When the Buyer says your supplier margin is too big....

With retailers struggling on 4% Net Margin, whilst many suppliers are in trouble on anything less than 9%, the buyer may claim that you are taking advantage.

S:   Glad to see you have looked up our latest published accounts. I obviously keep up to speed on your profitability, so now we can jointly explore ways of optimising your net margin, without driving me out of business

B:   Well, you are always banging on about lack of money, so I thought I’d call your bluff: Here you are making 9% and we only have 4%

S:   On the surface, it looks bad, and it had me worried first time around. However, deep down we are each trying to balance reward and risk, it’s just that we work in two  different business models..if you take more risk, you need more reward

B:   How come? …and I haven’t got time for a lecture on finance

S:   No way. For me to understand it, it has to be simple: As a manufacturer, we have to research and invest in product ideas up front, a big risk we are prepared to take, provided we can convince our shareholders that the rewards will be adequate. We also have lots of money tied up in state-of-art plant and equipment, whilst you can operate from leased premises, if necessary…

B:   We all take risks in business

S:   Agreed, but your risk is limited to taking in two weeks stock of our new product, and if our advertising and trade funding is not enough to move it, you can sell it at cost and de-list it. No harm done, except to our bottom line…

B:   Yes, but I could have given that space to something more successful

S:   ….and sacrificed an opportunity to experiment with a bit of innovation that might have given you a competitive edge. But let me explain more about why we need our margin to optimise your profitability…

B:   Ok, I buy the need for innovation, but I need to improve my bottom line

S    Fine, we need to manufacture big runs and hold at least 6 weeks buffer-stock of finished goods to cope with fluctuating demand. This allows you to operate on two weeks average stock. In fact, with our daily delivery of main SKUs, your average stock on our lines comes down to 2.5 days, reducing your risk even further.

B:   More like 3 days, but I take your point..

S:   Great, so when it comes to optimising your profit, the closer we work together, the more we can each make…you make more sales, we waste less money..

B:   How come?

S:   Think about it. Our biggest investment is in advertising (5%) and trade promotion (20%). See, you already get the lion’s share! So if we can coordinate our above-the-line campaigns with bespoke instore activity geared to your traffic flow, we get more for our buck, and the more you optimise shopper demand. Provided you manage potential wastage, the increments go straight to your bottom line.

Buyer:   So what do you need from me?

SuperNAM:   Now you are talking! If you give me guaranteed forecasts, we can optimise factory output. If you can pay a bit faster, we don’t have to fund so much free credit, but the real payoff can be via improved compliance instore…

Adventures of SuperNAM (19)

Differential Euros - how a French euro can be worth more than a Cypriot euro?

As we approach the final stages of EU governments’ efforts to agree to use bank deposits exceeding €100,000 as a means of ‘bailing in’ or rescuing ailing banks, clients have asked for an explanation of how this can result in differing values for a euro within the EU.

When a government raids depositors savings accounts, those who can do so try to move their money overseas. The government is obliged to ban currency transfers to prevent such ‘exporting’ of savings and avoid a run on the banks….

Example
Suppose a Frenchman, Pierre, wants to sell his holiday home in Cyprus for €200k.
He has two bank accounts, one in Paris and one in Cyprus.
Nikos, a Cypriot citizen living in Cyprus, wants to buy Pierre’s holiday home.
He also has two bank accounts, one in Cyprus and one in Paris, but wants to pay via his Cyprus account i.e. in Cypriot euros.
Pierre wants to be paid via the French bank i.e. in French euros, to avoid having the money locked in Cyprus, because of the currency controls.
If Nikos insists on paying in Cypriot euros, then Pierre wants an additional €50k for the flat, as compensation for the risk of tying up his money in Cyprus. 

Therefore Cy€250k is worth Fr€200k …. 

