Thursday 9 July 2015
Tuesday 7 July 2015
Offline limits to online growth: Is click-and-collect 'cannibalising' retailers?
Given that the cost of fulfilling an online order is approximately £20, and market willingness-to-pay appears to have an upper limit of £5 per delivery, it is obvious that a retailer loses £15 per online order.
Charging for Click & Collect merely addresses the 'front end' of this problem in terms of covering some of the real cost of the 'final mile'. It also means that John Lewis introduction of a £2 charge is possibly adding to the problem by giving the impression that a home delivery option is worth the difference - £3...
Meanwhile, for a Bricks & Mortar retailer in a virtually zero-sum flat-line environment, any scale advantages will be neutralised by increasing redundancy of physical space.
With Click & Collect growing at 20-30% per annum, the real issue for retailers is that the growth of their online business not only cannibalises their regular in-store sales but also causes them to lose more money as online sales increase.
In a flat-line demand environment with market share increases having to come at the expense of the competition, it would appear that major physical retailers are in a race to the bottom in terms of profitability.
Meanwhile, Amazon and other pure-play online retailers will grow at the expense of physical players until a point is reached where even their growth is limited by consumers' refusal to pay adequate rates for order fulfillment.
For suppliers, this means that having managed to take the GSCOP-route out of the extremes resulting from dealing with the Big 4 multiples, we may be unconsciously accepting the even tighter harness of the online route to consumer...
In other words, with the benefit of hindsight, it might be wise to anticipate, prepare for and negotiate fair share dealings from the start, rather than require a Mk.2 GSCOP rescue sometime in the future...
Charging for Click & Collect merely addresses the 'front end' of this problem in terms of covering some of the real cost of the 'final mile'. It also means that John Lewis introduction of a £2 charge is possibly adding to the problem by giving the impression that a home delivery option is worth the difference - £3...
Meanwhile, for a Bricks & Mortar retailer in a virtually zero-sum flat-line environment, any scale advantages will be neutralised by increasing redundancy of physical space.
With Click & Collect growing at 20-30% per annum, the real issue for retailers is that the growth of their online business not only cannibalises their regular in-store sales but also causes them to lose more money as online sales increase.
In a flat-line demand environment with market share increases having to come at the expense of the competition, it would appear that major physical retailers are in a race to the bottom in terms of profitability.
Meanwhile, Amazon and other pure-play online retailers will grow at the expense of physical players until a point is reached where even their growth is limited by consumers' refusal to pay adequate rates for order fulfillment.
For suppliers, this means that having managed to take the GSCOP-route out of the extremes resulting from dealing with the Big 4 multiples, we may be unconsciously accepting the even tighter harness of the online route to consumer...
In other words, with the benefit of hindsight, it might be wise to anticipate, prepare for and negotiate fair share dealings from the start, rather than require a Mk.2 GSCOP rescue sometime in the future...
Tuesday 30 June 2015
Retail queue optimisation - or how to burn a mink coat safely...
According to The Telegraph, the UK population is losing the ability to form an orderly line, in that companies are developing new technology to make queuing more efficient or eliminate waiting altogether.
In fact, dedicated tennis fans join the famous (or infamous) Wimbledon queue every year and, for many, waiting in line has become almost as enjoyable as the tennis itself.
However, this may become increasingly exceptional.
In fact it is estimated that British retailers lose almost £4,000 a day because people are put off making purchases by queues.
The article goes on to detail initiatives by John Lewis aimed at to shortening queues for "click & collect" parcels, sensors embedded in trolley wheels, Barclaycard Anywhere’s device that eliminates the need for receipts and cash protection in-store, and provides a number of pictorial examples of potentially redundant traditional UK queueing…
Speaking of which, despite having a low tolerance limit for any form of queueing, I did spend 15 minutes in a sale-queue outside a major London store, back in 1979..
A neighbour of mine had decided to queue for 5 days to secure a mink coat reduced from £795 to £79, which she planned to burn in an animal rights protest.
