Tuesday 22 December 2015

Sir Ken Morrison's £6.6m Stake In Sainsbury’s, 'just looking'?


Sir Ken Morrison, the former Chairman and life president of Morrisons, has built up a £6.6m stake in Sainsbury’s.

According to The Times, Sir Ken owns 2.6m shares in the rival supermarket whilst his son William owns 2.1m, giving them a combined stake worth of £11.9m. Filings reveal that Sir Ken purchased his stake around April last year when as his frustrations with the management team of Morrisons was reaching its peak. He memorably criticised the then Chief Executive Dalton Philips, saying his turnaround strategy was "bulls***"....more

Monday 21 December 2015

Coles' onshelf Price-rise buck-pass

                                                                                                             pic: The Sydney Morning Herald

In a move reported in The Sydney Morning Herald, allegedly aimed at pressuring a supplier to reverse price rises, Coles in Australia has put signs on its shelves, saying popular infant formula maker Bellamy's threatened to pull its product if the grocer didn't accept its price rises.

Fortunately, demand for Bellamy's is too big to delist - part of the unprecedented Chinese demand for infant formula - but the real risk for suppliers and retailers is that one-sided revelations of a price negotiation could result in exposure of full concession exchange - think trade investment, pricing support, and all the other product-support mechanisms that would look outrageous in the tabloid press...

A pointer for other retailers, in other places?   

Saturday 19 December 2015

Earthquake-bed, for extreme earth-movement over Christmas...


                                                                                                                                  pic: The Telegraph
Key is not to be halfway in/out when activated...

Thursday 10 December 2015

Back to the Future via Hovering Lucozade Thief



Sky News report (here) the theft of a case of Lucozade from a Mitcham Co-op by a man on a hoverboard. When you check the security video, the shock is not that it can be done, but the fact that it happened in slow-motion, proving that really original instore theatre can over-ride blatant theft, the first time…

Wednesday 9 December 2015

Negative Interest Rates: Bankers vs. Mattresses - but what does it mean for NAMs?

                                                       Burglar Guide pic: The Daily Mail 

According to The Economist via CFO, in June of last year the European Central Bank reduced its benchmark interest rate, at which it lends to commercial banks, to 0.15% and its deposit rate, which it pays to banks on their reserves, to -0.1%.

As you know, in practice this negative interest rate means the ECB has been charging banks for holding their excess deposits in order to encourage more lending, in theory...

From a consumer point of view, it is likely that banks will be tempted to follow Alternative Bank Schweiz plan to charge consumers to hold their deposits via negative interest rates from January 2016.

This is where consumer savviness comes in...
Apart from putting their money under a mattress, depositors might choose to safeguard their savings by making advance payments to the taxman and then claiming them back, or withdraw their money as bankers' drafts and liquidate them when required...

The article adds that any form of pre-paid card, such as urban-transport passes, gift vouchers, or mobile phone SIMs could also double up as zero-yielding assets.

If interest rates became deeply negative, it would turn business conventions upside down. Companies would seek to make payments quickly and receive them slowly. Their inventories would grow fatter.

In other words, like deflation, negative interest rates are not an easy concept to work into the NAM's day-job, but we can be sure that the savvy consumer will be way ahead of us...

In fact, since since some savvy consumers are also well-networked burglars, you might usefully chalk the 'nothing worth stealing' option outside your house to disguise the fact that  you have personally taken the 'under-mattress' option...


Tuesday 8 December 2015

Sainsbury's ahead of the flatline and redundant-space curve?

Far from being ‘doom & gloom’, Mike Coupe has made a realistic call on the market by describing current demand as flatline and remaining so for the foreseeable trading future. In the same way he pointed out the emerging ‘20%' redundancy of large space retail, way ahead of other retailers.

So, when he says that multiples retail prices need to fall to a 5% to 10% differential to halt discounter drift, it would be unwise not to listen…

In other words, time for a ‘what if’ on your brand's Multiple presence, if he is even half right? 

Anti-LEGO Slippers, Knee-pads en route?

                                                                                                                               pic: Brilliant Ads

Friday 4 December 2015

The Offline Limit to Online Growth hits Debenham's share price

Yesterday's news of Goldman Sachs warning that Debenhams online shoppers are cannibalising in-store sales was the first overt sign that the market is acknowledging the profit-diluting effect of online growth in B&M business. The resulting 7% plunge in share price indicates the impact of online profit dilution for investors in B&M retail.

Essentially, 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 fulfilment 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 Bricks & Mortar stores…

Given that 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.

