Thursday, 29 September 2016

Deliveroo lunchbox direct to your desk - a hundred years later!

Deliveroo have launched a new service to provide ready-to-eat restaurant food for office workers. Whilst this may spur Amazon to develop an equivalent revenue stream, both would limp way behind India’s 100-Year-Old Lunch Delivery Service.

For instance, every day in Mumbai, some 5,000 deliverymen - called dabba wallahs - hand deliver 200,000 hot meals to doorsteps across the city. It's an intricate network that requires precise timing and numerous hand-offs from courier to courier, there and back.

Apart from split second timing and 100% reliability, and to make sure each lunch pail ends up at the right place, each container has a hieroglyphic-like coding system painted on the lid.

More details here, and some will have seen ‘The Lunchbox’ a popular movie that immortalised the process.

Back in the UK, it remains to be seen how speed of uptake and the emergence of competition (plus a 'higher-tech' coding system that is more than a pale imitation of the Indian method) leads to the development and optimisation of yet another 1:1 route to consumer in food service, at the expense of traditional ‘on & off’ consumption. 

Wednesday, 28 September 2016

Supermarket Price War Hits Sales At Sainsbury’s Whilst Argos Sees Robust Growth

Sainsbury’s has reported another fall in quarterly sales after it was forced to cut prices to remain competitive.

During the 16 weeks to 24 September, the chain’s like-for-like retail sales were down 1.1%, worsening from a 0.8% fall in its first quarter. However, Chief Executive Mike Coupe blamed the weak sales performance on food price deflation and said it had delivered like-for-like transaction growth across all channels and total volume growth.

The group added that it had now removed the vast majority of multi-buy promotions in favour of lower, regular prices which was helping it generate its highest-ever customer satisfaction scores. During this quarter, Sainsbury’s highlighted that it had made significant cuts in the price of broccoli, onions, Margherita pizza and its own-brand nappies.

Sainsbury’s convenience business and general merchandise offer continued to outperform its supermarkets with growth of 7% and 4% respectively. Its online grocery service also delivered 8% sales growth and nearly 12% growth in customer orders.

Meanwhile, the group’s newly-acquired Argos business posted robust growth for its second quarter to 27 August. Total sales grew 3% whilst like-for-like sales were up 2.3%.

Coupe commented: “Our ambition is to help customers live well for less. We have made further investment in everyday low prices and continue to improve the quality of our products. Our general merchandise and clothing offer is popular with customers and the acquisition of Home Retail Group will accelerate our multi-product, multi-channel strategy.”

He added: “We expect the market to remain competitive and the effect of the devaluation of sterling remains unclear. However, Sainsbury’s is well positioned to navigate the changing marketplace and we are confident that our strategy will enable us to continue to outperform our major peers.”

Commenting on the results, John Ibbotson, director of retail consultancy Retail Vision, said after outperforming its peers in recent years, Sainsbury’s has come down to earth with a bump. “The speed with which the tables have turned says much about the intensity of the competition in the market. A year ago Sainsbury’s was congratulating itself for retaining its middle-class clientbase while the German discounters decimated their rivals at Tesco and Morrisons,” he said.

“Now Tesco and Morrisons have staunched their losses and are fighting back with aggressive price cuts and some fundamental reforms to their structure. By contrast Sainsbury’s abolition of multi-buy promotions, and its introduction of simpler pricing, look distinctly underwhelming in the current brutal market conditions.”

However, he added that Argos should help boost Sainsbury’s bottom line in the short-term as well as improve its internet offer and logistics capability, adding: “But integrating the two firms will be time-consuming and distracting, and in the current environment Sainsbury’s cannot afford to take its eye of its core grocery business, even for a second.”

NAM Implications:
  • Where at: Sainsbury’s obviously on the way back, with the added complication of combining two business models – Sainsbury’s Food and Argos Non-food – and also B&M and online, with the City judging the company by total group performance, especially financials, in a market still influenced by discounter growth and convenience
  • Where headed: All of this in a run–up to an unprecedented Christmas price-war
  • Effect on you: Financial performance will colour Sainsbury’s relationships in terms of the lens through which they see supplier partnerships i.e. they will be particularly sensitive to financial impact on their performance in all business models
  • Action: From latest annual returns try to identify where your categories fit, then work out cost and value to Sainsbury’s of each element of your offering, and re-engineer where necessary

Saturday, 24 September 2016

Thursday, 22 September 2016

What if Amazon Entered the UK Wholesale Sector?

Following an insightful day at last week's IGD Wholesaling Summit, I dared to temporarily step into Mr. Bezos’ shoes and wondered to what extent the UK Wholesaling sector might represent a potential revenue stream for Amazon.

Given the ongoing retail structural changes taking place in unprecedented times, where every route to consumer counts, suppliers are now even more reliant on wholesalers to service medium and smaller independent grocers in the UK.

The cost of personal callage at say £50k annual cost of a ‘salesman’ making 20 calls per day, 200 days per annum @5% Net Profit margin, means that a 100% strike rate at £250 ordered per call to break even, means that direct supplier coverage via a field sales force is only viable at the upper end of the retail trade.

Meanwhile, independent retailers need retailing advice, guidance and support like never before. As small, understaffed and over-worked businesses, living from hand to mouth, literally, they are under many of the pressures being experienced by the multiples in terms of red-tape, legislation, narrowing margins, fluctuating demand, unpredictable cash-flows and cost-price increases in a flat-line demand environment. And, by the way, many have an Aldi or Lidl nearby, a constant temptation for their regulars…

They choose their assortments by a combination of instinct and experience, with mistakes ending up in their freezers for later consumption by their families. As the son of a Mom&Pop grocer, I can still remember coming in from school with my siblings, each complaining about ‘salmon cutlets again for tea’, following a glut in the Dublin fish markets…

It can be seen that wholesalers provide a vital service in accessing those parts of the trade suppliers cannot afford to reach…

In the case of delivered trade, wholesalers have improved speed of response and moved towards 100% availability whilst Cash & Carry are making it easier and faster to shop, all at significant cost to the bottom line in narrow margin businesses that are faced with increasing pipeline pressures such as National Minimum Wage and Sugar Tax…

From Amazon’s point-of-view, small independent grocers could simply look like big consumers. 