Thinking ahead...
In other words, if it looks like a major bank in the EU needs re-capitalising, and a government bans currency exports, then local euro devaluation follows by default, as the government helps itself to depositors’ savings, like in Cyprus…

Watch this space… 

BOPUT deals - at a checkout near you!

Contactless cards can hit shoppers with an inadvertent Buy-Once-Pay-UP-Twice deal as an extra payment can be triggered without their permission while paying with a standard bank card or cash.

The system, which can be used for goods worth up to £20, is supposed to work only when the cards are placed within two inches of special terminals at the checkout. But customers who got in touch with the Money Box show on BBC Radio 4 allegedly said they were charged when the plastic was in their purse and well away from the readers – meaning they unwittingly paid twice.

An article in the Daily Mail details shopper experiences in discovering the errors and obtaining refunds, and quotes the UK Cards Association’s suggestions that cardholders should not to put their wallet down in this quite narrow field when they pay.

Reality check!
Given that many shoppers may choose to hold their purse in one hand while multi-tasking                                (packing/coupons/babies/cash-back/loyalty points…) at the checkout, and even use their purse-hand to shield PIN input, it seems unreasonable to expect them to also remember to hold the purse at arm’s length, 'out-of-sight', away from the terminal…?

Action
Taking into account the fragile level of acceptance and relative novelty of contactless payment, retailers need to find ways of identifying the scale of the problem –‘naïve’ shoppers will expect that computer screens will simply reveal duplicate payments at a checkout terminal and in retailer records – and make immediate refunds, rather than await the inevitable build-up of creeping suspicion, and suffer the loss of business to ‘old fashioned’ competitors that still rely on personal contact…. 

Porsche gatecrashes Aldi – the ultimate in hard discounter pulling power?

                                                                                        Picture: Twitter / SarahGPuetz
Speaking to the Carmarthen Journal newspaper, store manager Tom Jones (!) said: "The chap who had the crash had just bought the car, and thought it was in reverse…..”

Reminds me of a pal in the City who picked up the keys of his first Porsche and couldn’t resist leaving work early. He went to the underground garage, switched on, touched the accelerator, shot up the ramp, took the gate off its hinges and ended up on the other side of a fortunately quiet, mid-afternoon street….

All goes to show, like in negotiation, power is often better implied than applied…

But now and again, giving it full throttle can be fun….

Have a powerful weekend, from the NamNews Team!

Trade Issues and the NAM – How Much Should You Know, or Care?

Given the unmapped rate of change in these unprecedented times, keeping up with the issues has become virtually impossible.

As the resident company expert on the retail scene, you are meant to have factored key issues into your trading strategies, with the lack of such foresight becoming obvious only in retrospect.

This means developing the ability to quickly evaluate individual issues, using the following approach:
- What is this about?
- Where is it headed?
- How does it affect me?
- What to do about it?
- How to do it?

In other words, be able to see what's coming and see what matters

For more on application, see this month’s NamNews editorial May 2013

Forgotten Underground Edwardian shopping arcade in West Yorkshire as traffic builder?

                                                                         pic:  Nick Catford, Subterranea Britannica
During renovation of the Royal Arcade in Keighley in 2003, a lower level of Edwardian shops was found underground during the clearance of the basement area.

The original Royal Arcade was built in 1901, the year Queen Victoria died and Edward VII came to the throne. Gott and Butterfield ironmongers moved in, and it was popularly known as Butterfield's arcade
The shop, once described as an Aladdin's cave selling household goods, bicycles and camping equipment, closed in 1983

Now Nick Holroyd, manager of the Royal Arcade, which is situated above the discovery, is investigating whether the street - once at ground level - can be restored. He has enlisted an architect and structural engineer - and plans are being made to develop the street, which has space for up to eight units.

Given that many high streets have long histories, perhaps there is scope for incorporating a high street’s origins into plans to revitalise town centre shopping areas, and possibly capitalise on the consumer’s current retro-appetite?

A pointer for major multiples seeking 'non-commercial' projects?