Details here & here
I was working in Oxford St on Fay's fourth day and decided to join her in line and keep her company for a while. She was delighted to see me (!) as she apparently had some technical issues to resolve i.e. how to ensure the coat burned quickly. I assured her that my expertise was limited to retail buying and selling, but decided to practice my listening skills for a moment…
I asked her what she planned and she told me about a bottle of petrol she had about her person, intending to sprinkle it liberally, etc.
I cautioned her that unless she intended to make the ultimate sacrifice, perhaps draping the coat over a nearby wire waste-bin (pic) would suffice…thus ensuring a 100% success in terms of media coverage, and my little place in history…
Monday 29 June 2015
Sunday 28 June 2015
Friday 26 June 2015
The case for Shopper Marketing, packed in a conundrum?
We somehow break through the apathy - at great expense in terms of time, money and people - in unprecedented times, within a flat-line demand environment, at a significant price disadvantage in a cut-throat environment, manage to get our brand considered as a fleeting alternative, and motivate the potential consumer to move towards the nearest store.....
Only to leave them to their own devices at the door.
They then have to find their way to our part of the store, cope with the confusing appeals of the category's competing offers, including private label, all subject to the inevitable 'cool-off', even if our offer presents on-shelf as intended...
"I cannot forecast to you the action of the brand owner. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is the brand's need for 110% consumer satisfaction."
(with apologies to Mr Churchill)
Only to leave them to their own devices at the door.
They then have to find their way to our part of the store, cope with the confusing appeals of the category's competing offers, including private label, all subject to the inevitable 'cool-off', even if our offer presents on-shelf as intended...
"I cannot forecast to you the action of the brand owner. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is the brand's need for 110% consumer satisfaction."
(with apologies to Mr Churchill)
Tuesday 23 June 2015
The GCA-GSCOP five-issue approach to optimisation of supplier-retailer relationships.....
Some indication of the steady progress being made by the GCA can be gleaned from the latest YouGov survey (here), but nothing beats participating in yesterday's 2nd Annual Conference, a unique mix of Sales, Finance and Legal stakeholders, all sharing a common interest in optimising the supplier-retailer relationship.
(NamTip: key for NAMs to have a detailed knowledge of GSCOP in order to fulfill their co-ordinating role re the major customer)
At the start of the GSCOP process, the GCA was faced with what could have been an overwhelming number of potential issues. However, by focusing on a rolling five-issue 'hit-list', Christine Tacon was able to help both suppliers and retailers focus on a manageable set of issues within GSCOP as follows:
Top Five Issues:
1. Consumer complaints (processing charges by retailer) - New (in discussion)
2. Delays in payment (failure to pay suppliers within agreed time periods) - New (in discussion)
3. Forecasting/service levels (issues arising re forecasting and call-off/delivery) - Live (currently under discussion with each party)
4. Requests for lump sums: (see GSCOP) - Live (currently under discussion with each party)
5. Packaging & design charges (possible excess over market rates) - Live (currently under discussion with each party)
Forensics: third party audits (2 year limit on claims) - Closed (meaning agreement has been reached on process and interpretation. Any further instances will be regarded as in breach)
Drop and drive - delivery performance:
(issues around possible discrepancies between deliveries and receipts - Closed (see Forensics)
As can be seen above, given that two issues are 'Closed', five issues remain. At yesterday's conference it was announced that the Consumer complaints issue is now closed. This means the GCA is now in the process of prioritising a new issue, to be determined by degree of relevance to suppliers/retailers i.e. your opportunity to submit details of perceived breaches either directly to the GCA, or via your trade association.
It has taken many years to reach this point in the evolution of supplier-retailer relationships. The application of GSCOP is now gathering momentum but still requires 'proof of purchase' in order to access the benefits
Your input can help...