In practice, an added benefit would be that independent retailers are capable of aggregating the demand of consumers that are too currently too small even for Amazon…

Amazon has all the necessary machinery - infinitely scalable - already in place.

Meanwhile, in the current climate, a small retailer would benefit from being able to buy even one pack of a single SKU i.e. no minimum order, access an infinite range, avail of auto-analysis of purchasing behaviour via the Amazon machinery, all with the ease of 1-Click ordering, 1-Day delivery and no-quibble returns. In effect, a fully comprehensive delivered wholesale service, with Click & Collect serving as an equivalent to a Cash & Carry service…

And merely a step away from allowing Amazon to place some consumer Click & Collect lockers in the store as further evidence of the Amazon-retailer trade partnership…

In terms of promotional help, Amazon could make a case to suppliers that promo-kits containing materials and guidance could be packaged as ‘products’ and offered to appropriate retailers via the Amazon portfolio, with YouTube demos complementing and enriching the supplier-retailer virtual relationship. Amazon would thus have a means of offering suppliers a cost effective means of supporting smaller independent retailers, and all without a salesman having to cross the threshold…

In the process, a convenience store, given access to infinite variety, fast, could easily morph into a general store capable of meeting micro-demands from local consumers, cost-effectively, the ultimate convenience outlet.

In terms of timing and sequence, Amazon could offer this service on the back of Prime Fresh in the London area almost immediately. Thinking about it, many of the retailers/sole-proprietors are probably Amazon subscribers anyway, paying cash, so little or no vetting would be required. Most branded goods suppliers will already have existing links with Amazon, so little change would be required by either party.

In greater London Amazon would be faced with their most intense competition from wholesalers, so any success resulting from adapting their business model in this market could be rolled out to other parts of the UK, as fast as Amazon chooses to move…

In other words, a very real threat to wholesalers that are unable or unwilling to recognise the need to anticipate and react to competition from a company whose mission statement includes selling anything that can be legally sold to anyone, anywhere, anytime in whatever way they choose to buy…

All else is detail...

P.S. If you would like a copy of our companion paper: How UK Grocery Wholesalers could pre-empt Amazon… Please email me on

Sainsbury’s Ramps Up Online Operations With Opening Of First Purpose-Built Fulfilment Centre

Upping the online ante gives Sainsbury's an edge in London
  • Where at: Given that Amazon have made time and 100% availability the key online differentiators, Sainsbury’s are in a position to comply 100%, in what is the most concentrated online market in the UK
  • Where headed: Fulfilment (speed & availability) in the London area will become a key online driver
  • How it affects you: This zero-defect criterion will challenge any systems that are less than perfect
  • Action: Set this standard for your business in the London area, and apply as much as possible elsewhere

Wednesday, 21 September 2016

Promotions Failing To Ignite Sales For Retailers - IRI

Given that IRI's research re effectiveness of promotions shows that reality does not match expectation when it comes to sales, this study of over 85,000 promotions in UK supermarkets, convenience stores and health and beauty outlets raises the following issues for NAMs:
  • Where at: Essentially, vital to examine your specific categories/brand performance, but it looks like any gain for retailers is via trade investment rather than margin on incremental sales
  • Where headed: Eventually, more enlightened retailers will realise that specific brands appear to be growing at expense of competitors, thus in breach of basic principles of category optimisation, rather than incrementally growing the category. Short term retailers will simply grab the money
  • How it affects you: Not good for building brand equity
  • Action: Best to revert to fundamentals, assessing each part of the marketing mix and emphase any real advantage vs. alternatives available

Promotional Cut-backs - a reduction in Superstore appeal?

Tuesday, 13 September 2016

Arcadia to give online shoppers three months to pay

According to the Retail Gazette, Arcadia will offer online shoppers three months interest-free credit on online purchases.

Topshop, Dorothy Perkins, Miss Selfridge and Burton will now offer a “Buy Now, Pay Later” scheme.

Given the stresses on consumer budgets, this move will undoubtedly give the retailer access to incremental business.

The question has to be how long Arcadia will retain a competitive edge if other retailers follow suit.
Even more concerning will be the extent to which issues of loan non-performance, and retrieval of payment-default goods will lead to a degree of negative media coverage that is beyond even the levels currently enjoyed by the company…

Tuesday, 30 August 2016

Inflation, the next planning factor?

Given the post-Brexit fall in the pound, it follows that imported ingredients will cost more…
Add the recent BOE reduction in interest rates (0.5% to 0.25%!!), means the pound is even less attractive vs. other currencies.

Stir in the fact that UK food manufacturing costs are rising by around 10%, and you have a recipe for increased inflation, causing prices to rise in line with demand…

Except for UK retail

Already on reduced margins, major multiples cannot afford to absorb any cost increases.  Equally suppliers, having stripped out any ‘excess' costs, are unable to take any more pain... Meanwhile, the price war/s make it unlikely that shelf prices will bear any significant upward movement without loss of share.

All of this means increasing pressure on the mults, loss of market share and the growing importance of alternative routes to consumer.

For suppliers it means re-balancing their customer portfolios to reflect the new realities, secure in the knowledge that at least some of the competition will await a return to normal before being forced to change…