Sunday 29 November 2015
Wednesday 25 November 2015
Online acceleration and Big Space redundancy – the twin dilemmas of UK Retailing
Essentially, in the current climate, major retailers are faced with two significant drains on profitability. First, the high cost of fulfilment compared with B&M retailing makes online business dilutive of overall profit. Secondly, as consumers shop smaller, faster, closer, this makes 20% of out-of-town big space redundant, thus depressing outlet productivity, or rate of rotation of the store asset.
In other words, this results in negative impacts on Net Margin i.e. Return on Sales, and Capital rotation, or Sales/Capital Employed, the two components of ROCE (Return On Capital Employed).
Understanding how it works in practice will help you appreciate, and resist, excessive demands by your customer, and also show you how best to help, on a fair-share basis.
Essentially, as you know, ROCE = Return/Sales x Sales/Capital Employed.
If ROCE meets stock market expectations, the share price goes up, reducing the cost of borrowing, and can make it less expensive to acquire other retailers via a combination of shares and cash. However, more importantly, a good ROCE increases the value of buyers’ share options and autonomy in running the business. As the share price falls in response to diminishing levels of ROCE, the opposite occurs.
This may explain why supplier-retailer relationships are becoming more fraught and increasingly personal as B&M retailers begin to understand the real profitability of online fulfillment coupled with the growing problem of large space redundancy on overall company profitability…
Online as profit dilutor
Given that it is one of the only real growth areas in retail, major retailers cannot afford not to optimise the full online potential of their brand. However, compared with the relative simplicity of serving a customer instore, meeting a consumer’s online needs means additional fulfillment costs including picking, packing, shipping and handling returns.
Online grocery is even more complex in that a typical online shopping basket contains more low value and bulky items, reducing the number of orders per van and thus dilutes van productivity. In addition, consumers are generally unwilling to pay for delivery.
As a result, given that a home delivery costs £20, and that the consumer is unwilling to pay more than £5 per order, the retailer loses £15 per drop, only partly recovered via the margin on the goods delivered. Incidentally, those retailers hoping to improve online profitability by shifting their emphasis onto more lucrative categories (i.e. bigger margin non-foods), then pick up the additional profit-dilutor of online returns, where shoppers send back goods at four times the rate of returns made to B&M stores…
As B&M retailing can be more profitable than online, it follows that, as a retailer grows their online business faster than their B&M sales, the overall profitability of their business will be diluted.
Big space redundancy
In ideal times, B&M retailing can be more profitable than online. However, given the structural changes taking place in UK retailing, with discounters and local convenience stores growing at the expense of large space out-of-town players in a flat-line market, so the scale advantages of the major mults are diminishing.
In other words, large space retailers are finding that at least 20% of the store space is redundant, meaning that whereas it was possible to generate £1,000/sq. ft./annum, these sales have to be spread over a greater sales area.
For example: Say a retailer sells £1k/sq. ft. in a 120,000 sq. ft. outlet = £120m sales/annum. With 20% space now underutilised, the store sales become £96m i.e. 95,000 effective space @ £1k, reducing the sales productivity to £800/sq. ft./annum on the 120,000 sq. ft. store, with an equivalent impact on net margin and store utilisation or capital rotation.
Moreover, having conducted range culls to eliminate overlap and duplication, retailers are finding that 80% of sales are generated by 20% of the SKUs, resulting in a ‘long tail’ sales profile, whilst at the same time reducing product choice via the cull.
However, given that space - and its cost - are irrelevant online, in that a product tail can be as long as the number of products available, albeit selling less than one item per quarter, a B&M retailer can be even more tempted to develop their online offering in order to offer the consumer more choice, thus leading to more profit dilution via the fulfilment costs…
On balance UK B&M retailers are heading towards a future of permanent net margins of 2.5% or less, having grown - and built their share prices - on the basis of 5% + net profit before tax… It is impossible to increase prices, or significantly reduce operational costs, thus leaving the supplier as the main source of help…
In other words, this results in negative impacts on Net Margin i.e. Return on Sales, and Capital rotation, or Sales/Capital Employed, the two components of ROCE (Return On Capital Employed).
