3
1st Quarter Projections Rise
More Michigan retailers project January– March sales will be as good or better than the first three months of 2015. Page 3
7
Chip Cards Update
Data gathered in the months since credit card liability shifted begin to show the extent of credit card fraud. Page 7
9
Flint’s Reminder
Toxic waste usually isn’t associated with retail, but retailers are not immune from environmental regulations. Page 9
® February 2016 Vol. 41 No. 1
Warm weather a culprit in cooler holiday sales across state and nation (Also see Page 3) Unseasonably warm weather helped push Michigan retailers’ holiday sales below forecasts. Sales increased 0.4 percent over the 2014 season, despite retailers’ forecasts of a 2 percent rise, according to the latest Michigan Retail Index survey, a joint project of Michigan Retailers Association and the Federal Reserve Bank of Chicago. Although sales did grow, the modest increase was disappointing in light of several factors that had pointed to a more robust season. The combination of lower gasoline and home heating prices, reduced unemployment and stronger consumer confidence pointed to stronger sales. But warm weather and lack of snow hurt sales of winter apparel, other winter merchandise and holiday recreation. As an example, only 20 percent of Northern Michigan retailers increased sales during December, compared to 60 percent the previous December. Deep discounts, more mobile shopping and going up against strong figures from last year also hurt performance. In 2014, 52 percent of Michigan retailers reported increases in holiday sales. That slid to 45 percent this past season. Similar Pattern Sales across the nation showed a similar pattern by coming in below projections. U.S. holiday sales rose 3 percent – below preseason forecasts of 3.7 percent – the National Retail Federation reported. For the holiday season, 45 percent of Michigan retailers reported yearto-year increases, while 34 percent experienced declines and 21 percent said sales were flat. Continued on page 6
The official publication of Michigan Retailers Association
www.retailers.com
Big events shaping Capitol agenda Crisis issues, such as fixing the Flint water system and dealing with the severe financial problems of Detroit Public Schools, will help determine what happens to the list of tax and regulatory issues facing retail in the
Michigan Legislature in 2016. Governor Rick Snyder spent most of his State of the State Address on January 17 focusing on the Flint water situation and Detroit schools’ finances.
Traditionally, a governor uses the address to put forth a long list of initiatives he wants the legislature to enact during the year. Not this year. Those two issues, plus other priorities for legislative leaders – including major changes to no-fault auto insurance – mean this year’s agenda could be far different from 2015, when retail achieved two major victories and a host of smaller ones. For good measure, it is also an election year for all members of the Michigan House of Representatives, as well as a presidential year. Upcoming elections always affect what lawmakers do in the months leading up to November – including leaving issues until the sometimes wild lame-duck session Continued on page 4
Chip & PIN adds greater security
Company Roots The company’s roots were plant-
Credit cards using a chip and PIN (personal identification number) are more secure than those with a chip and signature and provide better protection for retailers and their customers. That’s why MRA believes Chip & PIN should be the standard in the U.S., as it is in much of Europe and the rest of the world, MRA told state lawmakers exploring the issue. The House Financial Services Committee held an informational hearing on January 20 to discuss the differences between new credit cards issued with a chip and a signature (Chip & Sign) vs. those with a chip and a PIN (Chip & PIN). MRA was invited to testify. U.S. card issuers are issuing primarily Chip & Sign cards, which include the chip microprocessor and are authorized by the card owner’s signature rather than a PIN. In Chip & PIN, the four-digit PIN serves as a second level of encrypted protection, making it more difficult to guess or duplicate a PIN that is unique to the card owner than it is
Continued on page 7
Continued on page 9
Members of the second generation of family owned and operated English Gardens display the IGC Retailer of the Year Award at the Royal Oak store. Pictured are: (front row from left) Bob Walker, Lynette Walker, Linda Vespa Yugovich, Val Vespa, Rick Vespa; (back from left) Frank Janosz, John Darin, Debbie Lowman, Dean Darin, Johnny Darin.
Garden retailer’s award rooted in customer care by Doug Henze Surviving and thriving for 60 years is no small feat for any business, but John Darin couldn’t make success sound simpler. “It was always about listening to the customers,” said the president of gardening center retailer English Gardens, headquartered in West Bloomfield. “We’d listen and figure out what they wanted and go out and
get it for them.” That philosophy helped Darin’s family grow the company from the single Dearborn Heights location it acquired in 1954 into a six-store operation with annual sales just shy of $30 million. It also recently earned English Gardens the top award in its industry – 2015 Retailer of the Year from Independent Garden Centers (IGC). IGC is the world’s largest trade show and conference for independent garden center owners, managers and buyers.