Click & Collect is not the full answer
Meanwhile, Click & Collect is not a compete solution, in that, having the shopper shoulder the burden of the last mile by collecting from the store, this still leaves the retailer to cover the cost of picking, packing, order admin, payment and returns. Compare this with the relative simplicity of a store visit by a regular shopper....

However, Click & Collect can have the added benefit of possible additional sales resulting from the ‘collect’ visit. This is probably one of the reasons that Tesco is converting some of its redundant superstore space into fulfilment/click & collect centres by using 42,000 sq. ft. of its Dudley Extra store in the West Midlands (The Grocer).

Action for NAMs?
Online profit dilution means that suppliers need to ensure that your part of the B&M retailer’s online portfolio is tightly matched to consumer need, in order to minimise the possibility of returns. This means pruning your online range to fit specific retailer online traffic, although given that space is not a cost online, the retailer’s online portfolio can contain many of your slow moving ‘long tail’ products and thus compensate for any instore 'culling' based on rate-of-sale hurdles.

Longer term, it is important to monitor the B&M retailers annual accounts in order to track overall profit dilution as their online business grows. Retailers will not normally divulge % of sales made online so you will have to rely on anecdotal feedback, but it could be worthwhile to use say 15% online vs. 85% mainstream until you pick up evidence to the contrary.

Ideally, well-run B&M retailers should make 5%+ Net Margin in the UK, but obviously the typical 2% to 3% currently being made are the result of 8 years of flat-line demand and increasingly the growth of their online business.

What is indisputable is the fact that online is a profit dilutor, the stock-market now coming around to that view, and you are ideally ahead of the curve…

Thursday 3 December 2015

Morrisons' fall from the FTSE 100 - what's the big deal?

As you know, a place in the FTSE 100 is determined by the size of a company's market capitalisation, in turn driven by share price, ROCE, itself a product of a company's Net Margin and rotation of capital i.e. sales/capital employed, which regulars will remember is stockturn and sales/sq. ft...

Over the past eight months, Morrisons' share price has fallen from £2.08 to £1.51, taking its market capitalisation i.e. market value of the company, down to £3.6bn, below the FTSE 100 hurdle rate, meaning that the stock market has not bought into the company's recovery plans...

Why does demotion to the lower league FTSE 250 matter?
First, some major investment funds track the FTSE 100, and will now sell all their Morrisons' shares, driving its share price down.

Second, since the key people in Morrisons are on share options, so the value of their wealth will fall...

But what can I do?
Whilst your job as a NAM is to optimise your brand in the marketplace, from Morrisons point-of-view, you are there to help them improve their share price...

This means driving their ROCE (think of 15% to make a difference), by helping them increase Net Profit (3% would make a difference, from its current negative territory) and increasing its capital turn (i.e. increasing its space productivity - sales per sq. ft. - and by delivering smaller quantities, more often, thereby increasing its stock turn of your brand. With a benchmark of £1,000/sq. ft./annum, you should easily be able to prove that your brand footprint generates at least three times that in terms of sales/sq. ft...

Meanwhile, remembering that their average gross margin is 25%, your brand's 30% retail margin should easily carry the 15% store running costs, and head office overheads of 5% to deliver 10% to the bottom line.

In other words, hone your skills in calculating the cost of everything you do for the customer, translate it into direct impact on their P&L, and Balance Sheet, and really connect with Morrisons' top-of-mind issues. 

You really think your brand matters to them other than as a means of improving the share price?

...and the big deal?
With the share price falling to £1.51, the resulting market cap. puts Morrisons firmly in play for those major retailers and private equity players that feel that at £3.5bn, or less, the company would respond favourably to a change of ownership and a little re-engineering....

Now do you still feel that the buyer's top-of-mind concern this morning is your brand's latest improvement in consumer blind taste-test performance?

Wednesday 2 December 2015

Grazing Shrinkers and the Grape-test…


A new study reported in The Retail Bulletin has found that almost £3 billion worth of items are stolen annually through 27% of shoppers 'grazing' in supermarkets, and stealing £4 each per week.

Shoppers ‘grazing’ on grapes as they shop the store, can add up to a significant shrinkage problem for the retailer.  However, the issue can be further complicated by the fact that a shopper may not regard unauthorised snacking as thieving.

This presents an opportunity for the retailer in that as the grazing shopper makes little attempt at concealment, the ‘thief’ can be more easily apprehended.  However, when challenged, shoppers have been known to claim that they deserve a reward for buying, in that a £50 grocery purchase entitles them to a treat or discount.  Besides, active sampling at the Deli counter, specialist shops encouraging tasting, and continuous in-store recipe demonstrations can add to the ambiguity of the issue.

