THREE STEPS TO FREEMIUM SUCCESS TAXPAYERS LOSE GAME OF MONOPOLY
BRIGHT LAYOUT HIGHLIGHTS WINFIELD MANOR ESTATE
REGION’S BUSINESS
PHILADELPHIA EDITION
A JOURNAL OF BUSINESS AND POLITICS
FROM CITY TO SUBURBS, RETAILERS OPTIMISTIC ABOUT HOLIDAY SEASON Despite the aftershocks of Hurricane Sandy and fears of the fiscal cliff, analysts believe consumers are ready to spend.
SUBURBAN COUNTIES ADDRESS BUDGETS FIREFIGHTER ISSUE HIGHLIGHTS CITY’S LABOR TENSIONS PHILABUNDANCE LOOKS BEYOND THANKSGIVING RegionsBusiness.com $2.00 U.S.
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21 NOVEMBER 2012
REGIONSBUSINESS.COM
CONTENTS
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Retailers Optimistic About Holiday Season
3
MY RESEARCH SUGGESTS THAT PEER COLLABORATION MODELS WORK BETTER THAN HIERARCHIES. EMPOWERMENT IS NO LONGER A MOTHERHOOD CONCEPT.’
Despite the country’s uncertain economic situation, retailers big and small alike are expecting a strong finish to 2012.
!
5
—DON TAPSCOTT
Suburbs Look At 2013 Budgets ! Bucks and Montgomery appear to be on track to hold steady on taxes, but Chester is considering its first hike in three years.
15
Reality of Expiring Payroll Tax Cut
13
City’s Labor Unrest Still Smoldering ! City council will hold hearings on firefighter transfers, but the core issue may be tension between Mayor Nutter and the city’s unions.
PRG welcomes National Penn Bank to their newest center city location at the corner of 21st and Market. Occupancy is scheduled for the Spring 2013 while the apartments above have begun delivery, totaling 282 units. PRG would also like to thank Metro Commercial Real Estate and Joe Dougherty for their efforts representing the Tenant.
It may not seem like much now, but when you look ahead, you’ll see some real pain. !
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Using Freemiums
! Simply giving away products or services isn’t a strategy, but it can be part of one that grows and strengthens your business.
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End State Monopoly on Wine, Spirits ! Pennsylvania taxpayers and consumers are the losers in the state’s game of Monopoly being played with the wine and spirits trade.
PRESIDENT AND PUBLISHER James D. McDonald
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21 NOVEMBER 2012
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EDITOR’S DESK
Finally, On To The Season Of Gratitude
Karl Smith is the Editorial Director for Region’s Business. You can contact him at ksmith@regionsbusiness.com.
I enjoy the phrase “misery loves company” because if there’s one thing people really love to do, it’s engage in a protracted gripe session. When I used to spend a lot of time working in coffee shops (yes, mostly Starbucks), I was privvy to a lot of gripe sessions, overhearing people spend hours, literally, complaining about weather, traffic, their son’s inability to call on regular basis and that “snitty hairdresser who thinks she knows it all.” Yes, that’s a quote - who could forget hearing that? There are plenty of bigger issues we can gripe about, too, these days. The economy continues to stagger like a drunken sailor on shore leave and our region is still struggling to shake off the impact of Hurricane Sandy.
But a quirk in the calendar has placed Thanksgiving at the earliest possible date - November 22, which means we need to get over our post-election hangover and get serious about gratitude. The early arrival of our biggest eating holiday of the year means less time to prepare for the feast, of course, but it also provides the longest possible holiday shopping season we can ever have. When you combine our country’s economic doldrums with the fact that the primary driver of said economy is consumer spending, it seems like the right thing at the right time. The upside of Sandy’s visit is that we should expect to see an economic boomlet along the Shore as those towns get past the immediate problems and get serious about rebuilding. Thank-
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ful that Sandy arrived? No. But should we be thankful that we can rebuild? No doubt. The economy has shown tepid signs that it’s ready to start growing and the combination of a strong holiday season and Sandy rebuilding efforts could kick that into overdrive. Republicans are still pouting over President Obama’s re-election, but they should look at the glass as half-full. The impending “fiscal cliff ” has pushed a serious discussion on tax reform to the forefront and it seems that there’s a real chance to get something done. And more than that, there’s a good chance something substantial and significant can be done if both sides follow through on commitments to work together toward a compromise that addresses the core issues.
With gratitude comes optimism and one of my favorite quirks in the calendar is that we go right from Thanksgiving into the Christmas season and then right into the new year. Taking the time to remember what we have to be thankful for certainly puts us in a good frame of mind and Christmas is nothing if not a celebration of all of that. And the arrival of a new year is a natural time for optimism. That’s a perfect trifecta. Here at Region’s Business, we’re already focusing on optimism. We have some great things in store for the remainder of this year and already have some really exciting stuff in the works for 2013. So we’ll be setting aside the gripe sessions for the rest of the year and hope you will, too.
21 NOVEMBER 2012
REGIONSBUSINESS.COM
RESTAURANT
WEEKLY BRIEFING RETAIL
MANUFACTURING
Apple Opens Willow Grove Store
Sandy Impact Felt By Philly Economy
Will BYOB Will BYOB, located at 1911 E. Passyunk Ave., will host a single night of what has been dubbed “experimental” modern cuisine, including a dish of monkfish liver torchon and a warm wassail cocktail. The event will take place 6:30 p.m. December 4 with 24 available seats. Tickets are $200 per person.
Il Pittore The Sansom Street restaurant Il Pittore has launched a six-course tasting menu, courtesy of chef Chris Painter. Dishes on the taster, which costs $100, are described as being seasonal.
Emmanuelle Northern Liberties will welcome the latest addition to its bar lineup, Emmanuelle. The Frenchinspired restaurant will serve sparkling cocktails, French cocktails and a variety of wines and beers. The craft cocktail bar will be located at the Piazza at Schmidt’s, and will host its grand opening November 22.
WILLOW GROVE PARK MALL
Apple opened a new store at Willow Grove Park Mall last week, offering the first 1,000 customers a free T-shirt. At the King of Prussia Mall, Apple will relocate to a new 10,000-square-foot location, making it the largest Apple Store location in the region. HIGHER EDUCATION
CCP Launches Energy Training Job Center Preparing for the onslaught of jobs to come from the development of Marcellus Shale, the Community College of Philadelphia will launch an Energy Training Center, the college’s president, Stephen M. Curtis, said November 15. “Colleges today have to move with the speed of business,” Mr. Curtis said at a roundtable with the Marcellus Shale Coalition. The center will offer certificate and academic pro-
WE WANT THE NEXT COMPANY THAT’S BORN HERE TO MATURE HERE.’ — SAM RHOADS, SENIOR VICE PRESIDENT OF FINANCE OF THE PHILADELPHIA INDUSTRIAL DEVELOPMENT CORPORATION, DURING AN INFORMATION SESSION ON STARTUPPHL
TAXES
Counties Consider Annual Budgets Bucks County After enacting a hiring freeze and a staff reduction of 242 workers, which saved $19.5 million for next year, taxes are unlikely to be raised when the county’s budget numbers arrive this week. Pensions and health care costs remain variables in the calculation. Commissioners have hiked taxes once in the last year — a 5.7 percent increase in December 2011.
grams for those seeking to enter the energy field, further supplementing programs with emphasis on workforce development. Training would focus on corporate jobs pertaining to the
Korman Surprises 20 Students With Scholarship Donation
The Butcher and the Brewer The Butcher and the Brewer, the meat-andbeer-oriented successor to the Boilermaker, closed November 17 following an “unforeseen sale of the building.” The restaurant had only been open since October 28.
Manufacturing gauges in Philadelphia saw a decrease as a result of Hurricane Sandy’s impacts, with the city’s manufacturing index sliding from +5.7 in October to -10.7, according to the Federal Reserve Bank of Philadelphia. The reading takes into account Philadelphia and New Jersey areas, the latter of which was hit hardest by the storm. Largely unchanged stock movement following the release of the data indicates traders may overlook the sudden dive in the index.
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Korman Communities founder Steven H. Korman awards $12,000 scholarships to 20 applicants from Temple’s School of Tourism and Hospitality Management at the Fox School of Business’s annual Musser Awards dinner. The students believed they were competing for a $10,000 scholarship. FOX SCHOOL OF BUSINESS
natural gas drilling, involving legal and engineering firms as well as suppliers. The program is also expected to aid Philadelphia Gas Works, which has 1,600 employees eligible for retirement.
Drexel to Unveil ExCITe Center Drexel University will unveil its 11,000-square-foot ExCITe Center later this month, according to Technically Philly. The Expressive and Creative Interaction Technologies Center houses the school’s engineering, media and digital art projects, including classes, clubs, research and events. Plans for the center were first rolled out in Fall 2010 as part of the university’s strategic initiative. The Middlesex County-based Shima Seiki has donated upwards of $1 million in equipment for the center.