(NamTip: key for NAMs to have a detailed knowledge of GSCOP in order to fulfill their co-ordinating role re the major customer)
At the start of the GSCOP process, the GCA was faced with what could have been an overwhelming number of potential issues. However, by focusing on a rolling five-issue 'hit-list', Christine Tacon was able to help both suppliers and retailers focus on a manageable set of issues within GSCOP as follows:
Top Five Issues:
1. Consumer complaints (processing charges by retailer) - New (in discussion)
2. Delays in payment (failure to pay suppliers within agreed time periods) - New (in discussion)
3. Forecasting/service levels (issues arising re forecasting and call-off/delivery) - Live (currently under discussion with each party)
4. Requests for lump sums: (see GSCOP) - Live (currently under discussion with each party)
5. Packaging & design charges (possible excess over market rates) - Live (currently under discussion with each party)
Forensics: third party audits (2 year limit on claims) - Closed (meaning agreement has been reached on process and interpretation. Any further instances will be regarded as in breach)
Drop and drive - delivery performance:
(issues around possible discrepancies between deliveries and receipts - Closed (see Forensics)
As can be seen above, given that two issues are 'Closed', five issues remain. At yesterday's conference it was announced that the Consumer complaints issue is now closed. This means the GCA is now in the process of prioritising a new issue, to be determined by degree of relevance to suppliers/retailers i.e. your opportunity to submit details of perceived breaches either directly to the GCA, or via your trade association.
It has taken many years to reach this point in the evolution of supplier-retailer relationships. The application of GSCOP is now gathering momentum but still requires 'proof of purchase' in order to access the benefits
Your input can help...
NB GCA Conference: Speaker presentations now available here
Sunday 21 June 2015
Tesco Express-cashback?
Police hunt robbers after supermarket cash machine blown off wall with explosives at Newtonhill Tesco, Aberdeenshire
Friday 19 June 2015
Restructuring for the new UK retail trade environment
With all attention focused on the structural changes occurring in UK retail, in particular the growth of the discounters and Waitrose at the expense of the Big 4, in a flat-line market, very little attention is being paid to the most obvious of knock-on implications, the need for some adjustment in how we manage this new mix of retail routes to consumer…
At current rates of large space redundancy, the economics of selling off ‘spare’ space – at a rate that forces buyers of the property to achieve sales intensities of £1,000/sq. ft.+ to justify the investment, the resulting property lock-in prevents major retailers from scaling down to the smaller, closer convenience outlets demanded by consumers shopping more often in smaller quantities.
This has to result in a gradual loss of market share from Kantar’s current levels of 73.5% for the Big 4, to a combination of the discounters, Waitrose, online and emerging formats. Incidentally, even if the Big 4 retain their fair share of online growth, online success does little or nothing to address their bricks & mortar surplus issues…
This has to result in losses in market share for the Big 4 – the only issue is the point of settlement..
All of this means that the requirements of the UK NAM role are changing, along with the relative importance of the Big 4 in supplier portfolios.
Time for a market-led change of emphasis at NAM level?
Subscribers can access the implications and options for NAMs in the June issue of NamNews.
At current rates of large space redundancy, the economics of selling off ‘spare’ space – at a rate that forces buyers of the property to achieve sales intensities of £1,000/sq. ft.+ to justify the investment, the resulting property lock-in prevents major retailers from scaling down to the smaller, closer convenience outlets demanded by consumers shopping more often in smaller quantities.
This has to result in a gradual loss of market share from Kantar’s current levels of 73.5% for the Big 4, to a combination of the discounters, Waitrose, online and emerging formats. Incidentally, even if the Big 4 retain their fair share of online growth, online success does little or nothing to address their bricks & mortar surplus issues…
This has to result in losses in market share for the Big 4 – the only issue is the point of settlement..
All of this means that the requirements of the UK NAM role are changing, along with the relative importance of the Big 4 in supplier portfolios.
Time for a market-led change of emphasis at NAM level?
Subscribers can access the implications and options for NAMs in the June issue of NamNews.