In-store grazing ‘condoned’ by the retailer and left unchecked, can lead to an escalation of the problem.  Regular shoppers, encouraged by fellow grazers and a seemingly tolerant environment, can then graduate from loose grapes to individually wrapped sweets and confectionery, and then move on to bars or countlines.  From these humble beginnings, razor blades and batteries may not seem like a big step.  There are obviously problems with apprehending a grazer in the store, in that in the first place the retailer is accusing an ‘innocent’ thief, who happens to be a regular customer.  Moreover the grazer may be a customer’s child, and young children, especially female, pose problems for male security guards, inside or outside the store.

An added complication is that, in law, a suspected shop-lifter cannot be accused until they have left the store, and then two witnesses are required in order to successfully press charges.  Apart from the fact that much of the evidence is edible, coupled with the inconvenience and potential waste of staff time, the retailer can be reluctant to take the matter as far as the courts.  However, it is essential that the retailer be seen to press charges and prosecute shoplifters.  For instance, a retailer making 2% net profit has to make incremental sales of £250 in order to recover £5 stolen in-store.

In reality, most shoppers probably stop at the grapes stage…but those that graduate to confectionery can pose a problem.  First there is the issue of ownership of the problem in that a grazer moving from grapes to confectionery may cause the retailer to attempt to shift some of the ‘blame’ for this aspect of shrinkage to the supply chain, in effect penalising the supplier for producing a product that is susceptible to above-average shrinkage.

Whilst grape shrinkage will always be regarded as wastage, escalating shrinkage can seriously damage sales of impulse confectionery.  For the consumer, this can mean reduced opportunities to buy resulting from restricted access to the product at point of purchase.  Inaccurate stock-counts can cause reduced availability and challenges to data credibility and insight, which in turn may sour supplier-retailer relationships.  Incidentally, a quick fix via selling on consignment merely shifts the cost i.e. the supplier delivers £100 and invoices £98, reflecting 2% shrinkage as the product passes through the checkout.

Attempting to measure the scale of the problem has to be a first step in order to justify the work involved in overcoming the political barriers that have prevented action in the past.  This means re-examining goods in/out relationships for sensitive categories and attempting to distinguish ‘genuine’ wastage from shrinkage arising from grazing.  Here suppliers and retailers have a vested interest in sharing the measurement burden, in order to ensure that the problem and associated costs remain in the appropriate part of the supply chain.  This objective exposure of the extent of the problem will help to legitimise the steps necessary for its reduction.

In order to begin to deal with grazing-shrinkage, it is important that retailers clarify to staff and shoppers, the distinction between legitimate sampling in-store, and unauthorised piecemeal snacking on the way to the checkout.  Then begins the slow process of re-educating shoppers (and their offspring) to the realisation that taking products without paying is wrong and carries a penalty…

Alternatively, why not encourage them to become shareholders, hoping that they will then see shrinkage of any kind as a reduction in their own profits, and not another form of dividend…

Tuesday 1 December 2015

Buying your new BMW Online Just Got a Whole Lot Easier

According to Newbusiness.co.uk, BMW have recently launched their new online ordering system, one that promises customers to be able to purchase a brand new car in around 10 minutes. Given that a new purchase used to require 4.5 visits to a car dealership, now 1.5 times.

Buying online represents 90% of the deal, with the messy business of practicing your buyer-side negotiation skills to complete the arrangement with a human representative of the shop floor at the dealership, reflecting BMW’s caution at going the final online mile.

And not forgetting to give you the opportunity to kick the tyres, just-in-case…

How long before Amazon simplify the process even more and even deliver the car to your home or office, perhaps by drone to avoid the cost of an extra driver…?

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…

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… 

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

Tuesday 17 November 2015

Would you buy a used car from this vending machine?

                                                                                                                          pic: The Independent
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?

                                                                                                                                            Berlin 1961

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?

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... 


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
  • 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?
  • 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   
With the benefit of a 20 year online head-start, and discovering the world's most popular books, Amazon are now capitalising on their insight via yesterday's opening of their first brick & mortar bookstore in Seattle.

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?

     ‘Step aside, old guy’                                                                   pic: Starship Technologies

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!

Saturday 31 October 2015

Friday 30 October 2015

Amazon Fresh - losing to win vs. Tesco?

We all know that the last thing UK mults need is loss-leading online competition, the only real growth area currently available, in an medium where shelf-space is not an issue....

Given that Amazon are feeling their way forward with a fresh offering in London and Birmingham to Prime members and have traditionally been prepared to operate at a loss to build share, they represent a very real threat to the major mults.., initially in major conurbations where Amazon's dense coverage is a major strength.