Chester County Commissioners in Chester County have expressed an intention to raise property taxes for the first time in three years, largely because of a shrinking tax base and an increase in pension contribution of about $1.5 million. Taxes are expected to increase by roughly $33 for the median value of a home in Chester County, which is $165,760. The increase covers an overhaul of the county emergency services radio system, which without the tax increase demands an additional $5.75 million. Montgomery County A draft budget proposal put together by commissioners indicates cuts in spending, but no new taxes for the county. The county would cut $5.1 million in funding for its community college and $1 million in funding for programs like Big Brothers/Big Sisters, the Elmwood Park Zoo and the Victim Service Center. The proposal would further place $2.5 million in the county’s well-depleted reserve fund and $3.3 million in its pension fund.
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21 NOVEMBER 2012
REGIONSBUSINESS.COM
WEEKLY BRIEFING
ENERGY
DEVELOPMENT
Site Expanded for Small Businesses
Proposal: Dining, Retail to Replace Vacant Church
The Pennsylvania Public Utility Commission upgraded its electric-shopping website November 13 to include small-business targeted enhancements. Through the website, PAPowerSwitch.com, 10 suppliers have listed themselves as providing “general service,” classifying services for both residential and smallbusiness customers. Features of the site include as much as 17 percent off the standard PECO rate.
PGW Agrees to Fine For 2011 Explosion Responding to the issuance of a $500,000 fine last week, Philadelphia Gas Works agreed November 14 to not only pay the sum, but also to improve its operating procedures highlighted by the 334 complaints by state regulators following a January 2011 explosion. The explosion is responsible for the death of Mark Keeley Keeley, a relatively new PGW employee who had made an attempt to ventilate a gas leak in the basement of a Tacony rowhouse. Stipulations of the settlement agreement release PGW from having to admit wrongdoing.
PGW Hires Broker As Sale Progresses A request for proposal was issued November 14 for a broker to oversee the possible sale of Philadelphia Gas Works. The broker will enter under a hypothetical circumstance, only being paid if the city determines the sale of PGW to be financially worthwhile.
A vacant church at 40th and Sansom streets will be demolished and replaced with dining and retail options, with three of the four spaces already leased, said the church’s property owner, P&A Associates. Currently, inhabitants of the property will include Dunkin’ Donuts, Whirled Peace Frozen Yogurt and Philadelphia Chutney Company. Following a journey that originally had the church being demolished last year or being slightly altered for tenants, the timeline for demolition and reconstruction remains unknown.
LAW
USP Expansion Approved University of the Sciences will expand its Science and Technology Center by creating a 55,000-square-foot building connecting a pedestrian walkway to the Samson College of Health Sciences. The plan, which was unanimously supported by the Zoning Board of Adjustment, would house the university’s program for physician assistants and feature a “green roof.” The project is expected to bring more jobs and residential development in the surrounding area of University of the Sciences, further broadening University City’s development.
SEPTA, UCD Collaborate on ‘Gateway’
Legal Industry Growing
EARLE MACK SCHOOL OF LAW AT DREXEL UNIVERSITY
According to recently released October data from the U.S. Bureau of Labor Statistics, the legal industry increased its number of available jobs for the second month in a row. The data shows the legal industry adding 600 jobs in October on top of the 1,300 added in September, combining with increases earlier in the year to total 6,000 gained legal jobs. Adding further good news for law school graduates, entry-level salaries are expected to rise by 3 percent in the next year, according to Robert Half Legal’s 2013 salary guide.
Former AG Pappert Joins Cozen O’Connor Firm
UNIVERSITY CITY DISTRICT
University City District will work with SEPTA to develop a green plaza to serve as a “gateway” between Center City and University City as passengers ride through the 40th Street Trolley Portal. The University City District announced November 13 that it has already been in the works with architecture firm Adropogon Associates, SEPTA and unspecified city agencies to create a more developed proposal. The second time such an effort has been made to change the portal, preliminary plans would have the transformation of the portal take effect in 2013.
Grant Sought for Waterfront Restaurant The Cooper’s Ferry Partnership has submitted an application for a $500,000 grant from the Urban Enterprise Zone Office to attract a Camden waterfront restaurant, according to the Philadelphia Inquirer. The nonprofit group hopes to
develop a three-story building that would rest across from the Ferry Terminal Building. The structure would cost $9 million and consist of a 4,500 square feet restaurant on its ground level, bolstered by 14,500 square feet of office space, according to the Inquirer report.
In line with the recent restructuring of Philadelphia law firm Cozen O’Connor, the firm announced November 13 that former Pennsylvania Attorney General Jerry Pappert will join the firm’s commercial litigation group. Mr. Pappert will handle commercial litigation and assist clients with services that include government Pappert investigation, corporate compliance, government relations and more. Mr. Pappert previously served as Pennsylvania’s attorney general from 2003 to 2005. CASINOS
Greenwood Adds to Board Greenwood Racing, owners and operators of Parx Casino and Parx Racing in Bensalem, announced the appointment of Thomas C. Bonner to its board of directors. Over the past 6 years, Bonner has been engaged in various aspects of GRI business including legal and regulatory counsel, strategic company development, and the operations of multiple entities.
21 NOVEMBER 2012
REGIONSBUSINESS.COM
WEEKLY BRIEFING
9
TRANSPORTATION
SEPTA Plans Wawa Station
LOCALISM.COM
SEPTA’s board has approved the acquisition of roughly five acres of land along Route 1 in Middletown Township, which the transit authority intends to use for the construction of a parking garage and access road for a new passenger station. The project on the table would extend regional rail service from Elwyn to Wawa in Delaware County, with total costs coming in at about $90 million. Interest in renewing the line to Wawa comes as the population surges in western Delaware County as well as southern Chester County.
Commuter Program Renamed RideECO The Delaware Valley Regional Planning Commission announced November 14 that it will rename its Philadelphia commuter- and employercentric program “RideECO.” The program, previously titled “TransitChek,” allows workers in the region to deduct pre-tax funds from their paychecks as a means to purchase transit fare. The system has employers withhold as much as $125 each month in earnings. No additional changes to the RideECO program are expected.
SPORTS
TECHNOLOGY
Trenton Ballpark Name Purchased
Corbett Issues Grants to Startups, Schools
Princeton, N.J.-based Church & Dwight Co. Inc, maker of Arm & Hammer cleaning products, will now have bragging rights as boasting the new name for Trenton Thunder’s ballpark. The 6,440-seat stadium, opened in 1994, is the home of Trenton Thunder, the double-A affiliate of the New York Yankees. The naming deal will run through a cycle of 20 years.
Gov. Tom Corbett announced last week that grants will be awarded to startups, universities and entrepreneurs in the state through a Ben Franklin Technology Development Authority-approved $1.9 million in funding from the Ben Franklin Technology Development Authority. The funds will be distributed through 10 Keystone Innovation Network program grants. The Keystone Innovation Network provides services intended to accelerate the development of technology and the commercialization of that technology, as well as support the leveraging of university research faculty and IPs. The move is intended to energize Pennsylvania as a leader in the nation for community- and university-based innovation efforts.
StubHub, 76ers Sign Agreement StubHub signed a deal November 15 that would usher it in as the Philadelphia 76ers’ official partner for the ticket marketplace. The fan-to-fan ticket vendor’s deal with the 76ers marks StubHub’s first integrated NBA partner. Neither party has released financial terms of their newfound partnership.
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21 NOVEMBER 2012
REGIONSBUSINESS.COM
WEEKLY BRIEFING GOTTA HAVE IT GADGET EXECUTIVE BOOKSHELF
Finding the Human Factor
WHO TO FOLLOW
In “The Missing Human Factor: How To Help Employees Work For You Or With You,” Filippo Galluppi serves as a guide for entrepreneurs, business owners, managers and executives to effectively manage employees and see them as more than machines to meet sales quotas. Rather, Mr. Galluppi outlines his 23 rules to develop and focus on the “Human Factor” in employee management. “My book is aimed at not just refocusing the philosophy of people, but at raising the power of human beings. In doing so, people may be more useful to a company as well as being given more credit for their ability to recognize and utilize the power of the human factor in both personal and business relationships,” said Mr. Galluppi, founder of Venus Scientific, Inc., a high-voltage power supply company, and Ultravolt, Inc., a company that designed and manufactured high-voltage power supplies.
