A pro-active use for empty prime retail space?

EA Sports Active, a Wii Sports type game with a variation on high impact work-outs, can be a win-win way of repopulating empty prime retail space. EA Sports Active launched in the spring and has sold over a million units in North America. An add-on (More Workouts) was launched last week.
EA Sports Active have opened stores in San Francisco and Boston where people can book a session with an "ambassador" or just walk in and have a play. Their breakthrough initiative is based on the idea that encouraging people to try the product via 'workout' would capitalise on their research showing that 80% of their consumers were recommending EA Sports Active to their friends. They knew that they had a good product but their challenge was getting the word further out there and really differentiating it from the other products. They point out that the stores are "like living billboards" in some of the world's most desirable shopping locations…..

Apart from extending the marketing reach of suppliers in appropriate categories, this idea could reach beyond the weekend and provide a 24/7 proactive shop-window for your brand.

Have a thoughtful work-out weekend from the Namnews Team!

Welcome hot-calling at home?

Wegmans Chain: In the US if Wegmans have a product recall they use their loyalty card data and mass telephone everyone who bought the product – they were the first to do this in the US

Whilst a number of other chains have copied them, nothing beats being first.....

Landlords' No-brainer Pragmatism Saves Blacks Leisure

Blacks' landlords running the numbers were left with two options today
According to the British Property Federation, landlords felt the choice was between the Company Voluntary Agreement where they agree to pay a maximum of six months' rent on its outlets in return for cancelling its long-term lease obligations. Blacks will remain liable for rates until the property is re-let or until the lease expires (12 years), or a 'pre-pack' administration - where the business collapses and is then sold immediately out of administration following a pre-arranged deal to shed unwanted assets - which could have left landlords with nothing, plus an obligation to pay rates on empty properties.

Paying the rates is a huge issue as it's one thing landlords not taking any money in, it's another them opening their own wallets and paying out. It could be six months until these shops are retenanted, or it could be five years….
These are moves that both local Councils and landlords will have to consider taking in order to help rebuild the retail trade.

The future of Blacks Leisure and more than 4,000 retail jobs were sdecured today after landlords gave their 'overwhelming' (75%) support for the rescue deal.

Incidentally, before parking the problem with the 'greedy' landlords, NAMs & KAMs should bear in mind that this Blacks Leisure hit will be taken solely by the landlords - many of whom are owned by the public and its pension funds.....

An Offer You Cannot Refuse?

Picture: Pacemaker

Cross-border shopping in Northern Ireland can not only offer €/£ parity, but also cheaper prices on goods that are 18-20% dearer in the South, according to the Irish Times.(See article for more extreme examples)

Whilst Irish politicians' pleas to shoppers not to travel North are obviously falling on deaf ears, the real issue for retailers and suppliers is the growing demand for UK multiples and suppliers to reveal the profitability of their Irish operations in their annual reports.

Otherwise their claims that the price discrepancies are simply due to the higher costs of doing business in the Republic will be increasingly undermined.

Ultimately, a government under unprecedented domestic pressures could attempt to force disclosure via the tax route…..

Bolland's step forward to M&S, a step back for Morrisons?

The high street retailer confirmed on Wednesday the Netherlands-born Mr Bolland would replace Sir Stuart Rose, the group’s executive chairman, in the New Year, remaining at Morrisons until 31/01/2009….

Serious implications for Morrisons in that the move to employ Bolland was a radical step that worked unexpectedly well. He has been there long enough to lay down the template, but had too short a tenure to ensure smooth succession.

All supplier bets now off, all initiatives short-term, and big pressure on the shares
A sovereign wealth fund approach as the price drops?

Back to the drawing board….Ken?, Ken?

Supermarkets underestimating problems of breaking into the banking market?

How about bankers underestimating Supermarkets?
Today's contributors to the traditional banking backlash against supermarkets might consider the following:

• Major multiples don't do 'underestimating problems'
• Shopkeepers operate in an output-focused, numbers-based, 'no-nonsence', customer-orientated environment
• They aim at sharing cost-savings and value with repeat-visit, life-time-value shoppers
  Their loyalty schemes give them more usable customer-insight than a bank would be trusted to handle
• They constantly strive to enrich the shopping experience
• They operate systems that can turn 50,000 lines 25 times a year, with 95+% onshelf availability
• They play the money markets with daily takings and 30+ day's credit from suppliers, some earning upwards of £200m per annum in the process
• They start with a gross margin of 25% and still make 5% net
• They come with none of the traditional banker 'trust-baggage'
• They are fully staffed during the 'lunch-hour'……

Traditional banks don't seem to appreciate that the game has changed, changed utterly…underestimating the threat posed by new players that learn fast, and don't take prisoners…..!

Global-shrink stats 2009: UK rate = leaving shops unstaffed 5 days per year with doors open for shoppers to help themselves….key-chart on Kamblog

Pic: The Economist

The 2009 latest edition of the Global Barometer covers 41 countries including the UK, U.S., China, Australia, France, Germany, Brazil, South Africa, Turkey, and India. The UK Centre for Retail Research collected data from 1,0689 of the largest retail corporations with combined sales of $822 billion.