Understanding how it works in practice will help you appreciate, and resist, excessive demands by your customer, and also show you how best to help, on a fair-share basis.
Essentially, as you know, ROCE = Return/Sales x Sales/Capital Employed.
If ROCE meets stock market expectations, the share price goes up, reducing the cost of borrowing, and can make it less expensive to acquire other retailers via a combination of shares and cash. However, more importantly, a good ROCE increases the value of buyers’ share options and autonomy in running the business. As the share price falls in response to diminishing levels of ROCE, the opposite occurs.
This may explain why supplier-retailer relationships are becoming more fraught and increasingly personal as B&M retailers begin to understand the real profitability of online fulfillment coupled with the growing problem of large space redundancy on overall company profitability…
Online as profit dilutor
Given that it is one of the only real growth areas in retail, major retailers cannot afford not to optimise the full online potential of their brand. However, compared with the relative simplicity of serving a customer instore, meeting a consumer’s online needs means additional fulfillment costs including picking, packing, shipping and handling returns.
Online grocery is even more complex in that a typical online shopping basket contains more low value and bulky items, reducing the number of orders per van and thus dilutes van productivity. In addition, consumers are generally unwilling to pay for delivery.
As a result, given that a home delivery costs £20, and that the consumer is unwilling to pay more than £5 per order, the retailer loses £15 per drop, only partly recovered via the margin on the goods delivered. Incidentally, those retailers hoping to improve online profitability by shifting their emphasis onto more lucrative categories (i.e. bigger margin non-foods), then pick up the additional profit-dilutor of online returns, where shoppers send back goods at four times the rate of returns made to B&M stores…
As B&M retailing can be more profitable than online, it follows that, as a retailer grows their online business faster than their B&M sales, the overall profitability of their business will be diluted.
Big space redundancy
In ideal times, B&M retailing can be more profitable than online. However, given the structural changes taking place in UK retailing, with discounters and local convenience stores growing at the expense of large space out-of-town players in a flat-line market, so the scale advantages of the major mults are diminishing.
In other words, large space retailers are finding that at least 20% of the store space is redundant, meaning that whereas it was possible to generate £1,000/sq. ft./annum, these sales have to be spread over a greater sales area.
For example: Say a retailer sells £1k/sq. ft. in a 120,000 sq. ft. outlet = £120m sales/annum. With 20% space now underutilised, the store sales become £96m i.e. 95,000 effective space @ £1k, reducing the sales productivity to £800/sq. ft./annum on the 120,000 sq. ft. store, with an equivalent impact on net margin and store utilisation or capital rotation.
Moreover, having conducted range culls to eliminate overlap and duplication, retailers are finding that 80% of sales are generated by 20% of the SKUs, resulting in a ‘long tail’ sales profile, whilst at the same time reducing product choice via the cull.
However, given that space - and its cost - are irrelevant online, in that a product tail can be as long as the number of products available, albeit selling less than one item per quarter, a B&M retailer can be even more tempted to develop their online offering in order to offer the consumer more choice, thus leading to more profit dilution via the fulfilment costs…
On balance UK B&M retailers are heading towards a future of permanent net margins of 2.5% or less, having grown - and built their share prices - on the basis of 5% + net profit before tax… It is impossible to increase prices, or significantly reduce operational costs, thus leaving the supplier as the main source of help…
Monday 23 November 2015
Debenhams alleged early payment discounts - what it can mean for suppliers
According to The Telegraph, Debenhams have allegedly asked its suppliers for a reduction between 1% and 2%, in return for payment between 30 and 60 days earlier than usual.