2
Michigan Retailer
Pure Michigan Not Relaxing by James P. Hallan, MRA President and Chief Executive Officer Random thoughts to start the year ... generous membership. compensation program. At our January board meeting we Also, given the aging water systems His wisdom helped craft the sound enjoyed a terrific presentation by and other infrastructure of our larger business principles that laid the Dave Lorenz, vice president of Travel cities, one has to wonder how many groundwork for Retailers Insurance Michigan, on all the good work the more Flints are on the horizon. Company. On behalf of our memberPure Michigan campaign has pership, our very best congratulations formed to promote Michigan as a Leadership go to Wayne for receiving such a travel destination. In this issue you will note that richly deserved honor. In many parts of the state, retail Wayne Muller, former president of Also, a respectful nod to my counis directly tied to travel – eating and Muller Shoes in Grand Rapids, was terpart, Rick McAllister, who is shopping are major activities retiring after a distinguished of most tourists – and the career as president of the statistics are compelling. He Florida Retail Federation. detailed how the campaign MRA and FRF have had a long went from a $6 million budand trusted business relationget in 2006 that produced an ship that developed while ROI of $2 in state revenue Rick was at the helm. We wish for every $1 spent, to a $12.4 him the best and thank him million budget in 2014 that for his friendship. returned $7 on each dollar. Just as important, he outGas lined new promotions for With the price of gasoline 2016 that focus on Detroit, the and natural gas at bedrock levU.P. and the rest of the state. els, it is surprising that retail Clearly, the Pure Michigan sales aren’t stronger, especialcampaign, led by the wonly this past Christmas season. derful landscape imagery of Certainly, the stock market Michigan and the soothing Travel Michigan’s Dave Lorenz updates MRA board members gyrations and international tennarration of Tim Allen, is on the Pure Michigan campaign. Photo by Gary Shrewsbury. sions are weighing heavily on bringing visitors to Michigan. the minds of some consumers. That’s good for both the retail and elected to the National Shoe Retailhospitality industries. ers Association Hall of Fame. In the Snow 1990s Wayne served as chairman Where are you? How did we miss Elections of our Retailers Fund workers’ the storm that hit the East Coast? The commercials by the presidential hopefuls are endless and we still have a long way to go before the parties pick their candidates. Michigan’s primary is MRA has hired and other digital and social media set for March 8, so expect the field to Rachel Schafer as platforms, as well as tracking their narrow and commercials intensify. digital marketing results. She also creates ebulletins, Without commenting on partisan specialist to help writes copy for MRA websites and issues, I admire the stamina of every the Association produces web videos. candidate running for office and the increase its use of Other duties include helping run effort put forth in making his or her a broad range of the Buy Nearby campaign, overseeing case for the world’s toughest job. We digital and social the annual scholarship competition are indeed fortunate to live in a counmedia activities and writing and editing news releases Schafer try where we have the right to cast a to increase memand Michigan Retailer copy. vote in a free democracy to elect our bership and sales of services. Schafer has a background in video next leader. Too many countries deny Schafer, a recent graduate of Central editing and event organizing. She inthat basic right to their citizens. Michigan University, was an intern at terned at a local television station Michigan Virtual University prior to during her sophomore year of college Help for Flint joining MRA. She also interned at MRA and was introduced to digital media The facts will come to light, but while attending college. and its importance. it is an awful situation that needs a “Digital marketing is always evolvShe resides in Westphalia and enquick solution. Providing interim ing,” she said. “A new product, trend joys spending her free time fishing, help, many of our members have or platform becomes popular and it’s kayaking, playing basketball and stepped forward to provide bottled integrated into businesses around the volleyball. She’s an avid reader, adwater, filtration devices and financial globe. My job is to learn those strateventurer and sports enthusiast. assistance to help those suffering in gies and use them effectively to help “After interning at MRA for four the Flint community. improve our performance in a numsummers, I’ve been able to get to I won’t mention retailers by name ber of key areas.” know the staff and culture of the orfor fear of omitting someone. But you Her responsibilities include creganization really well,” she said. “I’m should all be very proud of the level ating marketing campaigns using excited to see what’s in store for MRA of support that has come from our Google Adwords, Facebook ads and myself in the future.”
MRA boosts digital marketing focus
www.retailers.com
Board of Directors: Dan Marshall
Chair Marshall Music Company, Lansing
James P. Hallan
President and CEO Michigan Retailers Association
Orin Mazzoni, Jr.
Vice Chair Orin Jewelers, Garden City
Peter R. Sobelton Treasurer Birmingham
William J. Hallan
Secretary Michigan Retailers Association
Thomas Ungrodt
Past Chair Ideation, Ann Arbor
Brian Ducharme AT&T
Becky Beauchine Kulka
Becky Beauchine Kulka Diamonds and Fine Jewelry, Okemos
Joseph McCurry
Credit Card Group
Larry Mullins
Brandon Tire & Auto Service Center, Ortonville
R.D. (Dan) Musser III
Grand Hotel, Mackinac Island
Barb Stein
Great Northern Trading Co., Rockford
Joe Swanson Target Corp.
James Walsh
Meijer, Inc., Grand Rapids
D. Larry Sherman
Board Member Emeritus
Michigan Retailers Services, Inc. Board of Directors: Bo Brines Little Forks Outfitters, Midland
Bill Golden
Golden Shoes, Traverse City
Emily Matthews
Potent Potables Project, Lansing
James P. Hallan Thomas B. Scott Publisher
Editor
Pat Kerwin
Design Manager
Publication Office: 603 South Washington Avenue Lansing, MI 48933 517.372.5656 or 800.366.3699 Fax: 517.372.1303 www.Retailers.com www.RetailersInsurance.com www.BuyNearbyMI.com
Subscriptions:
Michigan Retailer (USPS 345-780, ISSN 0889-0439) is published in February, April, June, August, October and December for $20 per year by Michigan Retailers Association, 603 South Washington Ave., Lansing, MI 48933. Subscription fees are automatically included in the Michigan Retailers Asociation membership dues. Periodical postage paid at Lansing, Michigan. POSTMASTER: Send address changes to 603 South Washington Ave., Lansing, MI 48933. The Michigan Retailer may be recycled with other white office paper.
February 2016
3
MICHIGAN RETAIL INDEX
1st Quarter projections rise after December dip Reserve Bank of Chicago’s Detroit branch. Index values above 50 generally indicate positive activity; the higher the number, the stronger the activity. National sales figures showed the same dip in December. Sales fell 0.1 percent, according to the U.S. Commerce Department. Looking forward, 47 percent of Michigan retailers expect sales during January–March to increase over
Current
the same period last year, while 22 percent project a decrease and 31 percent no change. That puts the seasonally adjusted outlook index at 71.0, up from 62.6 in November. A year ago December the outlook index stood at 68.0. State sales tax revenue in December was down 8.4 percent from the December 2014 level. The decline in sales tax collections occurred both in sales tax
3-Month
14 -15
Performance Index
13 -14
80
70
70
60
60
50
50
40
40
30
30
revenue from vehicle sales, which was down 6.4 percent from the year-ago level, and sales tax on all other taxable sales, which was down 8.7 percent. Complete results of this month’s Michigan Retail Index—including data on sales, inventory, prices, promotions and hiring—are available at www. retailers.com/mra/news/michiganretail-index.html. The website includes figures dating back to July 1994.
