Tesco makes start towards house sales @ £9,999?

News in the Daily Mail that the mass retailer is now selling garden sheds should not be a surprise to Tesco-watchers

Given the fact that even before this 'shopkeeper' began to offer mortgages, the banks' massive own goal precipitated the global financial crisis and offered grocers the banking category on a plate, it should be obvious that Tesco is in the business of eventually selling anything that can be legally sold to shoppers…

'Flat-pack' garden shed sales are merely a starter in a designer-developer-builder-seller housing continuum where traditional suppliers of a category have allowed inefficiencies and over-pricing to offer total non-experts to enter and compete on value for money. This has to be a warning to anyone, supplier or retailer, that no category is safe from exposure to common sense challenge by savvy consumers, or their champions…

And why not?

VAT Rise and the 5s & 9s…

The Chancellor was probably not thinking price-points when announcing the VAT hike to 20%.....!

Impact of VAT rise to 20% on brand retailing at £3.99, inc VAT

RSP inc VAT @ 17.5% = £3.99

Say retail margin          = 25%

                                     = £0.998

i.e. trade price is £2.547, ex VAT
VAT @ 17.5%             = £0.594 i.e. (£3.99/117.5) x 17.5

RSP inc VAT @ 20%   = £4.08 i.e. (£3.99/117.5) x 100 x 1.20

Retailer restores RSP to £3.99, (unless you and the savvy consumer prefer a price hike to £4.49?)

Either the retailer absorbs the loss:

RSP ex VAT @ 20%    = £3.325

i.e. New retail margin  = £0.778 i.e. (£3.325 - £2.547 )

                                     = 23.4%


Or, the retailer demands a cost-price reduction from the supplier to restore the 25% margin:

25% Retail margin on £3.99 ex VAT @ 20% = £0.831 i.e. £3.325 x 0.25

Therefore new trade price                             = £2.494 i.e. £3.325 - £0.831

i.e. a 2.1% reduction in trade price i.e. (£2.547 - £2.4940)/2.547 x 100

Q1: What incremental sales do you need to restore your margins?

Q2: Can you really afford not to be ready for the inevitable negotiation sessions?


(or would you prefer our inhouse NamCalc workshop tailored to your SKUs, competitors and customers, in order to pull the whole team up to speed?)

More on retailer reactions to VAT hike

Change? What change?

Think about it:

• Tesco, Asda, and Morrisons in advanced stages of assimilating new CEOs, with attendant organisational changes, planned and unexpected..?
• Sainsbury's re-shuffles its Plc and Operating board, Justin case…?
• Interesting high-level people leaving for jobs in other retailers, creating reciprocal gaps….?
• All multiples experiencing zero like-for-like growth, despite state-of-art…?

And that’s just the big guys, today…

Speaking of which, the toughest budget in a generation…with a little VAT tweak to add calculation to change?

In these circumstances, retailers simply have to be receptive to ways in which your brand can impact their profitability…the only constant?

If ever a window existed to demonstrate how your trade terms, margins and trade-support package impact the retailer's P&L, using open-domain financials…it’s now, like never before…?

Why not take a look at our in-house bespoke workshop: 'Maximise your financial bargaining power'
 
Better still, why not give me a call on 07977 273 409 to discuss how it can be adapted to your categories, customers, competition and 'today'…?

A pill-popping kiosk?

                        New machine dispenses prescription drugs in minutes  (pic Metronews.ca)

Just like an ATM, but instead of bills, these machines pop out pills.

Developed by PCA Services Inc. the dispensing system has been on test in Canada since early 2009, and according to the Daily Mail, will shortly go on trial in several UK hospitals.

Here’s how it works: The machine makes a scan of the prescription, which is transmitted to the pharmacist at the main PCA site who is processing the order. The pharmacist will approve the order, provide drug information and note possible side-effects, and ensure that it is stocked in the machine, which can hold up to 340 medications.

The drugs are identified through radio frequency identification tags on the product. They are again verified by the remote pharmacist, and then eventually dispensed.

Pharmacy groups and community pharmacists are obviously concerned.
Details of Canadian trials

Laphroaig in kind rent collection?

The 400,000 Friends of Laphroaig, the No1 Islay malt whisky, are each given a square foot of land on the island and invited to the distillery to collect their rent – a dram of Laphroaig.

First established in 1994, the Friends of Laphroaig has resonated with the brand's fervent fan base across the globe and now includes members from 161 countries, with the supporting website available in eight languages. More than 121,000 members are from the UK.
The Friends of Laphroaig is a fantastic marketing tool as it allows Maxxium to communicate directly with a large number of target consumers while encouraging word of mouth among potential new drinkers, by offering genuine benefits.

Whilst the field at the back of the local Superstore may lack the same pulling-power in terms of encouraging consumers to collect their milk at source in the Dairy aisle, perhaps this could be a way of adding another link to Clubcard members?
Have an engaging weekend, from the Namnews Team!

Pressure on UK Multiples to maintain the financial status quo?

Given the financial pressures, (CEO changes, zero UK growth, government limitations on scaling up, dropping share-prices, loss of autonomy) how likely are the multiples to take a hit on ‘banned conditions’?

GSCOP Banned Conditions (calculating financial impact)

• No delay in Payments (they currently pay in 45 days approx., scope for negotiating extension, 90 days ring a bell?)
• No requirement to predominantly fund a promotion (move from fully-funded to 50%?)
• No obligation to contribute to marketing costs (suppliers’ current payments reduced to zero?)
• No Payments for shrinkage (say average shrinkage = 2% of retail sales?)
• No Payments for wastage (say 5% of sales, conservatively?)
• No Payments as a condition of being a Supplier (say current payments for listing, etc = zero?)
• Compensation for forecasting errors (think refund of additional margin from normal sale of promo-stocks)
• No ‘arbitrary’ de-listing

Still need convincing?