Whilst suppliers obviously have the option to walk away, it can be more productive to negotiate, using numbers based on the current business. One approach could be as follows, substituting your own figures as appropriate, and checking with your finance department:
Assumptions:
- Supplier annual sales to the customer: £2,500,000
- Current credit given to customer: 65 days
- Supplier’s cost of borrowing money: 5%
60-day reduction 30-day reduction
Annual Invoiced sales to the Customer = £2,500,000
Customer currently pays in 65 days = 5.6 times/annum
i.e. 365/65
We want the customer to pay in 5 days
i.e. 73 times/annum
We want the customer to pay in 35 days i.e. 10.4 times/annum
Amount owing based on 65 days £446k £446k
Amount owing based on 5 days £34k i.e. £2.5m/73
Amount owing based on 35 days £240k i.e. £2.5m/10.4
Cashflow saving for supplier £412k £206k
Cost of borrowing @ 5%/annum £20.6k £10.3k
= 0.82% of sales = 0.4% of sales
Supplier should resist giving a discount more than 0.8% on a payment made 60 days earlier, or 0.4% discount for 30 days earlier. i.e. any discount above 0.8% for 60 days or 0.4% for 30 days is greater than the supplier’s 5% borrowing cost
Again, substitute your figures in the above calculations to establish your negotiation parameters, and check with finance colleagues…
Whilst suppliers obviously have the option to walk away, it can be more productive to negotiate, using numbers based on the current business. One approach could be as follows, substituting your own figures as appropriate, and checking with your finance department:
Assumptions:
- Supplier annual sales to the customer: £2,500,000
- Current credit given to customer: 65 days
- Supplier’s cost of borrowing money: 5%
60-day reduction 30-day reduction
Annual Invoiced sales to the Customer = £2,500,000
Customer currently pays in 65 days = 5.6 times/annum
i.e. 365/65
We want the customer to pay in 5 days
i.e. 73 times/annum
We want the customer to pay in 35 days i.e. 10.4 times/annum
Amount owing based on 65 days £446k £446k
Amount owing based on 5 days £34k i.e. £2.5m/73
Amount owing based on 35 days £240k i.e. £2.5m/10.4
Cashflow saving for supplier £412k £206k
Cost of borrowing @ 5%/annum £20.6k £10.3k
= 0.82% of sales = 0.4% of sales
Supplier should resist giving a discount more than 0.8% on a payment made 60 days earlier, or 0.4% discount for 30 days earlier. i.e. any discount above 0.8% for 60 days or 0.4% for 30 days is greater than the supplier’s 5% borrowing cost
Again, substitute your figures in the above calculations to establish your negotiation parameters, and check with finance colleagues…
Thursday 19 November 2015
Poundland's 26% profits slide, a looming lesson in volatility?
News of the steep fall in pre-tax profits, based partly on the peaking of the Loom bands craze - selling 728,000 of the plastic bracelets a week, dropping to 2,000 – illustrates the extent to which pound shops are affected by consumer whim.
Whilst Poundland are perfectly equipped to optimise such demand with great prices, deep down as a public company the helter-skelter nature of whim-demand has to make them more appreciative the steady-state sale of ‘less exciting’ mainstream brands.
Given this need, and providing the branded supplier’s costings make a pound version viable, then the price discounter represents a good alternative route to consumer.
However, in the medium term both retailer and supplier are increasingly vulnerable to any rise in running costs, such as the introduction of the living wage. Any increase in inflation will also present a problem, given the onshelf £1 price.
In time Poundland will become sufficiently established in the mind of the consumer as a source of good value and will probably be able to increase shelf prices, with the ‘£1’ becoming a reminder of low priced value for money.
Meanwhile, suppliers need a constant focus on cost control and product development in order to remain within the £1 price parameter, and work with Poundland on a fair-share search for realistic and profitable ways of optimising this unique but volatile route to consumer.
All else is detail....
Wednesday 18 November 2015
Guest Blog: Riding Two Horses – Managing a Mixed Business For Success by Richard Nall
It is the eternal conundrum for many CPG suppliers: Should we ‘get into’, or stay in, Own Label?