14 -15
Outlook Index
80
13 -14
2014
2015
700 600
661
673 617 580
616
602
500 400 300
DEC
NOV
OCT
SEP
AUG
JUL
JUN
MAY
APR
MAR
FEB
JAN
DEC
NOV
OCT
SEP
AUG
JUL
JUN
MAY APR
MAR
FEB
JAN
The new year has brought greater optimism for improved sales, according to the Michigan Retail Index, a joint project of MRA and the Federal Reserve Bank of Chicago. Nearly 80 percent of Michigan retailers project sales during January through March will be as good or better than the first three months of 2015. The latest Index survey results moved the Index’s short-term outlook component up more than eight points from November to reach 71 on the 100-point scale. The increase came after December sales disappointed many retailers and the month failed to provide a strong finish to the holiday shopping season. The survey found 42 percent of retailers increased sales over the same month a year ago, while 49 percent recorded declines and 9 percent reported no change. The results create a seasonally adjusted performance index of 48.7, down from 50.2 in November. A year ago December the performance index stood at 66.5. The 100-point index gauges the performance of the state’s overall retail industry, based on monthly surveys conducted by MRA and the Federal
Seasonally adjusted diffusion index, calculated by adding the percent of respondents indicating increased sales and half the percent indicating no change, and then seasonally adjusting the result using the U.S. Census Bureau’s X-11 Seasonal Adjustment procedure. Index values above 50 generally indicate an increase in activity, while values below 50 indicate a decrease.
200 (millions)
Oct
Nov
Dec
Be sure to complete your online survey each month!
46
Michigan Retailer
MRA honors Rep. Poleski as 2015 Legislator of Year The state lawmaker who was instrumental in MRA achieving its most important legislative victory in 2015 is the Association’s “Legislator of the Year.” State Rep. Earl Poleski was the sole sponsor of House Bill 4052 (Public Act 105 of 2015), which prohibits local units of govern-
such as item pricing reforms in 2011, the Organized Retail Crime Act in 2012 and Main Street Fairness in 2014. He was elected to the House in November 2010 to represent the people of Jackson County, including Jackson and the townships of Concord, Hanover,
Rep. Earl Poleski (second from left) with MRA Director of Government Affairs Amy Drumm, President and CEO James P. Hallan and Board Chair Dan Marshall of Marshall Music. Photo by Gary Shrewsbury
ment from adopting, enforcing or administering a local ordinance, policy or resolution on wage and benefit issues. The new law is intended to protect private businesses from a
Napoleon, Parma, Pulaski, Sandstone, Spring Arbor and Summit. Voters re-elected him to a third term in November 2014. The lawmaker is committed to improving state government and stopping Michigan from wasteful spending. He ran on a platform of repealing and replacing t h e b u rd e n s o m e Michigan Business Tax and quickly accomplished that in his first term. A Certified Public Accountant since 1981, he serves as a member of the House Appropriations Committee and the House Financial Liability Reform Committee. He is a graduate of Albion College and has a Master’s Degree in Taxation Science from Walsh College. He is a member of the Lally Group, PC accounting firm in Jackson. Rep. Poleski and his wife, Candy, live in Jackson and have two grown sons.
The new law continues efforts to improve Michigan’s business climate by having only one set of wage and benefit rules to follow throughout the state. patchwork of local labor laws that can drive up the costs of doing business. The measure, labeled by opponents as the “death star bill,” continues efforts to improve Michigan’s business climate by having only one set of wage and benefit rules to follow throughout the state. The Jackson Republican was honored at the January 19 Board of Directors meeting. Rep. Poleski has been an official “Friend of Retail” since MRA began the designation in 2012. He voted in support of critical retail issues
www.retailers.com
Events shaping Capitol agenda Continued from page 1
after the election. “There are a lot of retail issues that have carried over from last year, and we’re prepared to deal with them,” said Amy Drumm, MRA’s director of government affairs. “But at this point it’s hard to say how much focus lawmakers will give them. They could plow through them or put many aside until after the election.” 2015 Victories Topping the list of 2015 accomplishments was passage of local pre-emption legislation preventing local governments from enacting their own laws regarding minimum wage, paid leave time and fringe benefits. Another big win was passage late in the year of a road-funding package that didn’t increase the state sales tax. Voters gave retail a big assist in May by overwhelmingly defeating a complex ballot issue that would have raised the current 6 percent tax to 7 percent to help pay for road repairs. Among the issues MRA might face this year are: • “Assessor Overreach” This property tax issue gained much attention last year when legislators introduced several bills to address perceived wrongdoing by the Michigan Tax Tribunal in approving tax assessment appeals from large retailers. The appeals primarily utilize comparable sales that show a significant difference from the taxable value assigned by local tax assessors. The House Tax Policy Committee held two informational hearings on the issue and appointed a workgroup that met three times in December. MRA has worked to educate lawmakers that it’s unconstitutional in Michigan to single out large retail properties for different treatment than other properties. The vice chairman of the House Tax Policy Committee, who led the workgroup, plans to come up with draft legislation early in 2016. This issue will likely be MRA’s top focus in 2016. • Retail fraud cost recovery Legislation that failed to gain approval in 2014 was reintroduced in 2015 to allow for the recovery of law enforcement costs related to retail fraud cases. The Senate overwhelmingly approved the bill last April. The bill is designed to provide a greater incentive to law enforcement to pursue retail fraud cases. It is currently before the House Criminal Justice Committee,
