Irish Cross-border shopping boost

According to the Belfast Telegraph, unlike the rest of Northern Ireland, the retail trade in Derry is being boosted by up to 35% by people from Donegal making possible savings of 20%, leading traders have claimed.

Numbers are expected to increase further when the Republic introduces a new VAT rate of 23% — an increase of 2% — in January.

An increase in VAT of any size has an effect, especially in these recessionary times when people are being extra careful.

Say a flat-screen TV retails at  €350 inc VAT @ 21%. A VAT increase to 23% will then raise the shelf price to €356

(i.e. €350/121  = €289  = price net of VAT.  €289x1.23 = €356)

Not a lot, except to a savvy and/or cash-strapped consumer…already sensitive to £/€ exchange rates, plus a day-out in the North… 

Debenhams early payment of suppliers’ invoices - how to calculate a fair share settlement discount?

According to the Financial Times, Debenhams has been allegedly offering suppliers earlier payment in exchange for a discount on their invoices, a process adopted by some other big retailers. It appears that its supplier terms can be up to 120 days, although people close to the company say it also has suppliers on 30-day payment terms.

Successful negotiation of a fair-share discount off invoice is possible using the following process:

Say, annual Invoiced sales to the Customer = £9.5m

Customer now pays in 90 days

We want him to pay in 42 days

i.e. a 48-day reduction in payment period

Customer now pays       4.06 times per year i.e. 365/90              

We want him to pay       8.7 times per year i.e. 365/42                           

Amount he owes us when paying in 90 days

                                                = £9.5m/4.06 = £2.34m

   

Amount he owes us when paying in 42 days

                                                = £9.5m/ 8.7  = £1.1m

                                                    

Therefore the cashflow saving = £2.34m - £1.1m

                                                = £1.24m

Say the cost of borrowing is 10% interest per year

Therefore the cost of borrowing £1.24m for a year

                                                         = £0.124m

Which is equivalent to 1.3% of sales

                                          i.e.  £0.124m/£9.5 x 100%

                                   

Therefore any extra discount above 1.3% is attractive to the customer (or should be….! )

This discount is the most you should offer for a 48-day reduction in payment period!

(To tailor the calculation to your company-customer relationship, simply substitute your figures for sales, current payment periods and desired payment periods)

Incidentally, why stop at 42 days credit, a credit period in which a lot could go wrong?

In fact given the current state of the Euro-manoeuvres, we could soon enter an environment where selling to customers for cash becomes the only safe option…..!

Suppliers in cash call from M&S

According to the Mail On Sunday, M&S have allegedly asked suppliers for cash to help pay for its store refurbishment programme

Calculate the incremental sales required as follows:

Assumption: a customer wants additional payment of 1.25% of a supplier’s annual sales to the customer.

A supplier with a net margin of 9.5% on sales of say £150,000 per annum to the customer, needs incremental sales of £19,736

i.e. 1.25% of £150k  = £1,875  = 9.5% of incremental sales      
Therefore incremental sales = £1,875/9.5 x 100 = £19,736

Simply substitute your figures to calculate the incremental sales for your company

Have a nice day….

eBay gets physical via first UK xmas store

A pure-play online retailer is opening a real-life shop on Dean Street in Soho, London that will sell toys, gifts and electronics at up to 70% discount.

eBay is launching its first UK store, albeit temporarily, this Christmas to allow shoppers to browse in the physical world before buying online.

The pop-up boutique opens for just five days from 1 December in what is expected to be the peak buying period for the year.
It will stock the website's 200 bestsellers, which range from House of Fraser party frocks to toys from The Entertainer, but purchases will be delivered to customers' homes

Shoppers will buy via scanning QR codes, and in a click, bypass crowds, queues, tills, bags, transport and other Christmas shopping irritants…

Traditional shops that see pureplay online retailing as a virtual threat obviously ‘ain’t seen nothin’ yet…’

Meanwhile, eKAMs and ‘normal’ KAMs need to keep in mind that a pop-up shop is simply a permanent shop on test…

Have a virtually realistic weekend, from the Namnews Team!

Unit pricing – the ultimate test of retail credibility?

Following the end of the Age of Credit, and the emergence of the savvy consumer demanding demonstrable value-for-money, it is surely time for retailers to find a way of making like-with-like price comparison easier for even non-savvy shoppers.

In fact there is a real opportunity for a fast-footed retailer to gain the innovator's advantage forever, by being first with effective unit pricing.

First, given current low levels of numeracy amongst the population, unit pricing has to be explained (continuously) both at point of sale and in mass media

Incidentally, if true like-with-like comparison reveals a shortfall in defensible value-for-money compared with available competition, so be it... Better to reduce the retail price than have shopper-demand do it for you...

Finally, the like-with-like comparison needs clear, unambiguous and legible signing on shelf.

An interesting article by Which is currently pushing for change, but the real issue at stake is brand credibility, meaning the name over the door…

Brand owners well know that brand viability pivots on the fact that the cost of persuading a consumer to try a brand is so high that profits depend on that consumer coming back to the brand over and over, without having to be re-persuaded…

Loosing that credibility by deliberate price-deception on-shelf means not only losing repeat purchase, but can result in the shopper telling 10 friends…

(There has to be an app somewhere in this, may even be tempted myself….)