With core customers losing share (e.g. to grocery discounters), and lean manufacturing techniques releasing capacity year after year, organisations face a constant battle to fill their factories. Other solutions, such as exporting, take time to research, and appointing the right distributor can be fraught with difficulties; whilst M&A can exacerbate the problem (and concurrently release second hand kit for sale following manufacturing rationalisation, inadvertently creating a new competitor).
Superficially, it can seem attractive to fill capacity with own label but if that is as far as your thinking goes, then stay with your knitting. I suggest that you think carefully how you will ride both horses, both today and tomorrow. Is the problem that your and your competitors’ brands are not distinctive enough, or are your innovation efforts too weak? For many, these might be improved, so this should be your immediate focus.
If you still believe that your future lies in own label then start with a mental re-positioning. Think Retail Brand or Customer Brand. Successful firms treat customers’ brands as their own with concomitant levels of brand development and innovation resource. The only outwardly visible difference should be the lack of dialogue investment for the latter. Start with a crystal clear category vision, defining consumer and shopper growth drivers, followed by a hard-edged discussion as to portfolio roles, and expected levels of financial and organisational benefit and resource requirement.
You might ask yourselves some questions such as: Why would competing in retail brand be a good thing? What is their role in driving category sales and profit? With which retailer(s) do we want to work? What value would we add? How can we differentiate from our proprietary brands? How do we sustain those differences? What financial and organisational benefits will it bring? What rules need laying down?
An answer to these questions might look like: “Competing in Customer Brands allows us to drive category growth, and compete against Brand(s) X (Y and Z) with a diverse portfolio differentiated between the core category drivers. We will focus Brands A & B on Drivers M & N and develop our customer brand portfolio against Drivers P and Q where Brand(s) X (Y and Z) are strongest. Our category insight and operational capabilities set us apart so that we will make superior profits vs customer brand competitors.”
“We will earn scale benefits - procurement, manufacturing, distribution and trading - enhancing cash flow and shareholder returns. This will provide opportunity for increased investment in our branded portfolio. Net, we will fix our competitors with customer brands, gaining freedom of action to grow our branded business. Through learning how to be effective retail brand developers, we will create a more agile organisation that operates with significantly greater urgency than today.”
It might sound good but you need to consider, make and stick to some hard decisions re: key practicalities: How do we ensure our brand development stream remains a core priority and is not disrupted by short-term customer demands? How will we prioritise resource bottlenecks? How do we retain corporate enthusiasm for proprietary brands against customer brands? What IP will we allocate to Customer Brand innovation, if any? What are our ‘lines in the sand’, and are we REALLY prepared to enforce them?
If you think some of this might be nit-picking, think again. They are critical issues our clients face daily. Time and again, we have seen Leadership Teams, and particularly the CEO/MD, inadequately articulate and police their expectations here. The consequence? Resource and innovation that should sustain proprietary brands is diverted onto customer ranges. Over time, the brand stumbles, becoming less important to the manufacturer and customer who is (usually) earning better margins on their own products. The long-term outcome is invariably commoditisation and category stagnation as insight & discovery, true innovation, and dialogue investment decreases with marketing expenditure switched to customers to prop up sales.
So if this is a live issue for you, or you are already riding both horses, pause and reflect upon the strategic choices you are making, and ensure that your organisation (particularly your sales and innovation teams) fully understands what they are, what they mean, that they buy into them, and, critically, that they abide by them.
Richard Nall - richard@brandgarden.co.uk
With core customers losing share (e.g. to grocery discounters), and lean manufacturing techniques releasing capacity year after year, organisations face a constant battle to fill their factories. Other solutions, such as exporting, take time to research, and appointing the right distributor can be fraught with difficulties; whilst M&A can exacerbate the problem (and concurrently release second hand kit for sale following manufacturing rationalisation, inadvertently creating a new competitor).