• Total global shrinkage (stock loss from crime or waste expressed as a percentage of retail sales) cost retailers in the 41 countries US$ 114,823 million, equivalent to 1.43% of their retail sales.
• Shrinkage costs rose by 5.9% (from 1.35% to 1.43%)
• Shoplifting was seen as the major problem that retailers faced, accounting for 42.5% of shrinkage or $48.9 billion.
• The most-stolen items of retail merchandise within the 41 countries included branded and expensive products: cosmetics and skincare, alcohol, womenswear/ladies' apparel, perfume and fine fragrances, and designerwear. Other highly stolen lines included razor blades, DVDs/CDs, video games and video consoles, small electric items, and fashion accessories.

Think of the impact on retailers' (and suppliers'!) bottom-lines if shrinkage were reduced by 50%

More details + charts on Centre for Retail Research site

New Nokia Phone Will Scan Barcodes To Compare Prices Instantly

A great step forward for the shopper, but a giant leap for Kamkind in that this clears the way for 'complete' freedom to take photos instore. Could this spell the end of the need for secret photography in the aisle via a camera hidden within a dirty macintosh (coat!), and subsequent interrogation by shop staff, aroused by security-camera output?
(I once had the experience of being challenged by a security-guard in a Carrefour aisle in Brazil, who used his hand-gun to overcome the language issues…)
Have an incomparable weekend, from the Namnews Team!

How Low Can You Go…

By John Ruddy, Irish retail analyst, editor of Checkout Ireland magazine and its weekly Retail Intelligence news service.
It may be unfair to lay all the blame for the troublesome ‘new’ consumer at the door of the global downturn, but the 2008/2009 recession certainly has a lot to answer for.

Reduced incomes have made Irish consumers more promiscuous (in terms of store choice), less brand loyal (vs PL) and, in every retail format, more price and promotion conscious.

To react to this, retailers operating in Ireland have had to respond in a number of different ways.

Swathes of PL have been shoehorned into virtually every category – bringing total PL penetration (including discounters) up to around 20%. Promotions have gone from being a bonus (for shoppers) to a must (for retailers), with most multiples now selling circa 30% ‘on deal’. And price communication – once secondary to niceties like provenance, locality and shopper experience – is now the foremost message for retailers of all sizes and formats.

With this experience being mirrored in countless other retail markets, there is nothing particularly new to report here. The real question, however, is how sustainable the current promotional levels are, and whether retailers who built their brands based on more than just a price message can revert to this brand image when things improve in a few years time….More on application to Superquinn, Aldi customer-count, consumer spend-reductions and reactions across the Irish FMCG sector in free paper

‘The arrival of Tesco has forced us to reinvent ourselves’

When the original planning application for a Tesco supermarket in Scotland’s first Food Town, Castle Douglas, became public in 2004, there was a flood of angst-ridden comment from residents and local politicians alike, fearing that the town's unique designation would be shattered, and its tourist trade along with it.
However, pro-active local retailers that focused on adapting their business to the competition from Tesco have thrived as a result.On the face of it, the one-street town is still thriving: there are four butchers, two bakers, one greengrocer, three delicatessens, a sweetie shop and several cafes dotted down the historic thoroughfare of King Street. Every Tuesday and Friday, there is Wyllie McCulloch’s fresh fish stall Ferry Fish, which has been in the same spot for 25 years selling wild sea bass, North Sea haddock and west coast scallops, lobster and monkfish straight from the boats fishing the waters off Whithorn.

By accident or design, the successful retailers have applied Ken Stone's classic principles in competing with major multiples that have opened nearby:

Competing with the multiples locally

• Businesses that sell goods or services other than those sold by the multiples, tend to experience higher sales because of the spillover effect. The additional traffic attracted by the multiple will shop at these stores. (i.e. Aldi in US)
• Businesses that sell the same goods as the multiples tend to experience reductions in sales after a multiple branch opens locally
• Be prepared to make changes (re-invent yourself)
• Take proactive action, anticipate a period of declining sales and prepare both a short- and long-term business plan
• Identify market niches that aren't currently filled
• Improve level of customer service
• Carefully evaluate ability to compete on price and avoid trying ‘head-on’

Not rocket-science, but then good shopkeeping is simply about doing basic things very, very well.....ask Tesco!

Walmart has 'reconstructed' its group relationship with Asda by 'selling' it to its Leeds-based investment vehicle called Corinth Services Limited.

In an article in The Telegraph, a Walmart spokesman was quoted as saying that it had been done "for good financial management" reasons. He declined to comment on whether the move was tax driven, but said that all the companies were registered in the UK.

In the absence of further details from Walmart, the real issues for suppliers are why, and why now….?