Add to this the fact that home delivery can cost £20/drop vs. the maximum charge a consumer will tolerate is £5, and the scale of the threat can be appreciated.

With their 50%+ share of online grocery, Tesco have most to lose, but any Amazon Fresh success will obviously also impact the other mults.

The issue for suppliers has to be the extent to which the mults will try to recover losses via traditional brands as they try to compete in a new online reality...

Wednesday 28 October 2015

Walgreens Boots Alliance take Rite Aid - another global step..

Yesterday’s bid for Rite Aid will obviously impact the US market, but UK and EU NAMs need to place this move in a global context in order to anticipate the impact at local level.

For those that need reminding, in a few short years, Stefano Pessina transformed a small family business into Alliance Boots, a European drug retailing and wholesaling powerhouse, through a series of takeovers. In 2007, he took the company private in an $18.5bn leveraged buyout with KKR & Co. At year-end, KKR still owned about 4.6% of Walgreens stock.. And this successful integration and revitalisation of an iconic UK brand, without missing a beat (in contrast with Kraft's acquisition of Cadbury...).

WBA-Rite Aid will result in a company with annual sales of £65bn and a Mkt Cap = £68bn.
Compare this with Tesco annual sales £69.7bn and £15bn Market Cap…
(apart from the additional scale of WBA, this Sales/Mkt Cap comparison indicates the degree of Tesco's fall from grace, and the need for H&B suppliers to re-balance their customer portfolios...)

Given that the WBA merger has been one of the private-equity firm’s best-ever deals, making it well over four times KKR’s initial investment, the private equity group will want to stay at the table...
In other words, KKR are unlikely to miss out on funding further deals proposed by Mr Pessina…  

In defending the bid, Walgreens and Rite Aid would be likely to argue to regulators that they compete not just with other traditional drugstore chains, but also with companies such as groceries and club stores.

Finally, according to the WSJ, Mr. Pessina hasn’t been shy about his desire to do big deals. “We can clearly see the need or the opportunity for horizontal and vertical consolidation in our industry”

Joining some of the obvious dots, we should assume that SP is still working to a global agenda, growing by acquisition, targeting anything in healthcare and beauty, but also competing with grocers and warehouse clubs, anywhere…with appropriate funding on tap via KKR and the stockmarket…

Watch this space…

NAM Implications:
  • Scale? At $100bn sales, almost as big as Tesco global...!
  • Synergies? $1bn savings in year one is just the start ...
  • Negotiation? First agenda item has to be prices & terms disparities.
  • Preventive action? Suppliers have six months to remove anomalies, while WBA are distracted by the inevitable government scrutiny.
  • Amplify? Worth sharing with global colleagues for a co-ordinated approach?


Tuesday 27 October 2015

VW and the never-ending cycle of corporate scandals - how Darwin can help

According to the BBC, after Libor, payment protection insurance, phone hacking and every other scandal, nothing appears to have been learned to stem the tide of bad behaviour from some of the world's largest companies.

And now VW has been caught cheating on emissions tests, having been caught and fined in 1973 for dodging similar tests.

Research by Cass Business School’s Professor Andre Spicer indicates predictable post-scandal behaviour:

First three to six months: high activity, scapegoating, calm restoration, removal of people, evidence, stories and reminders…

More detail in the original article re failure to learn from mistakes via a focus on getting things done rather than how results are achieved, resulting in a culture that encourages recruitment of similar individuals with the same views, rather than a policy of diversity…

Stephen Carver, a lecturer at Cranfield points out that Darwinian survival is not survival of the fittest - he never said that. It's the most able to adapt. And that means diversity…

Impact on the brand
However, we would add that a fixation on complying with the letter, rather than the spirit of the law probably causes more damage in the eyes of the consumer. Considering the years spent building brand equity – that reassurance that it is not necessary to second-guess the quality – or the quantity – in the tin, the essence of branding…

Also we all know that FMCG marketing is built on the premise that the cost of introducing the consumer to the brand and achieving initial trial is so high that it is only on second or third purchase with less spent on having to ‘educate’ the consumer, does the  brand begin to make a profit.  Destroy that trust – by short-changing on contents vs. expectation – and then suffer the cost of re-building that trust.

For instance, if we accept that when a consumer’s needs are exceeded, they tell a friend, when disappointed, they tell ten friends, it might be said that a brand re-build costs ten times the cost of introduction.

Exaggeration?
Why not try it for yourself, sometime…?

Thursday 22 October 2015

When the buyer wants even more – an opportunity for a partnership re-cast?