Superficially, it can seem attractive to fill capacity with own label but if that is as far as your thinking goes, then stay with your knitting. I suggest that you think carefully how you will ride both horses, both today and tomorrow. Is the problem that your and your competitors’ brands are not distinctive enough, or are your innovation efforts too weak? For many, these might be improved, so this should be your immediate focus.
If you still believe that your future lies in own label then start with a mental re-positioning. Think Retail Brand or Customer Brand. Successful firms treat customers’ brands as their own with concomitant levels of brand development and innovation resource. The only outwardly visible difference should be the lack of dialogue investment for the latter. Start with a crystal clear category vision, defining consumer and shopper growth drivers, followed by a hard-edged discussion as to portfolio roles, and expected levels of financial and organisational benefit and resource requirement.
You might ask yourselves some questions such as: Why would competing in retail brand be a good thing? What is their role in driving category sales and profit? With which retailer(s) do we want to work? What value would we add? How can we differentiate from our proprietary brands? How do we sustain those differences? What financial and organisational benefits will it bring? What rules need laying down?
An answer to these questions might look like: “Competing in Customer Brands allows us to drive category growth, and compete against Brand(s) X (Y and Z) with a diverse portfolio differentiated between the core category drivers. We will focus Brands A & B on Drivers M & N and develop our customer brand portfolio against Drivers P and Q where Brand(s) X (Y and Z) are strongest. Our category insight and operational capabilities set us apart so that we will make superior profits vs customer brand competitors.”
“We will earn scale benefits - procurement, manufacturing, distribution and trading - enhancing cash flow and shareholder returns. This will provide opportunity for increased investment in our branded portfolio. Net, we will fix our competitors with customer brands, gaining freedom of action to grow our branded business. Through learning how to be effective retail brand developers, we will create a more agile organisation that operates with significantly greater urgency than today.”
It might sound good but you need to consider, make and stick to some hard decisions re: key practicalities: How do we ensure our brand development stream remains a core priority and is not disrupted by short-term customer demands? How will we prioritise resource bottlenecks? How do we retain corporate enthusiasm for proprietary brands against customer brands? What IP will we allocate to Customer Brand innovation, if any? What are our ‘lines in the sand’, and are we REALLY prepared to enforce them?
If you think some of this might be nit-picking, think again. They are critical issues our clients face daily. Time and again, we have seen Leadership Teams, and particularly the CEO/MD, inadequately articulate and police their expectations here. The consequence? Resource and innovation that should sustain proprietary brands is diverted onto customer ranges. Over time, the brand stumbles, becoming less important to the manufacturer and customer who is (usually) earning better margins on their own products. The long-term outcome is invariably commoditisation and category stagnation as insight & discovery, true innovation, and dialogue investment decreases with marketing expenditure switched to customers to prop up sales.
So if this is a live issue for you, or you are already riding both horses, pause and reflect upon the strategic choices you are making, and ensure that your organisation (particularly your sales and innovation teams) fully understands what they are, what they mean, that they buy into them, and, critically, that they abide by them.
Richard Nall - richard@brandgarden.co.uk
Tuesday 17 November 2015
Would you buy a used car from this vending machine?
The Independent reports that Carvana, the first complete online used-car retailer and Forbes 5th Most Promising Company, launched the world’s first, fully-automated, coin-operated car vending machine in Nashville in November.
(See how it works, on the Carvana site)
Apart from eliminating salesmen (!) and the distrust often associated with buying used-cars, this break-through initiative represents another fundamental change taking place in retailing, as buyers and sellers experiment in a desperate search for a competitive edge, and sometimes make ‘the impossible’ work in the process…
In FMCG marketing, this has to be a reminder to always think outside the category-box and our trading ‘comfort-zone’, as we seek ways of differentiating our offering, and take nothing for granted…
Speaking of which, back in Nashville, having taken possession, kicked the tyres and sniffed the exhaust, the buyer then has a seven-day “test-own” period and an option to return the car.