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21 NOVEMBER 2012
REGIONSBUSINESS.COM
DEALBOOK
REAL ESTATE
LABOR
HEALTH CARE
Local Apartment Buildings Sold in $70M Deal
Local Jobs in Balance as Hostess, Unions Agree to Mediation
West Chester Publisher Deals With UBM Medica
Abington Health To Purchase Lansdale Group
West Chester-based Matrix Medical Communications, publisher of the peer-reviewed e-journal, Innovations in Clinical Neuroscience, announced a new marketing and distribution partnership with UBM Medica US, a component of London-based UBM Connect. “We are confident that our peer-reviewed, targeted content, as well as our own network of healthcare professionals, will add greater depth and value to UBM Medica’s extensive array of communication vehicles,� Robert Dougherty, president and group publisher at Matrix Medical Communications said in a statement.
The 200-employee group Abington Health, which provides services in Bucks, Montgomery and Philadelphia Counties, announced November 14 that it has agreed to purchase the Lansdale-based North Penn Visiting Nurse Association for an undisclosed amount. The 100-employee nonprofit nursing organization maintained around $6.7 million in revenue for both the year ending June 30, 2011 and the previous year, but net income fell from $626,993 to $277,787 in the same period, according to a Philly.com report.
Englewood, N.J.-based residential property management service provider The Orbach Group said it has bought apartment communities in Bensalem and Norristown, plus properties in New York for a total of $70 million. Locally, Orbach acquired the 352-unit Bensalem apartments known as the Country Commons, and a 175-unit Norristown apartments called Sandy Hill Terrace. Both include Housing Assistance Payment contracts, according to the company. The sellers were not disclosed.
At the urging of bankruptcy judges, Hostess Brands Inc. agreed Monday to enter into private mediation with its employees’ union. Last week, Hostess suspended work at all 33 of its plants, including one in Northeast Philadelphia, after striking employees did not return to work by the evening of November 15. Hostess leadership began making moves immediately to declare bankruptcy and sell the company. Closure of the 33 plants would mean the loss of about 18,000 jobs, including about 400 at the Philadelphia site.
EZRA WOLFE
“My desire to do this is prompted primarily by the potential loss of over 18,000 jobs as well as my belief that there is a possibility to resolve this matter,� said Bankruptcy Judge Robert Drain of the Southern District of New York, according to a Chicago Tribune report.
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PHILADELPHIA POLITICS
REGIONSBUSINESS.COM
ADVERTISING
CITY COUNCIL
CITY COUNCIL
Proposal: Allow Billboard, Fund Surrounding Schools
Waterfront Buffer Bill to Council
Mayor’s Office Concerned By Proposed Code Change
A proposal by Councilman Mark Squilla has breathed new life into a years-old debate over whether the owners of the Electric Factory can put a billboard on the building. The councilman proposed last week allowing the controversial, electronic sign and using the revenue to help support three schools near the venue at Seventh and Callowhill streets. “We hoping to generate from the 20 percent given to this cause upwards of $300,000 to $500,000 a year for the local schools,” he told WHYY Newsworks. The Rules Committee will consider the proposal at its December 4 meeting. OFFICE OF THE CONTROLLER
City Defends Against Report Philadelphia defended the Cultural and Commercial Corridors Program’s use of funds after a scathing review by Controller Alan Butkovitz. Director of Commerce Alan Greenberger said the program was“highly successful.” He also defended funding to The Merchants Fund, which Mr. Butkovitz’s report claimed was not properly monitored. CITY COUNCIL MATTERS
Timothy Holwick is a freelance writer covering Philadelphia government. Find more coverage at citycouncilmatters.com and follow him on Twitter @CityCouncilBlog.
CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.
TOM IPRI
If a proposed, 50-foot stream buffer is passed by City Council late this month, at least one growing business would be likely to skip town, according to recent testimony. The legislation, which left the Rules Committee last week, would mandate the buffer along Philadelphia’s waterfront, banning any new construction within the buffer zone. Council could rule on the legislation as early as November 29. A compromise within the committee sessions amended the bill to allow private property owners whose buildings already intrude into the buffer to expand to
either side. Also, marine-related industry, marinas, utilities, and city-owned facilities would all be allowed within the buffer; under the previous code, they would have needed zoning approval. Wholesale distribution warehouses and storage would not be permissible within the buffer. Craig Schelter of the Development Workshop testified that the bill would be detrimental to expanding business. “This will directly lead to a major company that won’t be able to expand to their full potential and they are actively being courted by people outside of Philadelphia,” he said, according to a CBS report.
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During a recent Rules Committee meeting, the Nutter administration expressed concerns over a code amendment that would require some businesses to be approved by the zoning board, as was the practice under the old code. Included in the change would be — among other businesses — hardware stores, pet stores, delis, ice cream shops and veterans’ halls. The amendment, which Councilman Brian O’Neill planned to introduce as a new bill, would also mandate that commercial mixed-used buildings could be only 38 feet high instead of 55 feet. The councilman told the Daily News that he would kill the plan if members oppose it. BUSINESS
BOLSTERING OUR MANUFACTURING AND PROFESSIONAL SERVICES INDUSTRIES WILL GET OUR COUNTRY BACK ON TRACK.’ — MAYOR MICHAEL A. NUTTER, AFTER SIGNING A NON-BINDING ORDER CREATING A PHILADELPHIA-, PENNSYLVANIA-, AND AMERICAN-MADE PREFERENCE FOR ALL WORK PROJECTS
Council to Hold Hearings on Transfer of Firefighters On November 15, Philadelphia City Council — specifically Councilman Mark Squilla — introduced a resolution to authorize the Committee on Labor and Civil Service to hold hearings investigating a recent initiative by the City of Philadelphia to reassign 15-20 percent of firefighters annually. According to the text of the resolution, on November 1, Fire Commissioner Lloyd Ayers dispatched a memorandum describing an annual rotation to begin January 1. Initially the rotation concerns 156 firefighters who have worked at stations for 10 years or more. The rotations for the following year will consist of 293 firefighters who have worked at stations for at least eight years. According to Commissioner Ayers’ memorandum, firefighters scheduled for rotation will list their five location choices in order of preference, which the Fire Department will consider when assigning new locations.
Councilman Jim Kenney called the rotation an “unprecedented move by the [Mayor’s] Administration relative to our Fire Department.” The administration’s rationale is to provide a greater diversity of assignments and knowledge of geographic locations throughout the city, as well as additional opportunities for cross-training that could lead to a richer skill set and career advancement. According to the resolution, the planned transfers have “varying levels of resistance from the very firefighters populating the scheduled rotation list.” Councilman Kenney pointed out that New York City trains its rookie firefighters by moving them around for a six-year period and “we are doing the opposite.” The hearing will be held 10 a.m. November 27. Councilman Bobby Henon acknowledged Councilman Squilla’s leadership on the issue and plans on getting to the
bottom of the intentions behind the transfers, which he stated are likely well-intentioned but perhaps not keeping firefighters’ interests at heart. In subsequent discussions at the City Council meeting, council members spoke of the bonds firefighters develop with each other in their stations and the surrounding communities. While understanding that distributing experienced firefighters throughout the city has its benefits, the backlash from the firefighters’ union has clearly motivated council to take a longer look at the transfers. Councilman Brian O’Neill, one of few Republicans on City Council, also spoke in support of the resolution. He spoke about how firefighters in the Northeast are adept at navigating the countless named cross streets, which he said best utilized their experience. “You have to use common sense, and whatever the reasons are…we
have to start building up morale in the Fire Department and not continue to tear it down,” he said, alluding to the growing mistrust of firefighters toward their leadership. That mistrust is grounded in lack of communication about drastic changes. This resolution echoes a theme of recent union-related occurrences in the city. As some labor groups continue to become discontented with Mayor Michael Nutter’s delivery of new contracts or promises from elections, City Council continues to offer them a forum to voice their concerns. While it may be drastic to say that City Council is joining the outcries against Mayor Nutter, it certainly moves to question the administration more often than it supports it. These inquiries are the duty of council, but also worth noting from a political standpoint as Mayor Nutter’s tenure enters its final few years.
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POLITICAL COMMENTARY
REGIONSBUSINESS.COM
Corbett’s Next Priority: Getting Pa. Out of the Booze Business
Charlie Gerow is CEO of Quantum Communications, a Harrisburg-based public relations and issue advocacy firm.
CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.