where it awaits action. • Energy regulation/electric choice While neither chamber passed an energy reform bill in 2015, the House Energy Policy Committee took a vote in November on much-debated legislation to overhaul the state’s energy policy and regulations. At the center of the debate is HB 4298, a bill that impacts the electric choice market. While HB 4298 does not eliminate the current 10 percent enrollment cap, advocates of consumer choice – the ability to purchase electricity from an alternative supplier – claimed the changes would effectively kill the choice market. Amendments added to the bill would require an alternative energy customer that returns to a main utility company to remain with that utility for at least 15 years. If there were increased costs to the utility to get those customers back online, the customers would be required to stay with the utility for 20 years. • Electronic recycling consumer education Michigan has an e-waste law that the Department of Environmental Quality wants to revise in 2016. A piece of the draft bill requires retailers that sell covered items (computers, tablets, monitors, televisions, laptops, printers and smart phones) to provide education to consumers on how to recycle electronic items. MRA was part of a workgroup on the issue and has worked with members and the department to craft language flexible enough that members should not have a difficult time complying with the education requirement. A bill including compromise language should be introduced by spring. • Auto parts MRA has strong concerns over legislation that would limit a vehicle repair center to only using parts that meet or exceed Original Equipment Manufacturer (OEM) comparable quality parts as determined by a nationally recognized automotive parts testing agency. Language added to the bill before it was reported from committee last year gives customers and repair shop workers the false impression that aftermarket parts are inferior to OEM parts. Aftermarket parts are made with the same quality, and sometimes better quality, than OEM parts and cost less. The concerning language was
February 2016 stripped from the bill while on the House floor in 2015, but MRA will continue to closely monitor the bill to ensure the House or Senate does not restore the troublesome language prior to passage. • Patent reforms Legislation aimed at stopping badfaith patent infringement, or “patent trolls,” was approved by the Senate in 2015 but has not yet been taken up by the House. The legislation would require the courts to force a person who is found to have made a bad-faith assertion of patent infringement to post a bond in an amount equal to a good-faith estimate of the target’s costs to litigate the claim. • Training wage Legislation to increase, from 18 to 20, the age of employees eligible to receive a lower training wage was reported by a Senate Committee in 2015 and should receive a vote in 2016. Currently, employees age 18 and under can receive a training wage that is 85 percent of the state’s minimum wage. The legislation, SB 250, was introduced in an attempt to adjust for the new practical reality that many students are in training positions while in college. It also gives employers greater flexibility to give younger workers a chance while getting some relief from the state’s new higher minimum wage requirements. • Secondhand dealer/gem dealer tracking requirements Legislation to create a statewide system for the tracking of secondhand, pawned and traded items was discussed at length in 2015, yet no compromise was reached. MRA continues to work on gaining an exemption from the onerous secondhand dealer law that requires secondhand retailers to track and retain every item regardless of the price. Items under a cer tain dollar threshold would be exempt under MRA’s proposed changes. • Drone use Several bills to limit the use of unmanned, aerial drones around the Mackinac Bridge, near correctional facilities and near the Michigan C a p i t o l / C a p i t o l g ro u n d s w e re introduced in 2015. The bills also would provide for criminal penalties for intentional use that interferes with public safety or public utilities. While the bills did not receive any traction, MRA expects to see additional legislation as the technology continues to gain popularity. Recent Federal Aviation Administration (FAA) regulations and a request from the FAA that it
5 be consulted before passage of state laws should help alleviate some legislative concerns. • E-cigarettes There have been several attempts over the last few years to regulate the sale and use of e-cigarettes by minors. Legislation introduced in 2015 as SB 231 would add e-cigarettes or vapor products to the signage already required by existing law in the Youth Tobacco Act. House Bill 4431 would ban the sale of e-cigarettes and vapor products to minors but does not classify the products as tobacco products. Similar legislation supported by MRA failed last year when Gov. Snyder vetoed the bill. The governor said the legislation did not go far enough to classify vapor products as tobacco products. The FDA has not made a classification on these products and passage of a state law making that classification would be premature. Many retailers already treat vapor products similarly to tobacco products when it comes to selling the products to minors. • Cigarette sales to minors The Senate last year unanimously approved legislation to increase penalties for selling tobacco products to a minor, from $50 to $100 for a first violation and $500 for a second or subsequent violation. The current maximum fine of $50 has not been adjusted since 1988 and is seen as inadequate to deter youth smoking. The House may take up the legislation in 2016.
in the Senate to either remove the notification requirement and return to the language in HB 4437, or allow for more flexibility to use current reporting systems rather than taking additional steps to notify prescribers. MRA has been working with Senate Health Policy Committee members on the issue. • Medication synchronization S y n c h ro n i z a t i o n o f m u l t i p l e prescriptions would be easier under legislation to require health plans to apply a prorated daily cost-sharing
2015 QUICK STATS House
MRA studied 1,890 bills
Senate
introduced in 2015: 1,205 House Bills 685 Senate Bills
MRA tracked 194 bills impacting retail 160 of the 194 tracked bills
(shown to the left in tens)
continue on to next year,
34 were signed into law
Participated in
7 workgroups
• Tobacco cigar tax Legislation to remove the October 31, 2016, sunset on the 50-cent cap on cigar taxes was approved by the Senate in December but has not yet been taken up by the House. The bill was referred to the House Appropriations Committee and will likely be considered by the House this year. Given fluctuations in pricing and competition from neighboring states, MRA supports eliminating the sunset and maintaining the current 50-cent cap on cigar taxes. • Biosimilars After months of internal legislative debate and much uncertainty over notification, the House reported HB 4812 with an H-2 substitute in early November. As substituted, the bill requires the dispensing pharmacy to notify the prescriber when dispensing a biologic, biosimilar or interchangeable biosimilar drug. However, the bill approved by the House is unacceptable to the retail industry in its current form. MRA is seeking changes to the bill
rate for prescription drugs dispensed by an in-network pharmacy for a less than 30-day supply. Health plans must allow the prorated rate if the prescriber or pharmacist indicates a less than 30day supply is in the best interest of the patient or to synchronize the patient’s prescription drugs for chronic conditions. The health plans would not pay or reimburse a dispensing fee determined by the number of days’ supply and would instead only pay a dispensing fee if based on each prescription dispensed.