A potential win-win after all…
Monday 16 November 2015
What about the non-redundant good guys?
As always, when we focus on minimising the pain of redundancy, the real cut-back issues are not about those that are chosen to go, but rather those that choose not to stay…
Black Friday: running the endgame numbers?
Whilst Black Friday presents a useful promotional and media sales surge, deep down business does not like spikes...
Asda's decision to pass on this occasion, indicates that retailers are beginning to check the numbers and are realising that Black Friday may not be worth the trouble (and cost...).
According to The Telegraph, bargain-hungry Britons are expected to spend £1.07bn on online shopping alone during Black Friday, up from £810m last year, quoting Experian-IMRG.
However, UK retailers stand to lose £130m just from handling returns of items bought on Black Friday, according to the retail intelligence company Clear Returns.
In addition, costs related to lost margins, cleaning and storing, oversupply of stock and the lost value of future custom from the shopper add a further £50m to the returns bill.
In other words, unless suppliers and retailer-partners have integrated Black Friday into a fully costed omnichannel strategy, that yields acceptable returns for the risk - think stock-shortages caused by returns-system lock-in, for a start - it is inevitable that next year other retailers will acknowledge Asda's financial pragmatism and sit this one out...
Time for suppliers to explore alternative initiatives aimed at spreading the promotional effect into a more manageable demand profile?
Asda's decision to pass on this occasion, indicates that retailers are beginning to check the numbers and are realising that Black Friday may not be worth the trouble (and cost...).
According to The Telegraph, bargain-hungry Britons are expected to spend £1.07bn on online shopping alone during Black Friday, up from £810m last year, quoting Experian-IMRG.
However, UK retailers stand to lose £130m just from handling returns of items bought on Black Friday, according to the retail intelligence company Clear Returns.
In addition, costs related to lost margins, cleaning and storing, oversupply of stock and the lost value of future custom from the shopper add a further £50m to the returns bill.
In other words, unless suppliers and retailer-partners have integrated Black Friday into a fully costed omnichannel strategy, that yields acceptable returns for the risk - think stock-shortages caused by returns-system lock-in, for a start - it is inevitable that next year other retailers will acknowledge Asda's financial pragmatism and sit this one out...
Time for suppliers to explore alternative initiatives aimed at spreading the promotional effect into a more manageable demand profile?
Friday 13 November 2015
Cable companies cut ads because of Netflix - another nail for broadcast media?
According to Business Insider, major TV networks are so scared of Netflix they've actually started showing fewer ads, often up to 50% ad-reductions during reality shows, in a bid to lure back younger viewers.
Add to this the increasing use of streaming services and ad-blockers to anticipate a future where brand owners will switch to Seth Godin's permission-marketing - the privilege (not the right) of delivering anticipated, personal and relevant messages to people who actually want to get them - to appreciate that it is time for a fundamental rethink in how we communicate brand benefits.
Those who recognise the new power of the best consumers to ignore marketing, and realise that treating people with respect is the best way to earn their attention will re-allocate funds to social media with messages that respond to real consumer need..., while the rest stick with their increasingly old fashioned knitting...
Add to this the increasing use of streaming services and ad-blockers to anticipate a future where brand owners will switch to Seth Godin's permission-marketing - the privilege (not the right) of delivering anticipated, personal and relevant messages to people who actually want to get them - to appreciate that it is time for a fundamental rethink in how we communicate brand benefits.
Those who recognise the new power of the best consumers to ignore marketing, and realise that treating people with respect is the best way to earn their attention will re-allocate funds to social media with messages that respond to real consumer need..., while the rest stick with their increasingly old fashioned knitting...
Tuesday 10 November 2015
Tesco facing profitability challenges of online retailing and evolving shopper behaviour
At yesterday's CBI Annual Conference, Dave Lewis stressed the need to make their online business of tomorrow as profitable as their offline business of yesterday.