Thursday 18 June 2015
Waitrose 'pick your own discount' scheme - a further move from Back to Front margin?
Waitrose has introduced a new personalisation initiative instore and online called ‘pick your own offers’ to keep up with the competitive grocery market.
myWaitrose loyalty card holders will be encouraged to select 10 products that they would like to save 20% on, from 1,000 own-label and branded goods (staple items and more luxurious treats).
Whilst Waitrose unique initiative democratises the discount-choice, the issue for suppliers has to be the removal of control from a classic back-margin driven bucket, to a 1,000 product pool of Waitrose choice, and ultimately the discretion of the shopper…
Not what was intended in supplier strategies, but perhaps the ultimate in meeting shopper needs?
...and if successful in terms of traffic driving, a pointer for other retailers?
BTW, if you feel more secure with traditional back margin utilisation, it may be worth checking your category promo-profitability rating in Nielsen's latest interactive Win-Lose survey of promo-breakeven results
Wednesday 17 June 2015
Supermarket re-sets, an overdue cull of the obvious? A Guest-KamBlog from Wayne Robinson
First we had Kingsmill as a big brand casualty. Followed quickly by Rachel's Organic. Topped off by news that Cott have just been displaced in Tesco.
The range culling could take up to 18 months according to Jason Tarry at the IGD Tesco trade briefing.
That's 18 months of pain, and 18 month's watching the merry-go-round of brands and tertiary players being displaced in one retailer and (hopefully) winning in another retailer. It will be interesting to see how the brand distribution landscape looks at the end of the process. This industry "re-setting", whilst fascinating to observe, will undoubtedly have a far reaching and lasting impact, and not necessarily for the better for some manufacturers.
Certainly sme's at the other end of the manufacturing scale must be feeling very exposed. Research from Begbies Traynor highlighted over 1,400 food manufacturers were in "distress" - a rise of 94% yoy. The likely causes being the fall-out from the price war centered around the LAD's. Who knows what those numbers will look like once the full effects of the impending range changes kick-in.
So how do manufacturers respond to this next wave of turmoil and capitalise on the inevitable opportunities that it will throw up?
Could I suggest three ways?
1. Lurch into analysis mode...deep diving in to category data...ranking ros...etc. Am sure that it will help, but it feels a bit late for doing that...if you have a duff product with low ros then it shouldn't be on the shelf in the first place, and you have to accept that your days are numbered. (Dave Lewis stated at the IGD trade briefing that 20% of sku's in an Extra store were only selling 1 pack per store per week. Gulp.) Let's face it do we really think that Kingsmill, Rachel's and Cott didn't put the data in front of Tesco? It's not only the market/consumer data that will be swaying decisions about products on the shelves; there will be a financial element to this too.
2. Use your research and insight to bring products to market that are focused on consumers needs and have a true usp that add value to the category...otherwise known as innovation. Pret recently claimed in their annual results that innovation was a major contributing factor to their record results. We are so in need of some new news on the supermarket shelves to inspire us back in to shopping and move us all away from the price point paranoia that is taking the entire industry down a one-way street. Great article here highlighting that consumers are still searching for those exciting products...but struggling to find them, other than in specialists shops. Go figure.
3. Channel diversification. No manufacturer should be overly reliant on any one customer. There needs to be an acceptance that business with specific customers will ebb and flow; if you have a wide enough customer base then your overall sales will continue to grow and expand. There are plenty of growth opportunities outside of the grocery channel. Develop a plan, prioritise, and go forth and broaden your customer base!
With 30% of the range coming out of Tesco there is going to be some unpleasant fall-out. And whilst the remaining range will benefit from more space and perhaps more distribution, in the larger store format especially, there will still be plenty of opportunities and space for exciting and relevant new product development - Jason Tarry has made it clear that Tesco still want to have a market leading choice of products...and with Tesco claiming a renewed focus back on the Tesco brand, then this might be the saviour for many manufacturers looking to plug sales gaps.