Met with legislators
140 times
Testified before legislative committees
10 times
Attended
62 committee meetings
Sent 16 regular Government Affairs News Updates and one Special Government Affairs News Update
90 + attended Legislative Reception
6
Michigan Retailer
www.retailers.com
Cooler holiday shopping across state Continued from page 1
Specifically, 24 percent said sales increased more than 5 percent, 21 percent said sales grew less than 5 percent, 21 percent reported no change, 15 percent said sales decreased less than 5 percent and 19 percent said sales decreased more than 5 percent. Sales for all of 2015 were slightly stronger, coming in at 0.8 percent
above 2014. Fifty-six percent rang up higher sales for the year, while 35 percent said sales fell and 9 percent said sales were unchanged. Nearly two-thirds of the retailers in the group reporting better sales for the year said sales climbed more than 5 percent.
MICHIGAN RETAILERS HOLIDAY SALES FORECASTS/RESULTS
PRE-SEASON FORECAST
% members average % expecting sales change year-over-year SEASON sales increase
POST-SEASON RESULT
% members average% achieving sales change year-over-year sales increase
2015
67
2.0
45
0.4
2013
53
1.3
38
0.1
2014 2012 2011
2010
63
1.6
75
13.4
58
6.0
54
6.0
52 55 66 76
1.1 2.9 4.0
11.0
Source: Michigan Retail Index, a joint project of Michigan Retailers Association and Federal Reserve Bank of Chicago.
February 2016
7
Retailers award rooted in customer care
Continued from page 1
ed in necessity. Passion for the work bloomed later. With a slowdown in the heating and cooling and window installation businesses, Darin’s father, John Darin Sr., uncle Henry Vespa and a third partner bought English Gardens from its founder, Marshall English. “It was done for survival,” Darin said. “And then they grew to love the industry.” English Gardens initially was a florist and produce dealer that sold a bit of plant material. The company later decided to drop the produce lines to focus on the plant business. Darin, 64, got involved with the family business at age 10. He pulled weeds and packed customers’ purchases. “The only way I could see my dad was to start working with him at the store, because he’d have to work,” Darin remembers. “That was my quality time with my dad.” After college, in 1973, Darin joined the company full time.
beautification plans for homes, the company now operates English Gardens Landscaping, a Pontiac-based division that accounts for about 15 percent of overall business. Generational Shift Today’s English Gardens is operated by an 11-member second generation – including Darin’s siblings and cousins and their spouses – with the third generation becoming involved in the family business. The generational shift is part of the constant change the company has seen. “Versus when we started, it’s like night and day,” Darin said. “We’ve become a full-service, all-inclusive company for beautifying your yard and your home.” In 1975, English Gardens latched onto the Christmas decoration business to turn a gardening store dead zone into a profit center. The company now counts the Christmas season as its second busiest. In May, its peak month, the company employs about 400 people, compared to 150 in the doldrums of January and February. Around Christmas, English Gardens has 300 workers on hand. “We transition about 75 percent to 80 percent of our store from springtime to Christmas,” he said. “It’s definitely unique in the retail industry.” English Gardens’ evolution has included growth of patio furniture sales, which now account for about 10 percent of the company’s business, and it plans to expand ecommerce operations.
RETAIL TECHNOLOGY NEWS
Don’t be ‘lone car in lot’ and windows rolled down John Mayleben CPP, is MRA senior vice president technology and new product development and a national expert on electronic payment processing. He is the first person in Michigan and among the first in the nation to receive the Certified Payments Professional designation from the national Electronic Transactions Association. As most of you are aware (perhaps painfully), there has been a big change in the relationship between merchants that accept credit cards and the banks that issue them. This “liability shift” happened October 1 and impacts face-to-face payment transactions involving cards with an EMV chip on the front. Now that our merchant processing program has handled a couple million transactions for our members since then, we are starting to gain hard data on the number of counterfeit cards being used in retail stores. To date, about 10 percent of all chargebacks since October have involved EMV cards (also known as chip cards) used at merchants that have not yet upgraded their processing terminals. You’ll recall that the liability shift means that the organization with the least secure system now assumes risk for the counterfeit transaction. If you, the merchant, have not upgraded your terminal and you process a chip card whose alternative magnetic stripe has been recoded and is now
a “counterfeit card,” you assume liability for that transaction. EMV cards will continue to include a mag stripe, precisely so that shoppers can use them in businesses that aren’t using an EMV-ready terminal. Although your old terminal will work, you’ll bear the liability for a counterfeit chip card. As we get further into the world of EMV, I expect the number of chargebacks to rise, because the bad guys will have fewer and fewer places to use those cards. If all other merchants in your community have upgraded and you are the only one with an old terminal, the bad guys will figure that out and focus on your business as a place to use those cards. It is analogous to being the only car in the parking lot with the windows rolled down and no one in it; the thief will target your car because it is an easy target. The other place we expect to see an increase in the use of fraudulent cards is for online purchases. As we shut down face-to-face fraud, it is expected to cause online fraud to spike. Make sure you are preparing your business and your staff for these changing times. No one wants to be the poster child for what not to do.
customer wants to walk into the store or call in on the phone or go online to order the product,” Darin told Michigan Retailer. “That’s one of the top priorities we have for this coming year.” The company already has a mobile app to help customers find stores and find out about promotions and sales. And customers can shop online for certain stock that can be sent anywhere in the United States. English Gardens’ commitment to giving customers what they want English Gardens associates and families gathered to celebrate the company’s 60th anniversary. is also evident in such services as its Plant PharThe event was held at Four Star Greenhouses in Carelton. macy, which dispenses were Frank’s locations before that pre-printed or custom directions from multi-channel is top of mind for Presichain went out of business in 2004. a staff plant expert. dent and Co-owner John Darin, [who English Gardens also operates a In addition, customers can sign up says] “The game can’t be won at the Christmastime shop at the Village of for the Garden Club, whose members brick-and-mortar store alone anymore.” Rochester Hills mall. pay a $20 annual fee to receive a 10 “We’re looking at the whole, multiTo design and install outdoor percent discount on most purchases, channel sales network – whether the
plus extended warranties, a subscription to the company’s magazine and notification of special promotions.