Given that Tesco traditionally delivered 5% net margins and ROCE of 15%+, whilst online delivery has to be losing £15/drop, the scale of the challenge is obvious...
In effect, Tesco have to cope with consumers shopping smaller, nearer and more frequently vs. big, weekly, out-of-town of yesteryear...
This means that Tesco and the other mults, have to consider dealing with the resulting 'large space redundancy' by closing those branches that fail to deliver adequate profits.
In addition, while the retailer appears to be attracting shoppers to its Extra /Superstore outlets, over 75% of these visits are convenience shopping trips. This means that Tesco needs to persuade such shoppers to shop bigger, before they factor the cost of fuel into their out-of-town trips...
Meanwhile, to increase the profitability of their online business, Tesco need to achieve the saturation coverage of Amazon - or intensify their coverage locally - in order to drive down domestic delivery costs. Increasing the delivery charges and attempts to increase online basket-sizes to make sufficient difference are not really options..
Action for suppliers
Given that Tesco traditionally delivered 5% net margins and ROCE of 15%+, whilst online delivery has to be losing £15/drop, the scale of the challenge is obvious...
In effect, Tesco have to cope with consumers shopping smaller, nearer and more frequently vs. big, weekly, out-of-town of yesteryear...
This means that Tesco and the other mults, have to consider dealing with the resulting 'large space redundancy' by closing those branches that fail to deliver adequate profits.
In addition, while the retailer appears to be attracting shoppers to its Extra /Superstore outlets, over 75% of these visits are convenience shopping trips. This means that Tesco needs to persuade such shoppers to shop bigger, before they factor the cost of fuel into their out-of-town trips...
Meanwhile, to increase the profitability of their online business, Tesco need to achieve the saturation coverage of Amazon - or intensify their coverage locally - in order to drive down domestic delivery costs. Increasing the delivery charges and attempts to increase online basket-sizes to make sufficient difference are not really options..
Action for suppliers
- Focus on initiatives that can use out-of-town convenience shopping as a basis for additional ' 'convenient' purchases
- Spell out the financial impact on basket profitability of each element of the brand's offering
- Tie your online strategies to Tesco's need to optimise basket size and attract new online users, in your best local areas..
Amplify
Why not consider increasing the impact of your Tesco strategies by outlining the above approach to colleague-NAMs?
Monday 9 November 2015
How Singles Day eclipsed Black Friday and Cyber Monday
According to The Telegraph, an annual celebration known in China as “bare sticks holiday” – see appearance of date: 11.11 – Singles Day began as an anti-Valentine’s Day (1 child policy = male surplus) in the 1990s when students at Nanjing University started celebrating their single status, online.
The chart says it all, don’t you think?
Chart: Highcharts.com via The Telegraph
Driven by Alibaba, in the 24 hours of Singles Day last year, and in spite of economic re-sets, Chinese consumers spent a record-breaking 57.1bn yuan (£5.86bn, or almost $9bn) across Alibaba’s platforms, more than double what American consumers spent online across the 48 combined hours of Black Friday and Cyber Monday.
Opportunities for suppliers?
Worried about limited ‘singles potential’ following the recent abandonment of 1-child policy? No worry, China will take a generation to begin to recover from that particular interference in the natural order, at least…
The chart says it all, don’t you think?
Driven by Alibaba, in the 24 hours of Singles Day last year, and in spite of economic re-sets, Chinese consumers spent a record-breaking 57.1bn yuan (£5.86bn, or almost $9bn) across Alibaba’s platforms, more than double what American consumers spent online across the 48 combined hours of Black Friday and Cyber Monday.
Opportunities for suppliers?
- A no-brainer for global brands
- Scope for innovative niche brands, providing you can meet the demand..
