having a positive impact on consumer perceptions," Chipotle's communications director, Chris Arnold, said in an email to Business Insider, noting the ad "A Love Story" has helped boost customer perception.

"The program we launched yesterday, to update people on some of the important food-safety changes we have made, serves yet a different purpose," Arnold continued. "We promised our customers that we would establish Chipotle as an industry leader in food safety, so we wanted to be transparent about many of the food-safety advancements we have put in place."

Still, a rewards program seems like it should earn some goodwill from customers, especially one with rewards as good as Chipotle's. Chiptopia is, by all measures, a great deal—one of the best in the restaurant industry. If you buy 12 burritos over the three months (four a month), you get four free burritos.  That means it has a return rate of roughly 33 percent for customers.

That's an incredibly high return rate. For example, look at Starbucks, which has an incredibly successful rewards program. Starbucks Rewards members earn a free food or drink item after spending $62.50. A semi-pricey Starbucks drinks is $5, meaning you're generously receiving an 8 percent return.

Chipotle's rewards program seems to be facing two big problems when it comes to driving customer perception: It is too confusing to the average customer and not sustainable for Chipotle in the long term.

From the start, Chiptopia has been aimed at Chipotle loyalists—in part because the program is too confusing for any other customers. The three-tiered system takes quite a bit of studying to sort out, with each level having slightly different rewards and a long list of qualifiers.

In August, Morgan Stanley wrote in a research note that the program had helped convince loyal Chipotle customers to resume their prior frequency, but had not impacted the more casual customers that make up 75% of the chain's customers. While the most loyal quarter of the chain's customer base make up 60 percent to 70 percent of visits, if Chipotle wants to reach its former level of customer perception and sales, it needs to recapture the average consumer as well.

Which brings us to the second problem: Chiptopia wasn't designed to perform in the long term. Just as Chipotle can't afford to keep giving out free burritos forever, a rewards program with a 33 percent return rate would end up being extraordinarily expensive for the company.

That could be a problem for Chipotle.

"The program's end in September could alienate some customers just as they are getting accustomed to the rewards," BTIG analyst Peter Saleh wrote in a July research note.

Chipotle said two months ago that it was already working on a permanent program to prevent backlash once Chiptopia ends. The new program has not yet been announced by Chipotle, though the company is insistent that it is on the right track to make a comeback.

"Recovery is happening," says Arnold. "Since the investigation ended about seven months ago, we have recovered about 40 percent of the sales we lost from the low point in January (as of our most recent reporting period at the end of the second quarter), and introduced programs to help stimulate frequency and restore trust. These things are also moving in the right direction. But none of this happens overnight."

A new rewards program is likely another program with the goal of moving things in that direction in the near future. Hopefully for Chipotle, an updated program will be less confusing—even if rewards are less bountiful.

Sept. 21 2016 5:07 PM

The Demise of Sports Authority Is Great News for Dick’s Sporting Goods

This post originally appeared on Business Insider.

Dick's Sporting Goods is running out of competitors — and that's great news for the retail chain.

Many of the brand's rivals have fallen on hard times, says Paul R. La Monica at CNN Money.

Sports Authority and Sport Chalet have gone out of business amid an overall downturn in the athletic equipment industry, and Golfsmith recently filed for bankruptcy.

Sept. 19 2016 4:43 PM

Kmart Is Closing 64 Stores and Laying Off Thousands

This post originally appeared on Business Insider.

Kmart is closing 64 stores across 28 states.

Sears Holdings, which owns Sears and Kmart, informed Kmart employees of the closures on Friday, according to several local news reports and multiple employees who spoke with Business Insider.

The stores that are closing will begin liquidation sales on September 22 and close by mid-December, employees said.

Sept. 16 2016 5:06 PM

Breweries and Alcohol Distributors Are Getting Nervous About Weed Legalization in the Northeast

Big players in the alcohol business are pushing back on a major marijuana legalization initiative.

Massachusetts is one of five states with a ballot initiative this year that could legalize recreational use of marijuana, and the alcohol industry is leading the charge to stop the initiative. In Massachusetts, a political action committee that represents 16 of the state's beer distributors isamong the top three donors to an anti-legalization group, The Intercept's Lee Fang discovered.

Sept. 15 2016 5:50 PM

Samsung’s Exploding Note 7 Is Officially Getting a Recall

This post originally appeared on Business Insider.

The US Consumer Product Safety Commission has officially recalled Samsung's Galaxy Note 7.

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Here's the CPSC's statement:

This recall involves the Samsung Galaxy Note 7 smartphone sold before September 15, 2016. The recalled devices have a 5.7 inch screen and were sold in the following colors: black onyx, blue coral, gold platinum and silver titanium with a matching stylus. Samsung is printed on the top front of the phone and Galaxy Note 7 is printed on the back of the phone.

The recall comes after Samsung said it found several cases where Note 7 phones exploded.

The CPSC listing for the recall says about 1 million Note 7 units are affected by the recall. Customers can get a replacement phone (a Samsung Galaxy S7, Galaxy S7 Edge, or a new Note 7 without the battery problem) or a refund. They can go to Samsung's website and input the IMEI number on the back of their phone to see if their device is affected. In the meantime, the CPSC suggested that users power down their Note 7.