See: The Retailer’s Perspective on GSCOP
 
A Way Forward?
See: NamCalc Workshop, 34 ways of calculating financial impacts on your business

Bloomsday 16th June?

A non-stop account of a 24hr storecheck by an elderly KAM

Ocado delivering too much?

Despite not having made any profits in 10 years of trading, it is understandable that the owners of Ocado want to establish the latent value of their operation via a partial flotation. In other words, if initial investors, including loyal customers, take up the offer as expected, it will value the operation at £1bn.

According to the Evening Standard, Ocado has 1 million customers and sales of £427m. The only problems are lack of profit, possibly unsustainable service levels and the multiples playing online catchup…

Key issue will be customer alienation if service levels are reduced or charges increased to move EBITDA to acceptable levels of net profit and dividend payouts for shopper-shareholders…

Have a deliverable weekend, from the Namnews Team!

Tesco - The Key Changes

With Terry Leahy's surprise announcement of his retirement in March 2011,
Changes at Board Level from March 2011

Philip Clarke (50) will become Chief Executive of Tesco plc in March 2011. Philip has worked at Tesco throughout his career spending many years in retail and commercial. He joined the Tesco Board in 1998 and currently has responsibility for the group’s growing international operations in Asia and Europe as well as group IT.

Tim Mason (52), President and CEO of our Fresh & Easy business in the USA, will be given the additional group responsibility for branding, our values and climate change and will become Deputy CEO of Tesco plc. He will continue to be based in the US.

David Potts (53) will become the first CEO of our growing Asia business. He is currently Retail and Logistics Director in the UK, as well as having responsibility for the Republic of Ireland.

Richard Brasher (49), currently Commercial Director, will assume the newly-created role of CEO of the UK business and take responsibility for the Republic of Ireland.

Andrew Higginson (52), will continue as CEO Retail Services (comprising Tesco Bank, Tesco Telecoms, Tesco’s internet business and Dunnhumby).

Laurie McIlwee (48), will continue as Finance Director.

Lucy Neville-Rolfe (57) will continue as Corporate and Legal Affairs Director.

Other Matters

Trevor Masters will continue as CEO Central Europe and Turkey.

Gordon Fryett will head up Property across the group.

A new group Commercial role will also be created.

Independent retailer grows veg on Budgens roof

North London independent retailer Andrew Thornton has started growing vegetables on the roof of his Budgens store in Crouch End.
'Food from the Sky' is the brainchild of Thornton and Azul Thome of the Positive Earth Project, and makes Budgens the first supermarket in the world to grow food on its roof.

He said: "We need to grow more food in cities; with millions of square metres of suitable growing space on the roofs of London, we want to inspire others to follow suit."
As one of the key reasons for the project is to inspire and educate people on growing their own food, Thome will be running workshops on the Budgens roof garden in the near future.

This obviously raises raises the question of why confine this initiative to spare space outside the store, when it can be a way for multiples to bring the shopper even closer to the product via natural instore theatre?

Tesco re-defining the used-game market?

According to Thisismoney in the Daily Mail, Tesco is to offer customers second hand goods for the first time with shoppers able to sell their old computer games to the supermarket, which will then offer them for sale at a bargain price.


In what appears to be an attempt to attract customers from Game and HMV, Tesco will pay a good price ( i.e. better than the games competition) for pre-used games in good condition and resell at a discount to the new version price.

Given that any price above zero represents a gain for the owner of a 'redundant' game, and the games shops appear to offer little for second hand purchases, then Tesco simply has to offer £10-£20 for a game retailing new at £40, and apply a 50% markup to resell at a worthwhile discount to normal new prices. Offering much less will do more harm than good...

Applied to best-sellers only, this has to be a new business model for the games industry, and a no-brainer for Tesco.

Only issue in setting up a new renewal market-model will be copyright owners wanting to share the resale gains, as per moves in 're-selling' pre-owned books….

Asda's step towards phone-in-aisle price comparison

pic: FT

According to the Financial Times, under Asda’s scheme, with their price guarantee service, the shopper pays for products in store and then enters receipt details at home into Asda’s website to compare if anything was cheaper elsewhere. If a customer could have saved more by shopping elsewhere, the Asda site, operated by Mysupermarket.co.uk, will print out a coupon against future purchases to cover the difference, plus a penny.

According to Asda, about 15,000 people a day are now checking prices on the site, which covers about 70 per cent of Asda’s comparable products, and demand had “surpassed expectations”.

The real issue here is that Asda are beginning to undermine one of the fundamentals in Multiple retailer price perception. Consumer-shoppers traditionally relied upon a handful of KVIs to make a broad price comparison between prices charged by the multiples.

Asda have just opened up this decision process to include fact-based comparison across every SKU in the store…next step has to be phone-in-aisle price comparison.

Now although unit pricing never really took off, and shoppers are unlikely to leave a store for one lower-priced SKU, we are nowadays dealing with the 'savvy consumer' who demands demonstrable value for money.

Asda have just taken a step towards handing them the tool….

Are we now heading for replacement of 'state-of-art' grocery retailing a new, digital version of the oldest markets – where rival retailers call out their prices, offer their customers cups of tea and are always prepared when necessary to haggle?