As the dust settles from the General Election, talk turns to legislative initiatives in the new Congress and state General Assembly. While Washington is abuzz about the “fiscal cliff,” here at home, Governor Corbett has begun to lay out an ambitious legislative agenda. The next year should be a very good one for him. With healthy (albeit somewhat diminished in the Senate) majorities in both legislative chambers, and with re-election right around the corner, it’s prime time for major legislative victories. At the front of the line is reform of the state’s antiquated liquor sales system. The governor puts it simply: “There is no good reason for the state to be in the business of selling booze.” Every major public opinion poll (and plain logic) says Corbett is on the side of the angels on this one. Visitors are often confused by our
Byzantine system that dates back to the Prohibition era. They can’t figure out why you can buy a six pack at one location but have to go elsewhere to get a keg or a case, and have to make yet another trip to get a bottle of wine or whiskey. But popular opinion and logic don’t always drive public policy. Several governors have sought to do what Corbett is now trying to do. Attempts by Governors Thornburgh and Ridge ran into the same alliance of strange bedfellows — the retail clerks union and anti-alcohol consumption groups. However, economic reality and a broader reform agenda from Corbett might turn the tide. There’s been popular support for getting the state out of the liquor business for years. There’s just never been the political will to get it done. Some experts say privatization could yield as much as $2 billion
to the commonwealth. While advocates of continuing the state’s liquor monopoly argue that the PA Liquor Control Board (LCB) and its profits (generated by a very healthy markup on every bottle it sells) are a stable source of money for the state, it’s hard to argue against the infusion of $2 billion when balancing the budget is tough. The case for keeping the state stores gets even weaker when you consider the numerous studies and financials showing that the LCB is not nearly as profitable as they claim. Additionally, the other leg of the keep-the-monopoly argument — that the LCB inhibits social problems by controlling alcohol consumption — is wobbly. CDCattributable statistics do not show any advantage for PA over neighboring states. In fact, Pennsylvania is just about at the national average. Moreover, we are above the
national average for alcohol-related traffic fatalities. The Mackinac Center for Public Policy, which tracks social outcomes for states that control alcohol markets (most of them much less restrictively than Pa.) and those who don’t, has data which suggests no relationship between these controls and social outcomes. Getting the state out of the liquor business has been hashed and re-hashed in Harrisburg for years. We will see in 2013 if a reformminded governor can finally break the logjam and get Pennsylvania consumers what they’ve been looking for. If the governor can effectively tie the money generated by the sale of the LCB to budget items that need funding (education and transportation would top the list), he may be able to garner enough votes in the General Assembly to make history.
21 NOVEMBER 2012
PENNSYLVANIA POLITICS
REGIONSBUSINESS.COM
BY THE NUMBERS
HEALTH CARE
Sandy Boosts Obama, Corbett
Corbett Granted Extension for Health Care Plan
The original deadline was November 16; the governor now has until December 14. State officials told The Mercury that they delayed developGovernor Tom Corbett asked ment of the online exchange for and was granted a one- because too many questions month extension to make a deci- about cost and operational sion about whether Pennsylva- details remained unanswered. States that cannot or will not nia will set up a health insurance market under President Barack set up exchanges will have one run by the federal government. Obama’s health care law.
Their handling of Superstorm Sandy led to a boost in both President Barack Obama and Governor Tom Corbett’s approval ratings, according to the most recent state poll from Quinnipiac University.
52%
President Obama’s Approval Rating
40%
Wagner Calls for Reform at PSU
Governor Corbett’s Approval Rating The majority of respondents described the leaders’ response to Sandy as “excellent” or “good.”
COURTS
ELECTION 2014
Judges Claim Discrimination
Former DEP Leader Could Face Corbett
Six Pennsylvania judges, including four judges from the Philadelphia Common Pleas court, have filed a lawsuit claiming that their required retirement after their 70th birthday violates their Constitutional rights of equal protection and due process. OFFICE OF THE GOVERNOR
SANDUSKY CHILD SEX ABUSE SCANDAL
Pennsylvania Auditor General Jack Wagner called for greater transparency and a less powerful president in recent report on reform at Penn State University. He recommends that the power of university president — who serves as a voting member of the board of trustees but also serves on nearly every board committee — be decreased. Additionally, his report suggests that Penn State, and other state-related schools should fall under Pennsylvania’s Right to Know law.
Wagner
Corbett Focuses on Highways, Pensions, Liquor Pennsylvania Governor Tom Corbett will spend the second half of his term focusing on transportation funding, pension reform and privatization of liquor and wine sales, he told reporters at a Pennsylvania Press Club luncheon Monday.
John Hanger, former Secretary of the Department of Environmental Protection under Governor Ed Rendell, is “seriously looking at running for Governor,” he told PoliticsPA. “I’m engaged in a number of important meetings... If they go well, I think I’ll have something definitive to say by the end of November or early December,” he said. Mr. Hanger also served as the Commissioner of Pennsylvania’s Public Utilities Commission during the Ridge administration.
Holiday Shopping and the Expiring Payroll Tax Cut
Eric Boehm is bureau chief for PA Independent, an online political news organization.
CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.
‘Tis the beginning of the holiday shopping season — so let’s have a little fun and give you a budget of $1,000 to spend. No judgment here if you want to blow it all on yourself — a brand new MacBook or a flight to London sound pretty good. If you have kids, that $1,000 could vanish quickly on a new gaming system, the hottest titles of the season and, of course, a big screen plasma TV to bring those all-star athletes or alien invaders to life in your living room. That same $1,000 could buy enough gas — even at the current high prices — to road trip from Philadelphia to Los Angeles and back. Now let’s flash forward 12 months — to a reality where Congress has been unable to reach an agreement on how to handle the so-called “fiscal cliff ” or has buckled under pressure from the president and agreed to kill the Bush-era payroll tax cut as part of a grand bargain for avoiding other parts of the cliff. Matthew Knittel, director of Pennsylvania’s Independent Fiscal Office, our state’s version of the Congressional Budget Office,
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said he expects the payroll tax cut to be allowed to expire — though no one has a crystal ball on how Congress will act in the next five weeks. If he’s right, it’s bad news for consumers, businesses and, yes, even government. The expiration of the payroll tax cut on December 31 would cause the tax rate to climb from 4.2 percent to 6.2 percent in 2013. For the average Pennsylvania household making $50,000 annually, that means the federal government will have taken about an extra $1,000 of the money you earned by the time the next Black Friday rolls around. So forget that trip to Europe or California. Forget about those fancy gadgets for the kids. But it gets worse. Instead of spending that $1,000 to employ airline pilots or toy manufacturers, the government will decide where your money goes — after taking a healthy slice for itself, of course. It should be no surprise that businesses are worried about what the loss of that cash would mean — fewer customers buying fewer things. In turn, businesses can hire
fewer people or have to cut payroll in order to keep paying their own bills “It’s a ripple effect,” Gene Barr, president of the Pennsylvania Chamber of Business and Industry, told me this week. But policymakers in Harrisburg have reason to worry, too. If you spend that hard-earned $1,000 on a purchase of your choosing, some of it ends up going to the government anyway. The state would take $60 of it through sales taxes — more if you’re lucky enough to live in Philadelphia or Pittsburgh. The Independent Fiscal Office estimates that Pennsylvania will lose out on about $80 million in sales tax revenues because of the trickle-down effect of lower consumer spending due to the expiration of the payroll tax cut. That means less money for your favorite part of the state budget, or else a hole that has to be made up with tax dollars from somewhere else next year. So enjoy shopping this holiday season — next year may not be anywhere near as much fun.
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RETAILERS OPTIMISTIC ABOUT BLACK FRIDAY & BEYOND In the city and across the suburbs, from malls to national big box stores to mom & pop shops, there seems to be a consensus that retailers are in for a strong holiday shopping season.