In a statement to Business Insider, Samsung said replacement Note 7 phones will be in retail locations by Sept. 21.

The CPSC says there are 92 reported cases of batteries overheating in the US. That includes 26 reports of burns and 55 reports of property damage.  A CPSC spokesperson told reporters on a conference call that the Note 7 represents "a very serious fire hazard."

Samsung halted sales of the device about two weeks ago following reports that some batteries were exploding inside the device. Customers were instructed to contact their retailer to exchange the device for another Samsung phone or a refund. Airlines and public transportation organizations have been telling riders not to power on their Note 7s while in transit.

However, there have been several issues with the returns, as documented in reports by the Wall Street Journal and Gizmodo. Users report that Samsung's retail and carrier partners were not prepared to exchange Galaxy Note 7s, which frustrated many.

It's particularly bad timing for Samsung. The recall comes a day before Apple's new iPhone 7 goes on sale. The Note 7 received universally positive reviews ahead of the iPhone 7 launch.

Samsung has lost at least $20 billion in market cap since reports of Note 7 problems began two over two weeks ago.

Sept. 9 2016 11:30 AM

Why Is Apple Jacking Up the Prices of Its Devices in the U.K.?

Apple has used the cover of the iPhone 7 launch to bump up the prices of many of its products in Britain—apparently in response to a weak pound following Britain's vote to leave the EU.

The Cupertino technology giant has increased the U.K. prices of certain models of iPhone, iPad Pro, and iPad Air—while retaining the older, smaller pricetag in the U.S.

On Wednesday, Apple announced the iPhone 7, as well as the second Apple Watch, in its biggest launch day of the year. At the same time, it has increased the minimum internal storage in many of its devices, up from 16GB to 32GB.

On Apple's American website, this hasn't affected prices. But U.K. customers could be in for a shock if they were holding off on purchasing goods in the hope of a reduction.

The iPhone 7 is the most obvious offender. The cheapest version of the 6s retailed for £539; its successor, the 32GB iPhone 7, goes for £599 ($649 in the U.S., then and now). Meanwhile, the highest-end model, with 256GB of storage, is £919—£100 more than its predecessor.

Sept. 3 2016 9:00 AM

Why Coca-Cola Is Getting Into the Coffee Game

This post originally appeared on Business Insider.

Coca-Cola is investing in coffee.

On Thursday, Coca-Cola’s iced tea brand Gold Peak announced it is entering the ready-to-drink coffee business. The brand, which is currently best known for its $1 billion bottled iced tea business, will launch bottled coffees and tea lattes in the first quarter of 2017.

It’s a move that reveals Coca-Cola’s plans to enter the $2 billion ready-to-drink coffee industry—a move that might be key to the company’s future.

In July, Coca-Cola reported that its sparkling-beverage sales by volume dropped 1 percent in the second quarter, part of a larger downward trend in soda consumption. In 2015, the total volume of soda consumed in the US dropped 1.2 percent, compared to a drop of 0.9 percent in 2014, according to Beverage Digest.

As a result, Coca-Cola and Pepsi are looking to other beverages to grow sales.

Sept. 2 2016 12:18 PM

Samsung Is Recalling Its Exploding Phone. And Its Problems Are Only Getting Worse.

This post originally appeared on Business Insider.

Samsung’s nightmare scenario is happening.

The South Korean electronics giant was forced to suspend sales of its new flagship smartphone, the Galaxy Note 7, on Friday because dozens of the handsets have exploded.

The phone, which has been extremely well reviewed, is now also being recalled worldwide, in a move that is likely to cost Samsung hundreds of millions of dollars.

And compounding matters, the colossal disaster comes on the eve of the launch of a new iPhone from Samsung’s archrival Apple.

It’s a hard to overstate the size of this screw-up.

Sept. 1 2016 1:25 PM

Walmart Is Cutting 7,000 Office Jobs

Walmart is cutting 7,000 office jobs from its retail stores.

The positions, which involve invoicing and accounting in stores' back offices, are among the company's highest-paid hourly jobs. Sarah Nassauer at the Wall Street Journal first reported the cuts.

Walmart wants its back-office employees interacting with shoppers instead of doing paperwork, a Walmart spokeswoman told Business Insider.

Aug. 31 2016 6:13 PM

Theranos Is Temporarily Withdrawing Its Month-Old Zika Test 

This post originally appeared on Business Insider.

Theranos is withdrawing its bid for FDA approval of a diagnostic test for Zika that they announced earlier in August, according to a story in The Wall Street Journal.

Theranos confirmed to Business Insider that the test has been withdrawn, but said the company has plans to resubmit it.

John Carreyrou and Christopher Weaver report that an FDA inspection found that, as part of a study to validate the new test, the company had collected some data without a patient safety plan in place that was approved by an institutional review board.

The role of the board is to make sure that ahead of the trial and during it, the subjects’ rights and welfare are protected, according to the FDA. It’s a standard part of running studies that involve humans.

In the case of the Theranos study, the Journal noted, “it isn’t clear if the problem affected any patients.”

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