For full details including 27 pics and two 1890 site-plans, here 

Incidentally, if going underground seems like a perfect antidote to these unprecedented times, visit the home page of Subterranea  Britannica here

Eliminating the cost of the last mile: InPost lockers for online pickups

                                             Pic: one of InPost global partners, source InPost site
In the UK, InPost’s new network goes up against the existing ByBox network of parcel terminals, which are mainly used for business-to-business deliveries, and also the growing number of parcel shop networks – CollectPlus, myHermes, UPS Access Point and Local Letterbox.

According to the FT, Amazon already provides a locker delivery service for items purchased on its website while CollectPlus, a joint venture between parcel delivery business Yodel and PayPoint, delivers to more than 5,000 convenience stores, newsagents and petrol stations. Earlier this year John Lewis said it would begin offering CollectPlus to shoppers buying items from its website.

InPost UK, a subsidiary of private postal operator Integer.pl, launched its service two weeks ago with a network of 114 locker sites in Manchester, Leeds, Glasgow and Edinburgh among other places. The company plans to have 3,000 locker sites operational by the end of the year.

A win-win for Bricks & Mortar retailers and site-owners
Retailers can rent Inpost a site and benefit from:

• Extra income from rent
• Utilisation of unused sites
• Additional revenues as a result of increased footfall
• Increased customer satisfaction resulting from access to a new, innovative service

...with the added advantage for a retailer in not losing the 30% of space and cost of operating a 'manual' collection service instore, and perhaps a little boost for the High Street?

A final online break-through
However, the real benefit of third party operation of the collection facility has to be the elimination of the final barriers of inconvenience and cost associated with the traditional need for shoppers and retailers to coordinate a physical handover at the home, with consumers willingly absorbing the travelling cost of the final collection-mile, to pick up goods at their convenience.... 

Free 15-slide presentation here

Philosophising in a Checkout Queue: What the hell is water?

Two young fish swim past an older fish. The older fish says: "Morning boys. How's the water?"
The two younger fish swim on in silence until one says to the other: "what the hell is water?"

‘This is water’, a new video by The Glossary was put online five days ago and has already had over 3m visits. Writer David Foster Wallace, in a graduation speech, uses time in a checkout queue to explore the meaning of life, a fascinating 9minute achievement!

Whilst we all complain about long checkout queues, it is about the only place left that allows a NAM time to think…..

(For the James Joyce version see 'A Superstore Odyssey')

The Savvy Consumer-group – how co-buying makes a difference…

With one of our highest page-view counts this year, each lasting an average of 2.54 minutes, yesterday’s NamNews announcement re Tesco’s new co-buying Wine initiative was by far our most popular NamNews item. It also indicated the high level of reader interest in what could be a new way of relating with a brand’s consumers.

Essentially, co-buying (cooperative buying power) provides a way of aggregating consumer demand and using the resulting power to influence all aspects of the offering (Product, Price, Presentation and Place), with cost-price reduction obviously making the news. (For other uses, see Pepsi, GSK, Pfizer, Sony, Warehouse, Achica and Mumsnet case-studies here)  

In practice, co-buying enables the savvy consumer to identify like-minded individuals, anywhere, all focused on your brand, and share views, experiences and especially perceptions of value. If that temporary grouping can then pool their demands, find a way of negotiating collectively with the supplier, and secure effective fulfillment of the order, then suppliers will have opened up a new two-way route to the consumer.

The new Tesco wine-buying initiative provides a way of removing some of these hurdles and road-testing the basic concept, with machinery that can scale and embrace additional categories in response to real demand, fast. 

It also gives Tesco extra buying muscle, but because of the two-way nature of the new channel, along with the 10:1 complain/praise ratio, the retailer will obviously be ultra-conscious of how they are seen to handle needs at each end of the supply chain…
…a potential win-win-win for consumer, retailer and supplier?