Wayne Robinson - wayne@wayne-robinson.uk
The range culling could take up to 18 months according to Jason Tarry at the IGD Tesco trade briefing.
That's 18 months of pain, and 18 month's watching the merry-go-round of brands and tertiary players being displaced in one retailer and (hopefully) winning in another retailer. It will be interesting to see how the brand distribution landscape looks at the end of the process. This industry "re-setting", whilst fascinating to observe, will undoubtedly have a far reaching and lasting impact, and not necessarily for the better for some manufacturers.
Certainly sme's at the other end of the manufacturing scale must be feeling very exposed. Research from Begbies Traynor highlighted over 1,400 food manufacturers were in "distress" - a rise of 94% yoy. The likely causes being the fall-out from the price war centered around the LAD's. Who knows what those numbers will look like once the full effects of the impending range changes kick-in.
So how do manufacturers respond to this next wave of turmoil and capitalise on the inevitable opportunities that it will throw up?
Could I suggest three ways?
1. Lurch into analysis mode...deep diving in to category data...ranking ros...etc. Am sure that it will help, but it feels a bit late for doing that...if you have a duff product with low ros then it shouldn't be on the shelf in the first place, and you have to accept that your days are numbered. (Dave Lewis stated at the IGD trade briefing that 20% of sku's in an Extra store were only selling 1 pack per store per week. Gulp.) Let's face it do we really think that Kingsmill, Rachel's and Cott didn't put the data in front of Tesco? It's not only the market/consumer data that will be swaying decisions about products on the shelves; there will be a financial element to this too.
2. Use your research and insight to bring products to market that are focused on consumers needs and have a true usp that add value to the category...otherwise known as innovation. Pret recently claimed in their annual results that innovation was a major contributing factor to their record results. We are so in need of some new news on the supermarket shelves to inspire us back in to shopping and move us all away from the price point paranoia that is taking the entire industry down a one-way street. Great article here highlighting that consumers are still searching for those exciting products...but struggling to find them, other than in specialists shops. Go figure.
3. Channel diversification. No manufacturer should be overly reliant on any one customer. There needs to be an acceptance that business with specific customers will ebb and flow; if you have a wide enough customer base then your overall sales will continue to grow and expand. There are plenty of growth opportunities outside of the grocery channel. Develop a plan, prioritise, and go forth and broaden your customer base!
With 30% of the range coming out of Tesco there is going to be some unpleasant fall-out. And whilst the remaining range will benefit from more space and perhaps more distribution, in the larger store format especially, there will still be plenty of opportunities and space for exciting and relevant new product development - Jason Tarry has made it clear that Tesco still want to have a market leading choice of products...and with Tesco claiming a renewed focus back on the Tesco brand, then this might be the saviour for many manufacturers looking to plug sales gaps.
Wayne Robinson - wayne@wayne-robinson.uk
Monday 15 June 2015
The 8 Variables making every retailer a Big 4 competitor, and every consumer ‘the Boss’
Time was when the ‘available alternatives’ in retail competition were the remaining Big 3 for any of the four major players in UK retail, and every other retailer worried about the Big 4….
Now it could be said that the consumer enjoys 100% access to any way they choose to buy, whenever they want…
This means that all retailers compete with one another, in a zero-sum game - total available demand - with international online generating worrying amounts of leakage at the edges….
In practice the variables - the bases for comparison – include:
Products & Assortment: ‘I need access to any size, shape or variant - someone will provide…’
Pricing: ‘I want to have this for whatever, whenever, however I choose to pay…’
Promotional activities: ‘I may need help in making my choice, but I believe nothing’
Place i.e. store location: ‘I need to be able to reach out and buy one, ideally via the nearest button…’
Personnel: the ‘people interface’ becoming a liability?
Physical distribution & handling: ‘I don’t want or need to know…’
Presentation of stores & products: ‘If I choose to visit, it had better be my version of good'
Productivity: ‘ If you cannot make money in competition with my 100% access, that’s your problem..’