- Deep down, an incentive to seek out emerging trends and learn how to engage imaginatively, before the event become as obvious as Singles Day…
Worried about limited ‘singles potential’ following the recent abandonment of 1-child policy? No worry, China will take a generation to begin to recover from that particular interference in the natural order, at least…
Thursday 5 November 2015
Wormwood Scrubs Click & Collect beta test
HM Prisons,Youtube viaTomo news US
Karl Jensen, 27, the 'delivery-man' outside the jail, liasing by mobile, tied a bag containing drugs, a knife and a McMuffin sandwich to a fishing line that was pulled into a cell.
Karl will now have time to practice this version of click & collect from the inside, as he serves his new 2.5 year sentence...
P.S. For those not visiting via government transport, the sat-nav details are Du Cane Rd, London W12 0AE
Wednesday 4 November 2015
Amazon moves back to the future of traditional book-shopping
 |
| pic: Amazon via The Atlantic |
Being Amazon, key disrupting innovations include:
- Inventory: 6,000 titles (Amazons top selling online books), vs the over-crowded inventory of traditional book-stores
- Merchandising: Books are displayed face-out to maximise appeal (at last, publishers' cover designs get an onshelf-viewing, a step forward from spine-displays of traditional booksellers)
- Product information: under each book is a review card with the Amazon.com customer rating and a review
- Availability: Online access to every book in print, most deliverable in hours... Compare with '...two weeks, Sir, if the wholesaler has it in stock?'
- Freed-up space instore: Opportunity to hang out, or according to The Atlantic: Amazon Books is trying to be a place of community - a place where people will meet and hang out. A place that celebrates both introspection and extroversion. A place much like Apple’s buzzing, light-flooded, free-wifi-enabled temples - only with the tech gadgets on display being, for the most part, books.
- Scaleability: an unlimited selection of closed-down shops...need I say more?
Where next?
Given the inevitability of revolutionising retail book-selling, again, think specialist-shops in most worthwhile categories, given the Amazon insight, like toys, for a start.
Action: Why not try a what-if re your category, and hopefully gain some time?
Amplify: How about the benefits of a 'group-think' by sharing the above?
Tuesday 3 November 2015
Starship-robot home delivery – a new threat for the mults?
Former Skype co-founders have announced the launch of auto-buggies that are capable of carrying the equivalent of two grocery bags, and complete local deliveries within 5-30 minutes from a local hub or retail outlet, for £1.50 a drop, 10-15 times less than the cost of current last-mile delivery alternatives.
Thus in one stroke, they will become the latest market disruptor, meeting consumer needs to shop smaller, faster and more conveniently, with a delivery cost that undermines the traditional £20 cost that causes major retailers to lose £15 on a £5 delivery charge…
Starship Technologies is currently testing and demonstrating prototypes and plans to launch the first pilot services in cooperation with its service partners in the US, UK and other countries in 2016.
Customers can choose from a selection of short, precise delivery slots, and during delivery, shoppers can track the robot’s location in real time through a mobile app. On arrival only the app holder is able to unlock the cargo. Integrated navigation and obstacle avoidance software enables the robots to drive autonomously, but they are also overseen by human operators who can step in to ensure safety at all times, and where necessary converse with pedestrians.
Forgetting for a moment all the reasons why robot-delivery is not going to work, move into just-suppose mode and survey the post-success scene:
- Reductions in traditional home delivery charges…consumers already twitchy
- Mults/Ocado adopt robot-delivery, possibly leasing from Starship Tech?
- Or mults leave the small-delivery field and focus on ‘big deliveries’
- Just think applications in other categories/services…and don’t expect Jeff Bezos to sit this one out…
One thing is certain, the ‘fundamental re-structuring’ of the grocery market still has a mile to go…
Action for suppliers:
Starship Technologies are unlikely to attempt the additional risk of setting up of product-aggregation hubs and will probably form alliances with a wholesaler/s and/or possibly a major multiple..
If a wholesaler, expect that wholesaler to grow, and become more profitable and powerful.
In other words, time to reshuffle your customer portfolio deck, again!
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