Stories by Elissa Vallano Illustration by Don Lee
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The
Philadelphia region is decking the halls as Black Friday approaches, but this is not the typical holiday shopping season. Hurricane Sandy put more than a slight damper on the Northeast, and the ominous “fiscal cliff ” looming over Washington has caused nervousness among many retailers and consumers. October retail sales (released by the U.S. Department of Commerce) decreased 0.3 percent seasonally from September, yet increased 3.8 percent unadjusted year-over-year. Hurricane Sandy seems like the clear culprit for this dip in sales, but experts attribute it more to the current economy climate. Kathy Smith, Director of Marketing & Business Development at King of Prussia Mall, said. “At King of Prussia “While Hurricane Sandy certainly Mall, we’ve seen positive sales trends throughout the year that we expect to continue...” impacted consumer spending in PHOTO BY G. WIDMAN FOR GPTMC the northeast and mid-Atlantic recession,” Kathy Smith, Director of Marketing & Business Develstates, the larger threat to the overall economy is the impending fiscal cliff, which impacts opment at King of Prussia Mall, said. “At King of Prussia Mall, Americans across the country," National Retail Federation we've seen positive sales trends throughout the year that we expect (NRF) President and CEO Matthew Shay said. “The autoto continue through the holiday season.” King of Prussia Mall boasts more dedicated retail space than matic tax increases and spending cuts set to take effect at any other shopping mall in the United States. In the past 18 the end of the year may have more of an impact on business months, 22 retailers have been added, and it’s also in the process confidence and consumer spending than any other issue. It’s of creating a 140,000-square-foot corridor connecting the Plaza imperative that policymakers address the looming fiscal cliff and Court. The new space will allow for 40 additional stores, resnow to give consumers some certainty heading into the holiday shopping season.” taurants and customer lounge. But despite these concerns, Philadelphia-area consumers “King of Prussia has performed well, and there has been conare still expected to turn out in droves this holiday season. tinued demand for space,” Smith said. “In fact, 15 new national According to a preliminary Black Friday shopping survey and international retailers have opened in 2012. With 400 stores, by the NRF, up to 147 million people plan to shop Black many that are exclusive to the market, King of Prussia draws from Friday weekend - down slightly from the 152 million last a large, regional trade area.” year, but still steady and promising for retailers. Confidence in this year’s holiday shopping season can be felt “The underlying strength of the American consumer is throughout the King of Prussia Mall. Christmas decorations are encouraging, but it’s far from definitive,” NRF Chief Econoalready up, and the sales are just getting started. If fiscal strength could be determined by size alone, King of Prussia should have mist Jack Kleinhenz said. “Hurricane Sandy will have shortnothing to worry about in the coming month. term and long-term reverberations on the economy and will “We offer variety and exclusivity in a single destination that continue to impact consumer spending and retail sales over customers enjoy,” Smith said. “Philadelphia area shoppers can the coming months in the hardest-hit areas. Even though find their favorite stores, along with new-to-market retailers like retail sales declined in October, NRF remains confident in Tommy Bahama, Spanx, C. Wonder, Athleta, Burton and Marmot. moderate consumer spending nationwide, and expects a solid Three major expansions also happened in 2012. Forever 21, H&M holiday shopping season.” and Apple each tripled in size.” As for sales, there are a number of similar trends returning from Confidence in King of Prussia last year - mainly the continued popularity of electronics during the holiday season. Smartphones can be found in more than half Undoubtedly, there are more than a few tense retailers of American homes, and tablet computers are in one-third. They awaiting the holiday shopping season. King of Prussia Mall should drive annual consumer electronics sales to $206.5 billion isn’t one of them. this year, which will mark the first time sales have reached above “The forecast is the most optimistic it's been since the
Employees gifts are top of mind The American Express Small Business Holiday monitor shows that small businesses are aiming to keep employee moral high this holiday season.
25%
of entrepreneurs will be giving larger bonuses this year compared to last year.
40%
of small business owners will have a holiday party, compared to 35% lat year.
Alice Bredin (above), Small Business Advisor to American Express OPEN, said the survey shows retailers planning to discount less than last year, a sign they expect a strong holiday season. She also said “I was pleased to see the strong data around gift giving overall. This suggests to me that small business owners across the country are feeling some sense of optimism.” The data she cites:
51%
of small business owners plan to give gifts to clients and customers this year, the highest percentage since 2008. The average budget of $958 is the highest since 2007. (AMERICAN EXPRESS)
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REGIONSBUSINESS.COM
BY THE NUMBERS
Here is your holiday forecast
16.8%
expected increase in online sales over last year.
24.3%
is the amount online holiday sales will account for in total e-commerce sales in 2012.
15%
The increase in fourth quarter e-commerce sales predicted by the U.S. Department of Commerce.
5.6%
Amount holiday sales grew from 2010 to 2011.
700,000
Number of new seasonal employment opportunities in the retail industry nationwide.
12%
Is the growth over last year’s holiday season predicted by Shop.org. That would result in a holiday season worth $96 billion.
147M
Number of people expected to go shopping on Black Friday.
the $200 billion mark. The Consumer Electronics Association said sales are expected to grow 5.9% overall this year, up from an earlier estimate of 3.7% growth in 2011. “We're seeing that once again, electronics such as smartphones and tablets are topping shoppers' wish lists this year,” Smith said. “Apparel and accessories, jewelry, books, CDs, DVDs, and video games are also expected to sell well. Gift cards continue to be the most requested item, with 81% of shoppers planning to purchase at least one.” Booz & Company also predicts gift cards will be a huge category again this holiday season with more than 80 million shoppers planning to purchase them. That estimate is 4 percent more than last year. Brick and mortar and online retailers alike are all finding ways to creatively customize gift cards for consumers, and King of Prussia tries to make them as user-friendly as possible. “We offer gift cards with no monthly fees, no expiration of funds, and no lost value, so customers find the choice personal and practical,” Smith said. “This holiday season, we're also offering customers a choice of free gift packaging for each card with a minimum purchase of three King of Prussia Mall American Express cards, which can be purchased at either of the mall's two Guest Service centers.” As for the competition with online retailers, King of Prussia prefers to focus on the tangible experience of shopping. At the end of the day, they believe it is one of their greatest competitive advantages. “Online shopping offers convenience, yet most consumers still want to see, touch and feel before buying,” Smith said. “At King of Prussia, shopping is an experience that customers look forward to and enjoy.” Another one of King of Prussia’s distinct advantages in battle with Shoppers will flock downtown this season for gifts and attractions alike. PHOTO BY G. WIDMAN FOR GPTMC online retailers is its dedication to technology. They were one of the first malls ideas to customers with specific needs,” capitalizing on its booming population and in the country to embrace social media, Smith said. convenient walkability. which has resulted in more than 80,000 According to the Center City District, Facebook followers and a digital dataa business located on the 1400 block of Center City Walnut Street can expect to see an averbase of over 60,000 shoppers. King Expecting to Cash In of Prussia is well connected to its age of more than 2,000 people per hour. customers, and there is even a mobile The total demand for shoppers’ goods is Center City is another regional shopping app that helps customers navigate the $491 million within a 30-minute walk of area predicting strong sales this holiday mall and learn about sales and events. City Hall. Among retailers, restaurants are season. Center City is unique in that it has On Facebook, we will even have a predicted to perform especially well over experienced unprecedented growth over Santa's Helper program to offer gift the holidays. the last several years, and retailers plan on
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More than 48 new food-related businesses opened in Center City since August 2010, including Michael Schulson’s Sampan, Stephen Starr’s El Rey, Barbuzzo, Philadelphia Cupcake, Varga Bar, Zama, Zavino and 500 Degrees. In 1992, there were only 65 finedining restaurants in Center City, and most were situated around Rittenhouse Square. The number climbed to 185 by 2005, and today there are over 278 fine dining restaurants - a 328% increase since 1992. And including the South Street corridor into the equation would increase that number to 305. Center City’s restaurant scene remains a powerful subset of the region’s retail industry, but its shops are also optimistic about this year’s retail reports. The NRF predicts that 71.5% of young adults ages 18-24 will take advantage of midnight and early-bird Black Friday promotions. This is of particular note in Philadelphia since roughly 11% of the extended Center City area is comprised of residents 20-24 years of age.
Building a Business Around Holiday Cheer in Bucks County For many Philadelphia area residents, Peddler’s Village is synonymous with the holidays. The 42-acre, 18th century-style retail center courts a different type of
According to the Center City District, the total demand for shoppers’ goods is $491 million within a 30-minute walk of City Hall. PHOTO BY R. KENNEDY FOR GPTMC
Area Walmart stores will be open Thanksgiving night at 10 p.m.
Walmart Ready to ‘Win’ Season The world’s biggest retailer is ready for the world’s biggest retail season in one of the nation’s biggest markets. Steve Restivo, Walmart Director of Corporate Affairs, said his company’s stores are prepared for a huge season. “Here in Philadelphia, we know that Black Friday is like the Super Bowl and we intend to win,” he said. He cited two initiatives that he said would propel Walmart’s success. First, he said the company is following consumer feedback and starting its Black Friday events early, actually at 10 p.m. on Thursday. “So whether you stay up late or get up early, we have you covered,” he said. The company is also issuing a guarantee. While many Black Friday sales have eye-catching prices coupled with exceptionally small inventories, Walmart is gauranteeing shoppers will have access to three hot items (the iPad2, an Emerson 32-inch television and an LG Blu-ray player) at Black Friday prices. Mr. Restivo said the company will know quickly if its strategy pays off. “We’ll be watching hour-by hour at sales and customer activity,” he said. “By Friday morning, we’ll have trends and data to look at.” He said the company will “look at how our associates performed and measure our customers’ experience.” Specifically, “we’ll look at purchasing decisions around items we’ve decided to feature.” Mr. Restivo said it will be a dynamic process that changes across time and could differ from store to store. “We’ll be monitoring changes in real-time,” he said. “One of the strengths of having so many stores is that if we see a specific need, we can arrange for store-to-store replenishment, almost in real-time.” A strong synergy between the physical stores and Walmart.com, its two-pronged Black Friday strategy and the ability to track large amounts of data quickly put the retail giant in a good position in Philadelphia. “We’re excited and confident,” he said. “It’s going to be the best Black Friday ever.” -Region’s Business Staff
holiday shopper - one seeking a more nostalgic experience. By setting itself apart from the traditional malls, Peddler’s Village has been able to avoid many of the challenges its competitors currently face. The Peddler’s Village marketing team said that the general retail industry predictions for this holiday season are 3-4 percent above last year, but their year-to-date sales have already well exceeded this rate of increase. Still, they’re cautiously optimistic about the holidays given the impact on the region from Hurricane Sandy and the overall economic uncertainty. Peddler’s Village should be shielded from these pressures to some degree since they focus on the “total experience” — which includes 70 specialty stores, six restaurants, the 70-room Golden Plough Inn, and the Giggleberry Fair family entertainment center. By marketing itself as a “feel good” holiday shopping experience, they’ve built a retail business around friendly merchants, carolers, one million holiday lights, unconventional gifts, and locally owned shops with locally made merchandise - not simply the latest trends from international retailers. Peddler’s Village can also expect to lure more shoppers with their annual holiday events. This year marks its 50th anniversary celebration, and the main holiday events include the Gingerbread House Competition & Display, the Grand Illumination Celebration, Merchant’s Open House Weekend, and the annual Christmas Festival & Parade. Like King of Prussia, Peddler’s Village engages people via social media and coupon newsletters to remain competitive with online retailers. They have nearly 15,000 followers on Facebook and over 2,400 on Twitter to which they promote news and events. Shoppers can also purchase gifts online, and Peddler’s Village Gift Cards are valid for restaurants, lodging and entertainment as well as the shops.