Retailers no longer have any real choice, and it hurts..
This new ‘retail’ reality also raises a fundamental issue for brand suppliers: we cannot be everything, everywhere, what are the cut-off points within our current business model?
As brand suppliers, we have the advantage of a little warning re this fundamental change in consumer democratisation - the arrival of Sam Walton’s ‘consumer is boss’ realisation - via the retail turmoil occurring further down the supply chain..
Best we anticipate the changes required, before the consumer makes them on our behalf…
Now it could be said that the consumer enjoys 100% access to any way they choose to buy, whenever they want…
This means that all retailers compete with one another, in a zero-sum game - total available demand - with international online generating worrying amounts of leakage at the edges….
In practice the variables - the bases for comparison – include:
Products & Assortment: ‘I need access to any size, shape or variant - someone will provide…’
Pricing: ‘I want to have this for whatever, whenever, however I choose to pay…’
Promotional activities: ‘I may need help in making my choice, but I believe nothing’
Place i.e. store location: ‘I need to be able to reach out and buy one, ideally via the nearest button…’
Personnel: the ‘people interface’ becoming a liability?
Physical distribution & handling: ‘I don’t want or need to know…’
Presentation of stores & products: ‘If I choose to visit, it had better be my version of good'
Productivity: ‘ If you cannot make money in competition with my 100% access, that’s your problem..’
Retailers no longer have any real choice, and it hurts..
This new ‘retail’ reality also raises a fundamental issue for brand suppliers: we cannot be everything, everywhere, what are the cut-off points within our current business model?
As brand suppliers, we have the advantage of a little warning re this fundamental change in consumer democratisation - the arrival of Sam Walton’s ‘consumer is boss’ realisation - via the retail turmoil occurring further down the supply chain..
Best we anticipate the changes required, before the consumer makes them on our behalf…
Sunday 14 June 2015
Missing the obvious in urban evolution?
Cycle lanes for protection from cars...
Pedestrian streets for protection from cars...
and now, texting lanes for protection from cars...
Begging the obvious question: Why not ban cars?
Friday 12 June 2015
Thursday 11 June 2015
Back-margin funding of deeper price-cut by the Big 4?
The Telegraph today highlights a new report from Moody’s that says Tesco, Sainsbury's and Morrisons 'can't afford more price cuts', with sales and profits set to fall for another 12 to 18 months…
In other words, there has been some retrieval of customers, but the cost has resulted in margins being reduced by half since fiscal 2013/4....
However, this assumes that supplier trade investment has been used for the purpose intended i.e. in-store motivation of the shopper.
What if the retailer decides to switch a significant amount of back margin into price-cutting?
In practice this could work out as follows: Say suppliers contribute trade investment amounting to 20% of their turnover, to a retailer on 25% retail margin. This translates into 15% of net shelf price.
If the retailer decides to allocate say 5% for ‘back margin’ purposes, this frees up 10% of net sales that could be used for a combination of further price cuts and supplementing the bottom line….
This raises a number of issues for suppliers:
In other words, there has been some retrieval of customers, but the cost has resulted in margins being reduced by half since fiscal 2013/4....
However, this assumes that supplier trade investment has been used for the purpose intended i.e. in-store motivation of the shopper.
What if the retailer decides to switch a significant amount of back margin into price-cutting?
In practice this could work out as follows: Say suppliers contribute trade investment amounting to 20% of their turnover, to a retailer on 25% retail margin. This translates into 15% of net shelf price.
If the retailer decides to allocate say 5% for ‘back margin’ purposes, this frees up 10% of net sales that could be used for a combination of further price cuts and supplementing the bottom line….
This raises a number of issues for suppliers:
- Would you even know it had happened? i.e. Have you got updated T&Cs in place for each Back Margin bucket, along with appropriate KPIs?
- How ready are you to re-evaluate each element of your trade investment, confident in your ability to quantify the cost, and demonstrate the value to the buyer, using the retailer’s latest financials…?
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