Bus Q oR virtual shops?

HMV and Fox have introduced a campaign in the UK to buy DVDs at bus shelters, via QR code.

The campaign works by purchasing an ad space just like thousands of brands around the country. However, it’s no longer just an advert. The addition of a QR code makes it a real revenue-generator, through seamless integration of technology with a visual brand space.

Given the nation’s willingness to queue, the real opportunity for suppliers and retailers lies in posting QR-based adverts ANYWHERE a consumer waits…

Retail failures forecast to spike at Christmas

The FT reports that UK retail insolvencies and corporate failures could rise nearer to levels at the end of 2008 when the financial system was on the verge of breaking down and the economy was on the rocks. Pressures include difficulties in rolling over bank loans, paying Quarter-day rent demands, shopper reaction to price inflation on food, fuel and a flatline economy.

In these circumstances it is vital that NAMs attempt to assess the viability of customers and review trade partnership criteria based upon a combination of Companies House data and personal judgement of distress signs on the ground.

If sentiment or unwillingness to face up to market realities is causing a NAM to hesitate in pulling the plug, it might be worth remembering that a customer going bust owing £150k to a supplier on a 5% net margin, requires that the supplier make incremental sales of £3m to recover the loss…

Still feel like taking over the role of ‘bankers’ in the high street?

Rock’n'roll becomes form of economic stimulus

Live rock'n'roll is replacing recorded Christmas carols in the windows of Galeries Lafayette as the Parisian department store seeks to drum up curiosity, and client numbers, for this year's gift-buying season.

True to tradition, the shop is putting on a dazzling show for shoppers and tourists alike in the countdown to Christmas, but this year it is seeking to strike a chord with music-mad teenagers as much as fairytale fans young and old.

With a debt crisis forcing much of Europe into austerity, consumption has dropped in recent weeks, making crowd-pullers all the more important, even for upmarket stores that can count on a large tourist contingent in the heart of the French capital.

Rock legend Iggy Pop will open a series of nightly live shows in the window by a variety of major-label rock and folk bands, one from Mali, another from Australia and most of the others from France itself.

Have an instore, theatrical weekend, from the Namnews rockers!

Mind-goggling

It is now possible to scan someone’s brain and get a reasonable idea of what is going through his mind.

The Economist reports on three recent and fascinating studies that point a way to obtaining a better idea of what consumers (and buyers) really think.

One paper describes an attempt to study dreaming. A second can reconstruct a moving image of what an observer is looking at. And a third can tell what someone is thinking about.

A: Munich dreaming

Recruiting a group of lucid dreamers, where the person doing the dreaming is aware that he is dreaming, and can control his actions almost as if he were awake. This will perhaps solve one of the great mysteries of biology: what, exactly, is dreaming for?

B: Mind-reconstruction

The second study shows that it is now possible to make a surprisingly accurate reconstruction, in full motion and glorious Technicolor, of exactly what is passing through an awake person’s mind. As the pictures above show, the result was often a recognisable simulacrum of the original.

C: Mind Reading

The third study was similar to mind –reconstruction above, but rather than recreating images, the analysts were able to determine what topics people were pondering. In other words they could work out what type of object something was i.e. they could not distinguish a carrot from a stick of celery, but could say that it was a vegetable.

As the stakes increase in persuading consumers and buyers it will become increasingly important to get closer to real need assessment.

Early days, but these studies will show us how… 

Walmart opens Dot.com store to feature their online services

Walmart opened two trial outlets on 1^st November,  in a San Diego mall and in Los Angeles.

Walmart.com is a typical store-front space with big screen TV's on the wall, some computers and tablets on the desks and toys on a shelf. However, the idea isn't to sell the TV's and toys in the store but to help customers to shop online.

By opening up this type of store inside a high end mall, Walmart is aiming at shoppers who may not normally think of going to the discount giant.

Walmart officials said they will showcase key products like toys, home theatre and electronics.  Items ordered online can be delivered back to the Walmart.com store, to a regular Walmart location or shipped to the customer's home.  Any home orders will be reimbursed for shipping with an online gift card.

A scalable model giving them a footprint in locations too small for a regular store…

Video 

The £2.89 Dinner – A Christmas Threat For Brands?

                                                             Pic: Daily Mail & Good Housekeeping

It’s possible to serve turkey with all the trimmings for as little as £2.89 per head. According to The Daily Mail, a study by The Good Housekeeping Institute outlines a traditional own label Christmas dinner that it claims will serve eight for just £23.08

Selecting key ingredients from Lidl and the major multiples, the menu targets the savvy consumer with a brand-free solution to Christmas fare…

With consumers increasingly prepared to walk for a bargain, the dilemma for brand-owners has to be whether to try to regain access to the Christmas Dinner, or focus on Christmas categories where own labels do not dominate, yet….