BY THE NUMBERS
29%
Percentage of multichannel retailers who say they will promote their in-store Black Friday deals with mobile alerts, up from the 18.4 percent last year.
81%
Percentage of multichannel retailers who say they will use Facebook to alert shoppers about in-store deals, up from 73.7% last year.
81%
Percentage of shoppers who will purchase at least one gift card this year.
$156.86
Average amount shoppers will spend on gift cards, the highest amount in 10 years. Consumers will spend an average of $43.75 on each card they buy.
60%
Percentage of shoppers who said they would like to receive gift cards this year, up from 57.7% last year.
$28.79B
Expected total spending on gift cards.
$749.51
The average amount spent on gifts, décor, greeting cards and more this year, up slightly from last year.
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Brick-and-Mortar Stores Battle Online Onslaught When it comes to holiday shopping, many would do anything to avoid the chaos of a mall. Enduring the long lines, scouring for a parking space, and intermingling among other stressed out shoppers can just be too much to bear. Naturally, online shopping has been steadily growing in response to this demand, but brick-and-mortar stores pushed back last year in the war over holiday shoppers’ dollars. By offering free layaway and pricematch guarantees, brick-and-mortar stores were able to effectively compete last year. Despite this progress, online retailers efficiently capitalized on the popularity and ease of today’s technology, as well as consumers’ love for a good deal. According to Think with Google and Ipsos, about 80% of smartphone shoppers and 70% of tablet users said they used their device more frequently this year for holiday shopping.
Consumers will use their smartphones at many different points during their shopping experience, with 41% making purchases directly on their smartphone. Another 46% will research an item on their smartphone before going to a store to make the purchase, and 37% will research an item on their smartphone before eventually making the purchase online. Perhaps the biggest obstacle for brickand-mortar stores is “showrooming” when a customer visits a retail location to touch and feel a product, but then purchases the product at a lower price online. Amazon remains the giant of the online retail world, and they have built a business model that both brick-andmortar as well as online retailers strive to emulate. Low prices, fast shipping, personalized shopping, and popular customer service policies have made it more profitable than Safeway, Sears and
Macy's combined. Factor in the rise of deal sites like Gilt Groupe and Zappos, and online retailers are surging forward at a rapid rate. Shop.org reports that retail web sales will increase 12% over last year’s holiday shopping season to reach between $92 and $96 billion. How that will affect brick-and-mortar stores remains to be seen, but anxiety over the fiscal cliff is sure to have an impact on holiday shopping this year. The NRF predicts the average holiday shopper will spend $749.51 on gifts, decor, greeting cards and more - which is up slightly from the $740.57 spent last year. But almost one-third of consumers surveyed plans to comparative-shop online more often this holiday season
to find the best deals, and more than half will shop online for gifts and other items. "It’s critical for retail companies to constantly evolve as consumers do," NRF President and CEO Matthew Shay said. "And right now, shoppers want great deals, good value, and convenience - exactly what we’re seeing with this season’s late and early openings, price-matching, layaway, and mobile offerings.”
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REGION’S BUSINESS A JOURNAL OF BUSINESS & POLITICS
21 NOVEMBER 2012
REGIONSBUSINESS.COM
IDEAS
21
Three Simple Steps To Freemium Success
Audience engagement expert Danny Iny (SAY “eenie”) of Firepole Marketing is the author of “Naked Marketing.” Learn more at FirepoleMarketing.com.
CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.
A lot of entrepreneurs are turning to the strategy of giving away products and services for free to build an audience base, and eventually a customer base. The idea behind “freemium” sounds great, but it doesn’t always work. A big mistake is similar to the mistakes they make around social media or any other cool new marketing tool; they see someone else giving something away and making money, so they tell their marketing guy “I want what they have,” without giving a thought to the strategy that would actually make it work. The result, according to The Wall Street Journal: some companies are finding freemium “is turning out to be a costly trap, leaving them with higher operating costs and thousands of freeloaders.” To increase your chances of success with freemium, here are a few key things you should consider:
1. The offer has to be different. Freemium is fundamentally different from a free trial, yet they are often treated as basically the same thing: “you can get limited access to my software, platform, network, etc., and if you pay you can get unlimited access.” So basically you are getting more of the same. The problem is, people are not going to pay for more of the same. People are going to pay for something different, something better. Think of your free offer as a way of aggregating and engaging an audience, and your paid offer as something that will be valuable in a supplementary or related way, to a subset of that audience. LinkedIn is an excellent example; the free access to LinkedIn is appealing to a large base of people. Their premium subscription, which gives you advanced search and connection functionality, makes it
much easier to find the people you want to reach and you can reach out and connect to them in a way you can’t with the free membership. It’s not more of the free stuff – it’s a different set of features that is valuable to a subset of users. 2. Network effects that increase value to paid users. In a lot of successful freemium systems, there is a powerful network effect through which free users add value to paid users – and that is a strong argument for freemium. Skype is more valuable to me if all my friends have Skype, whether they are using a paid Skype service or not. Skype to Skype calls are free; Skype to phone calls cost money. It is not more of the same, and it’s not like you get 200 minutes of Skype to Skype calls free and you have to pay for more. It is a different service, of interest to a subset of users - and that is something you can charge for.
3. A very low incremental cost of fulfillment. When I create a free LinkedIn account, it doesn’t cost them money to support me. If they offered a one-on-one customer service rep to help me set up my account, the economics would be different, and it would be challenging for them on a freemium model, because there would be a significant incremental cost per user. Systems that do freemium well tend to have very low or non-existent incremental costs for additional free users. So remember, your paid product or service has to be qualitatively different from what you are offering for free. Your business should be structured in a way that creates value-adding network effects, and it should be easy and inexpensive to add and support free users. If all three of these factors are present, freemium just might be an excellent model for you to use.
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Q&A
21 NOVEMBER 2012
REGIONSBUSINESS.COM
BILL CLARK’S
ABUNDANT SEASON
The president and executive director of the Philabundance is happy to be busy this time of year, as donations help families for months. But hunger doesn’t take a holiday, and relief is a 12-month operation.
What’s the elevator pitch for Philabundance?
I always say it’s the Delaware Valley’s largest hunger relief organization. Ironically in a country as rich and affluent as the United States, we still have a number of folks who deal with hunger on a daily basis. Philabundance is one of several organizations committed to dealing with and eliminating hunger, eventually, totally. How and why did you first get involved with Philabundance and hunger relief?
I’ve been in this role since 2001
— so 11 years now — but I’ve been personally interested in hunger and food supply since high school, from science projects to a career in the food business. It goes back to my childhood. My father worked for a company where he could lose his job any day. Food was not always a given. Mrs. Paul’s Fish Sticks were so familiar, I felt like she was my aunt.
explain to their children why they can’t have a turkey, why their table isn’t full like that. And at the other end of the spectrum, it increases the awareness among all citizens of their luck, if you would, in being free from want and empathy for those who have not been secure in that.
How is this time of year different?