Anticipating the future with Alliance Boots

At 71, Stefano Pessina is obviously a man in a hurry and, although light on detail, he tends to achieve what he promises.

Given the value, and difficulty, of being able to predict the future, a second-best for NAMs can be to anticipate a  major customer's future situation via a combination of the customer's  'published' plans together with the NAM ‘s commercial logic and common sense...

Essentially, according to the FT, the company works for ‘today’ and ‘tomorrow’

‘Today’ means optimising the Walgreens’ tie-up,  jointly buying in areas of scale, including generic drugs and goods not for resale. They are also preparing for the launch of Boots products in Walgreens’ 8,000 stores, with trials in certain flagship locations. They recently built a potential 23% stake in a pharma wholesaler (More on AmeriSource Bergen moves in FT, here)

‘Tomorrow’
From the time of the initial formation of Alliance Boots and the tie-up with Walgreens it was possible to anticipate the inevitable moves of fast  global coverage via acquisition, assembling a combination of scale and influence/power in both retailing and  wholesaling, selling  anything in H&B  goods and services that can be legally sold to shoppers... In practice, this means a combination of acquisitions and partnerships across the globe especially in larger markets like China (Latest moves in FT here)

The future
On balance, suppliers, retailers and wholesalers have to anticipate:
- Completion of the Walgreens’ tie-up in two years
- A customer well advanced in achievement of the global ambitions outlined above
- A company needing to work down its 2012 debt of £7bn by £500m per annum
- All achieved by a company that is surviving an unprecedented global financial crisis that has severely compromised other players in the market

Two questions for NAMs:
- How would you play the trading relationship with your company, if you were in the Boots driving seat?
- What can you do today to anticipate the obvious?

Whither Mr Stefano when Walgreens complete the takeover of Alliance Boots?
With a potential 20% share of the action and being the largest shareholder of a £30bn mkt cap company, we leave you with a quote from the man himself:

“I will probably have a certain influence. But the influence is not due to the shares, the influence is due to the experience, and the value you can bring to the table…..”.

Big Brother checking you out, faster?

Supermarket giant Kroger Co. (KR) is winning the war against lengthy checkout lines with a powerful weapon: infrared cameras long used by the military and law-enforcement to track people.

These cameras, which detect body heat, sit at the entrances and above cash registers at most of Kroger's roughly 2,400 stores. Paired with in-house software that determines the number of lanes that need to be open, the technology has reduced the customer's average wait time to 26 seconds. That compares with an average of four minutes before Kroger began installing the cameras in 2010.

Kroger executives say they are continuously improving the QueVision software to better predict shopping behaviour and fine-tune the staffing of the checkout lanes. And they are testing other ways to get shoppers out more quickly, including a tunnel-like device resembling an MRI machine that scans items as they go through, then automatically bags them.

The real breakthrough will be on subsequent shopping trips when willing shoppers can be persuaded to avail of a longer in-aisle experience, knowing that checkout times are 90% faster…  

'Back to Normal' or a 100% reduction in meat imports?

                                                    Advert in The Times Saturday May 4th 2013

Sunday Times 5th May 2013

Tesco store within days of beef crisis

All is changed, changed utterly, 

A terrible beauty is born....

                                                     W.B. Yeats

Achieving inner-peace amidst the fire-fighting.....

My dear NAM
As one of the long term special people in my little circle, I am passing this on to you because it definitely worked for me today, and we all could probably use more calm in our lives.

Some doctor on TV this morning said the way to achieve inner peace is to finish all the things you have started.

So I looked around my house to see things I'd started and hadn't finished and, before leaving for work this morning, I finished off a bottle of Merlot, a bottle of Chardonnay, a bodle of Baileys, a butle of wum, a pockage of Prungles, tha mainder of bot Prozic and Valiuminun scriptins, the res of the chesescke an a box a chocletz.

Yu haf no idr how bludy fablus I feel rite now.