Bearing in mind
- Asda has been underperforming profitwise vs Walmart global (Net Margin 2.8% vs 5.3%)
- Difficulties in scaling up in the UK because of competition legislation preventing Asda from acquiring a major UK player, and planning legislation preventing significant organic growth
- Major opportunities for Walmart elsewhere

Possibilities:
- Could be a way of isolating Asda financial performance from Walmart global?
- Could be easier to sell Adsa as a 'stand alone' company to management + Private Equity?, Sovereign Wealth Funds, or to a major foreign player (India, China, Russia) seeking a UK presence?

Worth a 'what if' on the impact upon your trade strategies?
1 Bear in mind the radically different cultures resulting from acquisition by Private Equity (i.e. 4-year exit strategy, focus on financial ratios to optimise value via reflotation) vs Sovereign Wealth Funding (longer term, more involvement of current management, focus on longer term, steadier, but profitable development of the business.)
2 Acquisition by a major foreign player (India, China, Russia) would probably be a friendly rather than a hostile bid, working with the existing team to feel their way forward in the UK environment…but global implications for major suppliers ref prices and terms disparities…

A Mad KAM is Better?

New research* indicates that bad moods can actually be good for you, and that being unhappy makes people less gullible, improves their ability to judge others and also boosts memory. The study, authored by psychology professor Joseph Forgas at the University of New South Wales, showed that people in a negative mood were more critical of, and paid more attention to, their surroundings than happier people, who were more likely to believe anything they were told. People in negative mood are less prone to judgmental errors, are more resistant to eyewitness distortions and are better at producing high-quality, effective persuasive messages.
The research suggests that sadness ... promotes information processing strategies best suited to dealing with more demanding situations.

So perhaps the aggressive buyer is doing us a favour after all?

However, as the research also indicates that a positive mood seems to promote creativity, flexibility, cooperation, and reliance on mental shortcuts, maybe the ability to swing (or act?) from happy to sad marks the truly professional KAM in the final act...?

Have a theatrical weekend, from the Namnews Team !

Vin de Pays de scouse?

To make vino more accessible Spar is using local dialects on its wine labels.

Somerset version: "Alright my luvver, eers one helluva Merlot. Be stinkin hummin a sivvies thar be bleddy ansome wi yaw croust or oggy. Purfect ta share wi yaw pardy as i' aiin ta eavy. Mygar be a purdy wine! Churs!"

Liverpool version: "A totally boss bottle of Merlot which smells o' blackberry, choccie, a brew and toffees. Juicy and complex like, this bevey is top wi most scran 'specially me ma's scouse. Tellin ye, this is deffo a bevey that will leave youz and youz mates made up over yez Sayers pastie."

Newcastle wine has "legs leik a thoroughbred", while in Scotland the label describes "a youngane's colour wi cherries an black fruit on the nose"

N.B. Namnews would like to categorically state that there is no truth in the rumour that the Spar Wine Controller is now sporting a black eye, arising from the less than enthusiastic reaction of some focus groups during the research…whilst the government cannot yet decide on its possible racist implications, due to translation difficulties…

BOGOF: A fair share of the losses?

Persuading your customer to forego their retail margin on the free item can help, but you both lose money!

This example shows where a retailer and a supplier decide to jointly fund the BOGOF promotion. This means the supplier will supply the free item ‘free of charge’ to the retailer, who in turn offers ‘buy one, get one free’ to the shopper for £10. The supplier makes a normal gross margin of 50% (in other words they can manufacture the product for 50% of the price to the trade). The supplier also makes a normal net profit of 10% on normal sales.

Meanwhile, the retailer makes a normal trade margin of 25% of shelf prices, ex VAT, has handling costs 0f 10% and overheads of 10%, leaving 5% net profit. As you know, state-of-art retailers normally have a net profit of 5% of sales, ex VAT.

In this example, where the retailer gives up his gross margin on the free item, and the supplier provides the free item free-of-charge to the retailer, it can be seen that the retailer loses £0.75 per item, or £1.50 per BOGOF and the supplier loses £1.50 per item, or £3 per BOGOF sold.

Obviously, this means that both parties will lose money on every BOGOF promotion!

Fairshare negotiation can help…

See yesterday's post below for when the retailer refuses to forego the retail margin!

BOGOF losers?

A BOGOF sold for £10, with a supplier Gross Margin of 50% and Net Margin of 10%, refunding the retailer's margin, can lose the supplier £5.50 per BOGOF !

See example above, where the supplier has agreed to replace the retailer’s margin on the free item in a BOGOF.

Here it can be seen that the retailer continues to make his normal margin (say 25% Gross, 5% Net) on the free item.
However, because the supplier has to refund the retail margin, it can be seen that the supplier loses £2.75 on every item, or £5.50 on every BOGOF sold on promotion.
Sure, the promotion will create excitement in store, but will not only damage brand equity, it will also lose money…

P.S. If you want to discuss the BOGOF application to your trading termstion, drop me a line on bmoore@namnews.com