Philabundance and organizations like ours deal with this problem 52 weeks of the year. We take the surges and plan for the times that people least expect. The busiest time of
This is, for us, probably the busiest season for a couple different reasons. For clients, it drives it home in a very painful way, and they have to
What happens next week? Next month?
need is mid-May and June, when families don’t have access to school lunches. The season of awareness is Thanksgiving to Christmas, and we’ll get nine months worth of supplies, but it is a challenge all year. If you’re going to be a good person, you’ve got to do it more than on Sunday morning. You’ve got to do it seven days a week. I would welcome people to go to our website (www.philabundance.org) and find out how to get involved.
21 NOVEMBER 2012
REGIONSBUSINESS.COM
FINE ESTATES PREVIEW
23
Bright, Spacious Layout Define Winfield Manor Home This classic stone manor house is a wonderful upscale setting to be built by Pohlig Homes,LLC on a truly spectacular 2.4-acre lot located on a cul-de-sac in Devon’s exclusive community of Winfield. This brilliant and award-winning Pembrooke II floor plan by Visich Architects combines bright and spacious layout with the grandeur of Main Line area estate homes for today’s most discerning buyer. (5 BR, 6 Full/2 Half BA - $3,945,651) Elegant entrance foyer, elaborate millwork throughout, living room fireplace, bay window in dining room, French doors and fireplace in study and fireplace with built-in cabinetry in family room are but a few of superior amenities included. Gourmet Kountry Kraft kitchen with pro appliances and granite tops. Master suite with tray ceiling, fireplace, marble bath and dressing room with walk-in closets. Fabulous LL-with bar, sauna, media room and full exercise room. A magnificent flagstone terrace affords this home privacy and fabulous views. Exterior features outstanding stone, cedar and stucco facade, garden walls, circular drive, pool and cabana.
For complete real estate information, call The Main Line Living Group of the Devon Home Marketing Center at 610-889-5556
WRIGHTSTOWN TOWNSHIP Custom home on 2.6 acres ~ Over 5,000 square feet of luxury living space ~ Amazing finished lower level ~ 3 car attached and 5 car detached garages~ $725,000
UPPER MAKEFIELD TOWNSHIP Exceptional 5 yr young custom home with superb details & amenities ~ 5 bedrooms & 5.1 baths ~ Custom cabinetry and tile work, arched entries, Lyptus hardwoods, lavish master suite, finished walkout basement & more ~ $1,500,000
WARWICK TOWNSHIP Car enthusiasts and hobbyists must see! Two homes and outbuildings for the price of one! Historic stone home plus Carriage/Tenant house ~ Beautiful Bank Barn ~ Corn Crib ~ 2.11 acres ~ $539,900
Belamour
NEW CUSTOM CONSTRUCTION UPPER MAKEFIELD TOWNSHIP, PA 29 beautiful home sites (10 magnificent lots still to choose from) 1-2.5 acres Just 3 miles from I95 Pisani Builders Associates, Inc.
DOYLESTOWN TOWNSHIP New custom construction by Michael J Sullivan, Inc. ~ PERMITS ISSUED ~ BUILDING HAS BEGUN 1.25 acre lot ~ 3,400 square feett ~ 3 1/2 bath ~ 3 car garage. Quality amenities included ~ $599,000
Building packages starting from $1,200,000. Off-site locations also available.
DOYLESTOWN AREA Design your new home today with Lykon Custom Builders on 1.74 acre estate lot next to preserved land & open space ~ Central Bucks Schools ~ Personal attention from design to finish ~ Other lots available ~ from $649,990
Perspective. Delivered weekly. $40 annually. To subscribe, call 877.700.6245 or 215.627.6397
REGION’S BUSINESS A JOURNAL OF BUSINESS & POLITICS
21 NOVEMBER 2012
REGIONSBUSINESS.COM
CHAMBER REPORT
27
NATIONAL ASSOC. OF WOMEN BUSINESS OWNERS
MAIN LINE CHAMBER OF COMMERCE
PHILADELPHIA MARATHON
Women of Distinction Honored
State Farm, IBX Honored at MLCC Red Carpet
Marathon Draws 60,000 Viewers
On November 27, the Philadelphia Business Journal and program partner National Association of Women Business Owners (NAWBO), presenting sponsor Wells Fargo and co-sponsors Cancer Treatment Centers of America and Ernst & Young, LLP will present the 2012 Women of Distinction awards program at the Sheraton Philadelphia Downtown Hotel. Twenty-five women in business and one rising star recipient, 35 years old or younger, will be recognized for professional accomplishments and community involvement in front of an audience of 500 guests. Single tickets are available.
SUBMITTED
PIPER JAFFRAY ANNUAL HEALTHCARE CONFERENCE
ViroPharma CFO Presenting in NYC Charles Rowland, vice president and chief financial officer of Exton, Pa.-based ViroPharma, will present at the Piper Jaffray 24th Annual Healthcare Conference in New York City November 28. ViroPharma’s presentations will be webcast live for investors through www.viropharma.com and available for a period of 14 days following the conferences.
Ten chamber-member companies were recognized for their philanthropy and service at the Main Line Chamber of Commerce’s Red Carpet Dinner November 15. Additional recognition was given to Stephen J. DiOrio, of State Farm, who was honored with the 2012 Chairman’s award, and Independence Blue Cross, which received the United Way Regional Impact Award. The evening also featured a performance from musical group Capitol Steps and remarks from president and CEO of Lincoln Financial Group, Dennis Glass.
FULL SERVICE ADVERTISING AGENCY s Strategic Planning s Media Buying
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s Marketing Consulting 255 Great Valley Parkway, Suite 150 Malvern, PA 19355
219 Cuthbert Street, Suite 500 Philadelphia, PA 19106
p: 610.644.8637 s f: 610.540.6433
StreamCompanies.com
The 2012 Philadelphia Marathon, “The Best Time of Your Life,” drew 30,000 runners and 60,000 spectators for its 19th annual weekend November 16 through 18. Festivities began with a free two-day Health and Fitness Expo Friday and Saturday, followed by the Rothman Institute 8K and Kids Fun Run on Saturday. The full, 26.2-mile Boston-qualifier Marathon and 13.1-mile half-marathon both took place Sunday. Mike McKeeman, of Ardmore, won the marathon with a time of 2 hours, 17 minutes and 51 seconds. NETWORKING FOR PROFESSIONALS
Networking Event Scheduled Networking For Professionals will host Shakers and Stirrers of Philadelphia Business Networking Mixer at Tavern 17 in South Philadelphia November 27. Tickets are $20 and available at the door.
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21 NOVEMBER 2012
REGIONSBUSINESS.COM
OPINION
Taxpayers Do Not Benefit From State’s Game of Monopoly
Jay Ostrich is the director of public affairs of the Commonwealth Foundation, Pennsylvania’s free-market think tank. Learn more at commonwealthfoundation.org.
CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.
Growing up near Reading, we enjoyed like no other the game of Monopoly. The possibilities were endless, the rules clear and the objective simple. But in the end, there could be only one winner with other players left on the outside, bankrupt and broken. Such are the ends of all monopolies, private or public – just ask Pennsylvania taxpayers and consumers of wine and spirits who played the game since 1933. Today, the Keystone State remains one of only two states in the entire nation (the other Utah) where citizens and consumers are forced to play monopoly with a government that wields ironfisted control over all wholesale and retail sales of both wine and spirits. Whether you are a restaurateur or individual consumer, if you want to play you will pay and obey their rules. Sadly, the PLCB controls the dice, changes the rules as they go and play with your money, consumers and teetotalers alike, while picking wine winners and liquor losers for a small crop of producers of their choosing. Customers may never pass go, shop elsewhere or even hang a shingle to compete lest they face the dreaded Chance Card that always reads “Go Directly to Jail.” Sound like a fun game? Pennsylvanians surely don’t think so as credible and consistent polling has shown overwhelming majorities of Democrats, Republicans and Independents support ending the game in favor of privatization that will bring personal and economic freedoms while keeping more jobs and higher tax revenues flowing into the community chest. But in a desperate move to prove their value, PLCB officials have gone one step further to expand their monopoly. In a recent investigative report, the Pittsburgh Tribune-Review uncorked a secretive plot by board officials that siphoned millions in taxpayer money to research, copyright, brand, advertise and market more than 30 “in-house” government wines and spirits to compete directly with private labels for shelf space and consumers.