Expansion “It was an interesting time,” Darin recalled. “Frank’s Nursery was starting to grow, and they were a major competitor.” Although Frank’s had 30 or 40 stores – and Kmart Corp. was beginning to open gardening shops – English Gardens’ partners persevered. From 1973 to 1979, the company tripled its volume, leading to the opening of the West Bloomfield store in 1980. The company followed that with the 1987 opening of the Clinton Township store, on then-two-lane Hall Road, and the Eastpointe location in 1996. English Gardens opened a Royal Oak store in 1998 – now its flagship store – and an Ann Arbor operation in 2005. The Eastpointe and Ann Arbor stores
Multi-Channel Retail A story in IGC magazine about its reasons for the award states: “English Gardens isn’t sitting back on its long track record of robust store sales. Going
New Opportunities While there are no immediate plans for geographic expansion, Darin said, the company is always on the lookout for new store opportunities. “We’re looking at places like Auburn Hills, Plymouth, Northville, Novi,” he said, “[but] today, it’s difficult to make a substantial investment in brick and mortar.” Like many businesses, English Gardens felt the impact of the Great Recession, which dropped core sales as much as 5 percent and the landscaping business 30 percent. But the company has seen a snapback, with overall sales increasing each year since 2010, Darin said. “We’re having a great year this year,” he said. “We’re back past where we were in 2007. “The industr y is ver y robust, Continued on page 8
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Michigan Retailer
www.retailers.com
RE: RETAILERS
Muller enters U.S. shoe retailing Hall of Fame Former Grand Rapids shoe retailer Wayne Muller was inducted into the National Shoe Retailers Association Hall of Fame during the organization’s 2015 annual leadership conference in Tuscon, Arizona.
graduating with a degree in business from the University of Michigan and serving as an officer in the National Guard. They expanded the business, Muller’s Family Shoe Centers, to four locations, and welcomed Muller’s brother, Paul, into the business with them. Upon retirement, Wayne sold his holdings to Paul, who continued the business their grandfather started in 1913 NSRA noted that during his two terms as chairman, beginning in 1982, Wayne spearheaded efforts to assist independent footwear retailers in handling inventory by computer. He also Wayne Muller (right) with his wife, Cynthia, and brother, led development of Paul, during Wayne’s induction into the NSRA Hall of Fame. NSRA’s Professional Muller was recognized for his outSelling manual and helped increase standing leadership in the industry membership more than 300 percent. and his efforts to help other shoe After retiring, he bowed to requests retailers throughout his career and from a variety of retailers and footafter retirement in 1992. wear manufacturers to provide them He is a former chairman of NSRA with consulting services. Although he and a former chair of Retailers Fund, focused most of his efforts on Grand MRA’s workers’ compensation insurRapids – where he founded the Famance program that became Retailers ily Business Alliance – he continued Insurance Company. to volunteer on behalf of NSRA. Muller, a third generation footwear In 1997 he helped initiate NSRA’s retailer, initially joined his father in “When the Shoe Fits: The Basics of the shoe business in the 1950s after Professional Shoe Fitting” program, a
half-day course that taught more than 5,000 sales associates to understand customers’ footwear needs based on their worn shoes, to measure both feet and compensate for differences between the left and right ones, and to fit shoes properly and explain shoe characteristics to information-hungry customers. The course was supplemented by a 126-page textbook that enabled attendees to review their hands-on lessons and begin to demonstrate them as mentors to other sales associates. Muller traveled to dozens of cities as a program instructor. He also routinely attended NSRA conferences, sometimes serving as a speaker or moderator. Paul, also a former chairman of NSRA, was honored to announce Wayne’s selection to the Hall of Fame. In accepting the award, Wayne acknowledged his wife, Cynthia, and thanked NSRA members for their many years of help and friendship, which he said he treasures to this day. NSRA inaugurated its Hall of Fame in 2012. Its 15 members include the late Al Singer, a former shoe retailer from Bay City.
...
Donald Coe, co-founder of Black Star Farms winery in Suttons Bay, is retiring – and fulfilling a promise to his wife to step away from the busi-
SAN FRANCISCO
ness when he reached the age of 75. The Traverse City Record Eagle reported that Coe and his wife, Marylou, have sold their share of the business to longtime partners Kerm and Sallie Campbell. Coe and Kerm opened the business in 1998, transforming the former equestrian facility into a world-class winery and bed and breakfast encompassing 120 acres and worth a reported $5 million.
...
Droves of volunteers answered the call to help reopen Kean’s Store Company in downtown Mason in time for the Christmas shopping season, after a June 21 fire shuttered the downtown landmark. The Lansing State Journal reported the volunteer drive was organized by Stephanie Rawson, a retired woodcarver whose work was carried by Kean’s for years, who reached out to thousands of people through Facebook and local organizations and businesses. Kean’s, an old-fashioned variety store, opened in the 1920s and has been a big part of the Mason community and as well as the Greater Lansing area for decades. Teresa Wren, whose family founded Kean’s, owns the business with her husband, Steve.
Retailers award Continued from page 7
because people do take a lot of interest in gardening.” English Gardens has worked to make community connection part of its business plan. Children’s Hospital of Michigan, The Barbara Ann Karmanos Cancer Institute and Forgotten Harvest are among its charitable causes. Serving Millennnials One of the company’s next challenges will be catering to millennials, who represent a growing market. The core customer right now is the female, 35-year-old to 70-year-old doit-yourselfer. “Millennials grew up on iPods and computers,” Darin said. “It’s hard to get them to do anything with their hands, so I think we’ll see the service business grow. “If they decide they want us to come to their homes and do it for them, we’re going to do it for them.” That willingness to adapt embraces the spirit of the IGC award, given annually to a garden center demonstrating leadership and innovation. “It’s quite an honor to be added to that club,” Darin said. Doug Henze is a freelance writer and former business reporter for the Oakland Press in Pontiac.