Plaese sned dhis orn to dem yu fee ar in ned ov iennr pisss. An telum, u fukin luvum.!!

Yours fondly

Brian

PS Now ready to mobilise your well-being?

Virtually 54% of shoppers leave a trolley-load of shopping in the aisle and start again next door…

In the real world, supermarket heads would roll, but in mobile shopping, 54% of consumers leave the mobile site when they run into difficulty and over a quarter (28%) turn to a competitor, causing us to blame the shopper..

In the current flat-line climate, the major mobile achievement of attracting new users, drawing them down each aisle, persuading them to select from appropriate categories, despite a multitude of price-compare opportunities, filling expandable trolleys that are limited only by size of wallet (most times!) with zero-opportunities for pilferage, no distractions in terms of empty/crowded aisles, only to abandon them at the checkout and offer their appetite to a 1-click competitor seems unwise..

A NAM at the sharp-end knows it is insane…


New research shows mobile is becoming the defacto browsing and buying method in the home and on the go. Almost two-thirds of smartphone and tablet users access websites on a daily basis and over a half shop via their mobile device at least once a week.

The survey of 1,000 UK smartphone and tablet owners shows the biggest bugbear for shoppers using mobile sites is speed, cited as a frustration by 49%. However there are many issues impacting the mobile experience unrelated to loading speeds. These include having to navigate both horizontally and vertically to view the page (48%), difficulty logging in (37%), and links that are too small (35%). One in five smartphone and tablet users said they can’t easily complete transactions on a mobile device.

New virtual demands in flatline markets
NAMs who bust a gut linking consumers and brands in the aisle know that today’s mobile-savvy consumer has become less forgiving and expects mobile sites and apps to offer all the functionality they are used to on a desktop. In fact, all stakeholders know that ‘mobile first’ is rapidly becoming the most sensible strategy for any e-commerce business that hopes to learn anything from bricks & mortar realities…. .

Have a virtually long weekend, from the NamNews Team!
(Link to free report here)

The talk-ratio in negotiation - optimising scarce time with the buyer

With extending lead-times to gain access to the buyer, and the need to survive over-riding everything, a NAM can be tempted to jeopardise the outcome of a precious buyer-meeting by attempting to monopolise the conversation via a high-intensity monologue, eventually expressing 'hurt' at the buyer's unimaginative  demands for 'the margin'.

This basic mishandling of the session can be avoided by reverting to appropriate use of the 'talk-ratio' at different stages of the meeting. Essentially, relative interventions by seller and buyer should comply with the 30/70, 50/50, 70/30 rule as the meeting progresses through the different phases of beginning, middle and end..

The Beginning: NAM: 30%, Buyer 70%
Having resisted the temptation to unfurl the 200-slide 'presentation', NAMs may realise how little they know about the buyer, and lapse into interrogation-mode. However, time with the buyer is too precious to risk asking for basic facts that should have been researched elsewhere. NAMs should instead focus their 30% of the dialogue on fact-checking and opinion-checking using a mix of open and leading questions, seeking buying signals, and listening to and using the answers...

The Middle: NAM: 50%, Buyer 50%
Phase two should be a shared discussion of the issues, neutralising the objections ('if he ain't objecting, he ain't in the market...') and helping the buyer to buy, using a subtle combination of finance-based adding of value and devaluing of concessions, and testing possible 'need and solution' combinations. In other words, demonstrating a willingness to slice the cake to fit, and enlarging the size of cake only if justified by a willingness to buy more...
Good buyers love this bit...

The End: NAM: 70%, Buyer 30%
If the groundwork has been adequate, then the switch to 70/30 should be natural, and mutually beneficial, as the NAM is allowed to 'take over' the conversation and detail the solution, based upon facts established and agreed in earlier phases, with both parties confident that follow-through will meet, or even exceed expectations...

Time to ignore the flames and try a change of fuel?