taxpayers millions. In the end, it’s about whether the government has any right being in the alcohol sales business when private industry can do it with more convenience, greater selection and better prices. THE PLCB True, many argue PennsylvaPONDEROUSLY nia’s public safety is at stake with PRODUCED A the PLCB providing a service to protect citizens from the social ills MONOPOLY OF surrounding alcohol abuse. It’s a MANIPULATION, notion quickly dismissed by rigorMEDIOCRITY, ous academic studies and empirical MALFEASANCE observation of other privatized states AND with lower rates of alcohol-related MISMANAGEMENT.’ fatalities and maladies. The conclusion: Government-run liquor stores don’t prevent alcohol abuse. Clearly, Pennsylvanians are crying sour grapes with this costly game and are responding by making up rules of their own – openly breaking the law. Even according to a taxpayer-funded study commissioned by the PLCB, bootlegging through neighboring states is prevalent. In Philadelphia and eight bordering counties alone, the study revealed nearly half surveyed broke the law. This border bleed cost Pennsylvania nearly $100 million in sales and $40 million in state taxes. That’s right taxpayers, you now own a line This was never more evident than in of government wine and spirits. another curious PLCB decision whereby Unfortunately, shoppers can’t tell the they closed every state store in the aftermath difference with exotic brand names like of Hurricane Sandy, even though stores set TableLeaf, LA MERIKA, Hayes Valley, up just yards over the border remained open LasParcelas and Vinestone – this without for business, drawing parking lots full of so much as a press release from an agency Pennsylvanians. never shy about shining light upon predictAt the end of nearly 80 years of conable failures like its wine kiosk catastrophe. trol, the PLCB ponderously produced a Pennsylvanians are left to only guess monopoly of manipulation, mediocrity, “Government Wine” wouldn’t yield much malfeasance and mismanagement. In its enthusiasm. wake, we’ve been left with small cadre of But forget for a moment the utterly cronies counting their winnings, while the unexplainable phenomenon of a governrest of Pennsylvanians, private businesses and consumers lay broken and bankrupted ment agency competing unfairly with by bootlegging, border bleed and the loss of private business while using millions personal and economic freedoms. more tax dollars to advertise and market They’ve had their turn, we’ve played their these products in secrecy. Forget, too, the unfair game and now Pennsylvanians are violation of public trust that has launched demanding their legislators declare this external and internal ethics investigations out-of-control agency must never pass go or for numerous violations and disastrous collect another $200 again. decisions by executive staff that has cost
21 NOVEMBER 2012
REGIONSBUSINESS.COM
OPINION
29
Battle for Second Casino License Presents Opportunity
A
fter much speculation and background chatter, the application deadline for the license to run the second casino within the city limits has passed and the process can now begin in earnest. The proposals are nothing if not diverse, from a “Las Vegas quality” hotel and casino at the site of the Stadium Holiday Inn (submitted by the owners of Parx Casino and Maryland Live!) to Steve Wynn’s waterfront resort in Fishtown to developer Bart Blatstein’s vision of the $700 million Provence enveloping the old Philadelphia Inquirer building on North Broad Street. That diversity presents a challenge because the powers that be must grapple with the question of not only which business plan makes sense, but which vision is most likely to show results over the long term. Without knowing all the details, it is impossible to pick a favorite, but one thing is clear: A decision needs to be made, a developer needs to be selected and progress has to begin. The region cannot afford another debacle like Foxwoods, which was to be the city’s second casino. The complex, but ultimately disappointing story about how that never came to pass simply cannot be repeated. Despite the heated rhetoric of the anti-casino groups, the region is now host to a handful of casinos. The direct impact has
been decisive. Properties have been developed and put to use, thousands of jobs have been created and an immense amount of economic activity has been generated, both directly and indirectly because of those casinos. Travel and tourism is the shining star of the region’s economy, posting robust growth even in the throes of our nation’s faltering economy. The casinos are a part of that success story. Just as importantly, the casinos generate enormous amounts of tax revenue locally and for the state. That is revenue - and a lot of it - added to state and local coffers without a tax increase, without pinching the middle class, without taxing the wealthiest Pennsylvanians, without additional burdens on small businesses. The Pennsylvania Gaming Commission must do a complete and thorough job evaluating the applications, scrutizining the details to make sure that they award the license to a group that can get the project completed (which it failed to do last time around) and generating economic activity as quickly as possible, rather than just generating a lot of failed promises. There’s plenty of experience to go on this time around, so there is no excuse for failure. Pick a winner, pick it quickly and get this boost to our local economy moving.
REGION’S BUSINESS A JOURNAL OF BUSINESS AND POLITICS © COPYRIGHT 2012 INDEPENDENCE MEDIA 600 GERMANTOWN PIKE, SUITE 400 PLYMOUTH MEETING, PA 19462 610.940.1656 | WWW.REGIONSBUSINESS.COM
COMMENTARY FROM ACROSS THE WEB
Why we don’t have a Lincoln And perhaps we have no Lincolns because we have lost the ability to employ the power of language to move history. In an age of speech writers (almost all of whom are younger than the speaker and none of whom have ever been elected to office), it is impossible to imagine anyone on the public scene who could compose one sentence of the Gettysburg Address or the Inaugural speeches. GARY HART, THE HUFFINGTON POST 18 NOVEMBER 2012
Raising taxes is not the answer The nation’s federal tax revenues are rising, approaching the levels of just before the Great Recession. Spending is what we need to bring to heel, yet nobody seems to be talking about
EDITORIAL BOARD CEO and President James D. McDonald Editorial Director Karl Smith Associate Editor Terrence Casey
that in Washington right now. GERRI WILLIS, FOX BUSINESS 16 NOVEMBER 2012
State roads need attention now With more and more roads leading back to Pennsylvania’s transportation funding crisis these days, Gov. Corbett and Harrisburg lawmakers should be finding their way to a solution - and soon. They have one possible route already: Corbett’s own advisory panel last year charted a nearly painless course of raising driver fees and the wholesale gas tax to bring in $2.5 billion more for highways, bridges, and mass transit. PHILADELPHIA INQUIRER EDITORIAL 18 NOVEMBER 2012
New pot laws have downside What we do know is the patchwork of laws
@BarackProblema Hey Mr. Obama, I guess missile defense works pretty well (iron dome). Maybe you shouldn’t have cut ours? #obama is an idiot. 19 NOVEMBER 2012
concerning the legality of marijuana has produced a ripe climate for illegal activity, i.e., shipping marijuana across state lines for profit. BUCKS COUNTY COURIER TIMES EDITORIAL, 16 NOVEMBER 2012
HOW TO CONTRIBUTE To contribute, send comments, letters and essays to feedback@regionsbusiness.com. Opinions expressed by guest writers do not necessarily reflect those of Region’s Business. We reserve the right to edit all submissions for content, style and length.
ho ed
ho dy e
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21 NOVEMBER 2012
REGIONSBUSINESS.COM
BY THE NUMBERS
120,000
1.4
Tons of recycling collected in Philadelphia from June 2011-June 2012, an increase of 137 perecent from five years ago.
Miles in the 6ABC Dunkin Donuts Thanksgiving Day Parade. The route starts at 20th Street and JFK Boulevard.
$15.9B
18
Annual loss by the United States Postal Service for the fiscal year ending September 30. That’s an increase of more than 300% over last year.
Marching bands appearing in the parade, including three from Indiana. The Pennsbury High School Marching Band (The Long Orange Line) is the only Pennsylvania entry.
$11.1B
14
Amount of last year’s USPS loss attributed to “mounting costs for future retiree health benefits” and other “labor related expenses.”
Number of balloons in this year’s parade, including Sesame Street’s Cookie Monster and Elmo as well as Bugs Bunny.
Number of items handled by the USPS last year.
5%
Dance schools in this year’s parade including 20 from Pennsylvania and two from outside the tri-state area.
Decrease in the number of items handled by the USPS between 2011 and 2012.
1920 10
Years that 6ABC’s Cecily Tinan has served as host of the parade (including this year). Dave Roberts had the longest tenure as host, running from 1978 to 2009.
P
159.9B
30
First year for a Thanksgiving Day parade in Philadelphia, which makes it the oldest in the nation. Gimbels Department Store sponsored the parade for the first 65 years before it closed in 1986.
$
$11.8B
Amount of deposits in Philadelphia-area Wells Fargo branches, making it the biggest bank in the region. Citizen’s Bank is second with $8.8 billion. M. KENNEDY FOR GPTMC
1621
Year of the first Thanksgiving feast, a three-day affair in Plymouth Meeting.
0
Number of pumpkin pies at the first Thanksgiving.
1863
88%
Year President Abe Lincoln made Thanksgiving a national holiday.
Percent of Americans that will eat turkey at Thanksgiving.
5
13.3
Number of deer provided by the Wampanoag tribe for the first Thanksgiving feast.
Pounds of turkey eaten by the average American each year.
65,000
Number of people who receive food each week from the Philabundance program.
500
Number of agencies involved in Philadbundance.
T
New Look. New Energy. Renewed Commitment. Brokerage Concepts, Inc. has a new look, but our company's dedication to excellence remains. We look forward to delivering the quality service and support our brokers and partners have come to expect from us. We are committed to your success and we are eager to work with you. Chris Moyer 610.491.4824 Jane Hesler 610.491.4978 801 Lakeview Dr. ™ Suite 301 ™ Blue Bell, PA 19422