February 2016
9
IT’S THE LAW
Retailers not immune from toxic waste laws by William J. Hallan, MRA Executive Vice President, COO and General Counsel As the Flint water catastrophe escalates, I am reminded of a scene from the movie Erin Brockovich. The 2000 film, which was nominated for Best Picture, documents a class-action lawsuit against an energy corporation for environmental contamination. Hazardous waste from the company’s factory had leaked into the town’s water supply, causing the town’s residents to develop cancer. At one point in the film, lawyers from both sides are discussing a settlement, and after the energy company’s lawyer makes a lowball settlement offer, she starts to take a drink of water. Julia Roberts, the protagonist law clerk, gives her a thorough tonguelashing and remarks that the water was brought in specifically from the contaminated site. The lawyer thinks twice about taking a sip before putting the water down. While Hollywood adds a layer of drama, the Flint water situation is a prime example of how a public health issue can turn into a PR disaster. Retail is not often identified as an industry with environmental concerns. For the most part, manufacturers and industrial businesses are the focus of environmental regulations. Retail, however, is not immune from environmental compliance or the intricacies of hazardous waste. In fact, retailers are very much in the hazardous waste business, selling pesticides, cleaners, paints, beauty products and pharmaceuticals. Moreover, retailers are not just part of the distribution network, they often find themselves with an inventory of unsold or returned products that require proper storage, treatment and disposal. In Michigan, the Department of Environmental Quality (DEQ) ensures that retailers comply with federal and state guidelines for hazardous waste. Compliance varies depending on how much hazardous waste the retailer generates each month and whether the retailer is classified as a (1) conditionally exempt small quantity generator (less than 220 lbs); (2) small quantity generator (220-2,200 lbs); or (3) large quantity generator (2,200 or more). Even small quantity generators must adhere to rigorous compliance standards.
The DEQ routinely performs unannounced inspections and may investigate air quality, storm water discharge, hazardous waste management and wastewater discharge. Violations can result in penalties up to $25,000 per instance. If it is shown that the business knowingly placed another person in danger of serious bodily injury, a business can face fines up to $1,000,000 in addition to the costs associated with corrective action. Improper handling of hazardous waste can pose a serious health risk and jeopardize a retailer’s hard earned reputation. Retailers don’t get enough credit for the actions they are taking today to reduce environmental waste. According to a 2013 report by Public Sector Consultants, called “Improving Recycling Performance in Michigan: Best Practices, Options and Potential Cost,” retailers take back billions of beverage containers each year, voluntarily recycle millions of pounds of electronic waste (Best Buy, for example, takes back 400 pounds of product every minute their stores are open) and engage in voluntary cardboard and plastic recycling. The last thing a retailer needs is bad press from botched compliance. As a result, retailers should consider the following preliminary actions: 1. Determine if the waste is hazardous waste (MCL 324.11103). The DEQ has created an on-demand webinar available at www.michigan.gov/deqwaste. 2. Evaluate what measures you can take to reduce the volume or toxicity of the waste. 3. Develop a comprehensive recordkeeping system to track waste, which will be useful in the event of an inspection. 4. Consider hiring a consultant or third party to manage your waste storage, treatment and disposal. 5. Consider contacting DEQ Waste Management Division for more information, at 800.662.9278. 6. Review Chapter 2 of the DEQ guidebook at www.michigan.gov/ ehsguide. As a footnote, the U.S. Environmental Protection Agency (EPA) recently proposed new rules that would alter federal standards. The retail industry voiced many concerns during the comment period. We’ll keep you informed of future developments.
Membership Services Corner by Penny Sierakowski, MRA Customer Service Department Manager Cr edit Car d Processing • We n o w p r o v i d e merchant assistance via email, in addition to over the phone. You can email any general questions to customerservice@retailers.com. The response time for email inquiries is within 48 hours. • Please verify your 2015 form 1099K for accuracy. Contact customer service to make any changes. • If you have a terminal that does not accept chip cards or ApplePay, please contact us to discuss upgrade options.
• If your terminal is a Vx520 you may need to complete an update to accept chip cards. Contact us to verify your terminal. • To keep your processing costs low, answer all prompts on the terminal, including AVS (street number and zip code), CVV (3-digit security code on the back of card), Sales Tax (sales tax amount only), PO Number (if you don’t use a pur-
chase order number, the default would be the last four digits of the card number). • Fraud warning signs to watch for: - Larger than normal sales received via email, ecommerce or telephone - Multiple sales from the same customer within a short time period - Numerous credit cards provided by the same customer - Same Bin Number (first 6 digits of the credit card) on multiple cards - Several customers requesting larger than normal sales at the same time - Request to wire money - Customer insisting you charge credit card to pay a third party, such as a freight carrier - Request to ship out of the country. • If you receive a “Re-Enter or Lost Communication” response when processing a transaction, please contact us so we can verify the transaction before you continue to process. • Don’t forget to notify us of any changes with the authorized signer, tax identification number or bank account information on file. • If you utilize Static IP connectivity for processing, please call us to add this information to your file. • These terminals are no longer PCI Compliant and need to be upgraded: Zon, Tranz, Omni, Hypercom, Nurit. Please contact customer service to obtain upgrade options. • Data security compliance is mandatory. You must complete an annual PCI Self-Assessment Questionnaire to verify if your business is PCI compliant. Visit www. compliance101.com to begin the questionnaire.
Chip & PIN adds greater security Continued from page 1
to forge a signature. Te s t i f y i n g w e re M R A’s A m y Drumm, director of government affairs, and John Mayleben, senior vice president technology and new product development. “There is compelling evidence of the reduction in fraud in countries using primarily Chip & PIN cards,” said Mayleben. “Fraud is far more prevalent in the U.S. than in countries using Chip & PIN.” In the United Kingdom, for example, fraud losses at retailers have dropped 67 percent since the UK started using Chip & PIN, he said. The U.S. is a greater target for fraud
because other countries are using the more secure standard, he added. Drumm said issuing banks, which face somewhat higher costs with Chip & PIN, contend Chip & Sign is “good enough” improvement over the older magnetic stripe cards. “But is ‘good enough’ good enough for your financial information and identity? Michigan Retailers doesn’t believe it is, not when there’s a more secure technology readily available,” said Drumm. More information about the differences between Chip & Sign and Chip & PIN is available at www.chipandpinsecuritynow.org.