NB. Despite a diligent search, the above menu still showed a 10% increase in ingredient cost since last Christmas!

Shops offered £1 rents on high-vacancy streets

With vacant shops increasing on high streets, retail landlords seek to avoid paying business rates on empty units and are happy to offer £1 annual rental in return for payment of business rates.

Retailers taking advantage of the rental offers on end-of-lease outlets include Dixons and Card Factory, a lower-cost rival to Clinton Cards according to the Financial Times.

Apart from falling demand, unfair competition from charity–shops that have an 80% discount on business rates, and unrealistic parking charges, high street retailers have been unable to compete because of being tied into long (25 year) leases with no break-clauses and upward-only rent reviews. This legislation has to some extent fallen into disuse in recent years in response to market realities, but the law still needs to be changed in order to totally eliminate the practice.   

Finally, according to the Financial Times, high street retailers are also disadvantaged by the fact that business rates are based on a shop’s estimated annual rental value, on a five-year cycle, pegged to inflation More  

This will inevitably lead to further trade concentration in out-of-town developments, at the expense of the high street.
Suppliers face the dilemma of wanting to stimulate and support alternative routes to consumer, but current high street realities force them to invest in major players giving more reliable returns on trade funding investment... 

If the government are serious about attempting to restore the health of the retail high street they need to conduct realistic diagnoses and tackle root causes on a fair-share basis, in line with market realities…

Why Walmart’s new pharmacy-only shop is a breakthrough…

The Retailnet Group report that Walmart have opened their first standalone pharmacy in Mexico, a 3,000 sq.ft. outlet specialising in pharmacy goods and services.

They already operate their instore pharmacies in Argentina under the Farmacia Walmart brand, so the name is not unknown

Apart from the full range of Health, Beauty and Wellness products, the outlet offers optical, medical consulting services by qualified staff in the store

Why is this so fundamental?

Given their experience of instore pharmacy, this trial outlet represents a step-change for Walmart, and could be scaled up, fast.

Previously pharmacy was an ‘add-on’ to their mass-merchandise outlets, merely an additional service for shoppers.

The new standalone pharmacy represents dedication, Walmart-style…

Think about the possibility of Walmart buying up small independent pharmacies that are feeling the (after?) effects of the global financial crisis, small/medium sized chains, before they check out the big players like Boots, etc

Think about the buying power, prices & terms disparities, influence on global/regional and national government…

There is only one way this is going to go…

More details and instore pics   
Time to dedicate this weekend to rewriting your global and local pharmacy trade strategies?

Turning Product Placement on its head?

Loblaw has revealed an innovative move for its own label food range, the development of ready-meals based on recipes from reality TV show ‘Recipes to Riches’

The show features 21 contestants cooking up recipes which are voted upon by industry experts as well as home audiences. Loblaw said the winning recipes from each of 7 categories – from appetisers and entrees to desserts – will be offered as samples at its outlets across Canada. Once the winners of all the categories are declared on the show, they will then be turned into ‘President’s Choice’ own label products. The Canadian public will then vote for their favorite among the category winners and that person will take home the $250,000 grand prize.

An innovative application of an old Lateral Thing tool ‘what is the opposite of (product placement)?’

Application to the UK retail?

It would probably need an ex-Loblaws COO wanting to try something really innovative in a well-established No3 Grocer, ideally based in Bradford..(come-on folks, need I say more?)

Watch this ( TV ) space….

‘A trillion here, a trillion there, soon we will be talking about real money’

The eurozone's bailout fund now stands at one trillion euros (£880bn or $1.4tn) after a deal was thrashed out in Brussels by European leaders. A trillion is a number - 1,000,000,000,000  – we all need to factor into our trade strategies! In fact the Namnews team are currently exploring the possibility of increasing the Namcalc cell-size to accommodate more up-to-date number sizes….

However, the real issue is how to keep the sheer scale of a trillion front of mind, lest we end up ‘signing off’ our entire future through over-familiarity..

One way to enhance understanding is to divide a big number by the number of people affected, so if the population of the eurozone is about 330m, then a trillion shared represents about 3,000 euros for each person. Another way is to count the numbers one at a time, one per second. A million seconds is 11 days, a billion seconds is about 32 years and a trillion seconds is 32,000 years.

For those in sales and marketing, the use of 'trillions' in our general conversation can be seen as part of a trend towards linguistic inflation or 'bigging up'. This means that some words are used to the point of exhaustion and need replacing with others in order to maintain the strength of expression. So 'heroes' are now 'superheroes', we're not just angry any more, we are 'incandescent with rage'.

This suggests that it may be time to take a fresh look at your brand and concession-value claims in a search for new superlatives?

Finally, those working on future trade demands may appreciate the following definitions

Trillion - 1 + 12 zeros

Quadrillion - 1 + 15 zeros

Quintillion - 1 + 18 zeros

Sextillion - 1 + 21 zeros

Septillion - 1 + 24 zeros

Octillion - 1 + 27 zeros

Nonillion - 1 + 30 zeros

Decillion - 1 + 33 zeros