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Michigan Retailer
www.retailers.com
February 2016
11
LOTTERY
Instants lineup expected to keep ’16 sales rising by M. Scott Bowen, Commissioner Michigan Lottery instant games posted unprecedented sales numbers in 2015, eclipsing $1 billion in total sales for the first time. The 11 percent i n c re a s e c o m pared to 2014 is one of the highest growth rates in the nation. The Lottery’s team is committed to utilizing player research to develop new and innovative instant games that will attract avid and casual players and boost sales for retailers. A diverse slate of new instant games in 2016 is expected to create
top prizes of $5,000, $50,000, $500,000 and $1 million, respectively. Game families have been among the most successful instant games offered by the Lottery in recent years. In fact, the recent launch of the “Hot” family of games produced $14 million in sales in the game’s first week on sale. We expect retailers to experience similar success when the “Hit” family hits shelves in a few weeks. • Deluxe 7’s Play Book – When it comes to instant games, one of the questions we hear most often from players is: “When will the Lottery offer another game book?” In early summer, the Lottery will launch the Deluxe 7’s Play Book. Each $20 game book will feature six separate games with prizes ranging from $20 up to $2 million. The Deluxe 7’s Play Book will offer more than $46 million in total prizes. Players perceive game books as a great value with more chances to win. We expect a strong response from players when they have a chance to purchase a game book for the first time in six years. The year is off to a great start and we expect these new instant games, and others, to continue that momentum for the Lottery and retailers for another strong year in 2016.
“A diverse slate of new instant games in 2016 is expected to create excitement.” excitement for players and build upon the strong sales momentum retailers experienced in 2015. To make a strong start in 2016, the Lottery is launching Caesars® Jackpot in February. The $5 casino-themed instant game offers players up to 15 chances to win on each ticket plus a second chance opportunity to win one of 10 all-expense paid trips to Caesars Palace in Las Vegas. The game features more than $14 million in total prizes, including three $300,000 top prizes. With an aggressive prize structure and exciting second chance opportunities, Caesars Jackpot is expected to appeal to a wide range of players and drive sales for retailers. Other exciting instant games coming in 2016 include: • Wheel of Fortune® – Coming in spring, this $2 game will feature more than $6.8 million in prizes, including top prizes of $50,000. Players also will be able to enter non-winning tickets into a second chance drawing for an opportunity to win an all-expense paid trip to Hollywood. Winners of the trip will have the chance to compete in a non-televised game of Wheel of Fortune hosted by Pat Sajak and Vanna White along with an opportunity to win $1 million. • Hit Family of Games – Launching late in the spring, the “Hit” family will feature four games ranging in price from $1 up to $10. Collectively, the “Hit” games will offer players more than $155 million in prizes, including
New Instants These tickets go on sale Feb. 2: IG # 759 Caesars Jackpot $5 IG # 743 Emerald Green 7’s $2 New Pull Tabs These tickets go on sale Feb. 2: MI # 570 Slot Crazy $0.50 MI # 539 $10 Grand Cash $2 Retailers are reminded to activate all game tickets before putting them on sale to ensure winning tickets may be redeemed by players. About 97 cents of every dollar spent on Lottery tickets is returned to the state in the form of contributions to the state School Aid Fund, prizes to players and commissions to retailers. In the 2014 fiscal year, the Lottery’s contribution to Michigan’s public schools was $742.8 million. Since it began in 1972, the Lottery has contributed nearly $19 billion to education in Michigan. For additional information, follow the Michigan Lotter y on Facebook, Instagram, Twitter and online at www. michiganlottery.com.
NEW MEMBERS NMBSC LLC, Adrian Great Lakes 4D, Ann Arbor Bespoke Design Company, Ann Arbor Carlo John Pozzi, Auburn Hills Foundation for Behavorial Resources, Augusta Hyzer Hill Kuzak & Co PC, Bad Axe Meadow Brook Medical Care Facility, Bellaire GM Homes, Bloomfield Hills Brighton Stone & Fireplace Inc., Brighton Northshore Enterprises of Macomb Inc., Casco CCI Driveline LLC, Casco Cheboygan Area Arts Council Inc., Cheboygan Jim’s Body Shop, Clare Phil Cavill’s Tire & Auto Service Ctr Inc., Clawson Supino LLC, Detroit East Congregational Church, East Grand Rapids Willi’s Sausage Company Inc., Frankenmuth Accurate Truck Service LLC, Grand Rapids Peter G Mason DDS PC, Hart Tele-Rad Inc., Holland Silverstone Jewelers LLC, Howell Love’s Treasures, Hudsonville Langeland Memorial Chapel Inc., Kalamazoo
Two Fellas Grill, Kalamazoo Z00 City Grower Supply, Kalamazoo Trinity Lutheran Church, Kalamazoo Beeler Motorsports LLC, Kalamazoo Brookside Care LLC, Kalamazoo Calvin Lutz Farms LLC, Kaleva St Vincent Catholic Charities, Lansing Michigan Statewide Independent Living Corporation, Lansing Capital Area Humane Society, Lansing Leading Edge Tax Service Inc., Lincoln Park Blackrocks Brewery LLC, Marquette Buck Muck Inc., Pinconning Moss Ridge Inc., Ravenna Denno’s Furniture Inc., Saginaw Steve’s TV & VCR Service Inc., Saginaw Hammar’s Contracting Inc., Smiths Creek Swartz Creek Area Senior Citizens, Swartz Creek At Your Service Cleaning, Traverse City Integrated Design Solutions LLC, Troy St Paul’s UCC of Bainbridge, Watervliet Groovy Donuts LLC, Williamston