As you know, with Walmart and most probably Asda wanting extra help from suppliers to cover rising, but surely not unanticipated business costs, it is possible but unwise to simply say 'No’.

Better to treat this as an opportunity to go back to fundamentals on each side of the table. This is a bit like when a buyer makes a new demand immediately following the conclusion of a deal, such as ‘…and you will deliver to each branch’, a very old trick – so old, we used to call it the ‘quivering quill’ or sign-off demand – that destabilises the balance of a fair-share deal just negotiated.

The key here is to assume exaggerated shock or anger – if you have not anticipated the move and are really shocked/angered, your negotiation technique may need more fundamental remedials – and even go so far as to act as if you are about to terminate the interview - such as screwing up the draft plan. Apologise for having assumed a deal had been reached, and take the discussion back to the buyer’s ideal world requirements of a partnership with you and your company.

These are obviously extremely high-stakes moves, so you will obviously have placed the entire relationship in context, calculated the cost and value of each element, and will be acutely conscious of the fact that losing the Asda business means a factory closes…

The benefits of pre-interview planning means you do not have to prepare and respond to these moves ‘on the go’.

The key is to prepare right things… 

Full analysis and action in October issue of NamNews

Tuesday 20 October 2015

Amazon prepares for your Christmas shopping.....

                                                                                                                             Ralph D. Freso/Reuters
See 15 pics, (worth 15,000 words?) here

Friday 16 October 2015

Call me naive, but... How Tesco could rebuild trust in UK retail

Latest reports in The Guardian that over-complex supermarket pricing is being targeted by UK government to ease price comparison will probably end up in the usual letter-of-the-law observance, forgetting that consumer trust is based on the spirit-of-the-law.

Providing consumers with true bases for like-with-like comparison needs the combined efforts of suppliers and retailers with a common aim of rebuilding consumer trust, the essence of branding, both retailer and supplier.

Given its presence at the point-of-purchase, and at 29% market share with most to lose, I believe that Tesco - and its major suppliers are in a position to take the following steps:

Price clarity: A major opportunity lies in wait for those retailers that strip offerings back to the basics of letting consumers know what they get for their money. Apart from an obvious emphasis on unit pricing combined with a little education ref. prices per g/ml, it means eliminating all ‘letter & spirit’ legal issues regarding promotional offers, and replacing them with genuine, transparent and defensible offerings that can be compared accurately with competitors’ alternatives, like-for-like, but also meet and even exceed consumer expectation

Product delivery:  When a consumer opens a tin, its contents should match or even exceed the expectation created by the lid…a fundamental of branding based in part on the fact that the cost of making the first sale to a consumer is so high that profit is only possible on return visits without having to be re-sold. Tesco is in a unique position to add like-with-like conditions to its purchasing criteria, and delist brands that are found to have used content reduction to disguise a price rise…

Demand forecasting: As ‘experts’ in consumption, suppliers can be in a position to help refine demand calculations and the combination of this insight with a retailer’s instore on-time fully-shared expertise has to be a way of ensuring 100% zero-defect shelf availability, at minimal cost for all parties

Trade credit: Credit was always meant to cover the gap between delivery of goods to a reseller and payment by shoppers, and was never intended as a means of generating interest on 40-day deposits. As such, given average retailer stockturns of 20 times per annum, this means paying supplier invoices within 2.5 weeks of delivery, with recent moves to 14 day payment for small suppliers a good start. There is even a case for paying faster for items delivered on a daily basis

Trade investment: Post-audit recovery came about because of a combination of inadequate ‘paper trails’ of promotional agreements by suppliers, and the ability of financial programmes to search and claim for unpaid funds for six years previously.  Despite the strict letter of the law supporting this process, all retailers could show more goodwill and pragmatism by limiting such searches to a maximum of two years…

Trade Deductions: Should not be regarded and treated a source of income, but should reflect genuine failure to meet reasonable standards agreed in advance as a condition of purchase, with perhaps some element of reciprocation for failures of on-shelf compliance...

Organisational compliance: The above changes need to be understood and communicated at all levels within both supplier and retailer organisations, thereby reducing the possibility of 'rogue-employee' defences at higher levels of management…

Tesco, with 29% market share and a need to regain custom, is in a unique position to be in the vanguard of this change..

And if it results in a temporary loss of margin, so what…

In time, as shoppers - and suppliers - begin to relax into the feeling that in a Tesco store, ‘what you see is what you get’ and even more, then the result have to drop into the bottom line as repeat sales come in at less cost, like with all good brands…

HT to Wayne Robinson for Guardian link

Thursday 15 October 2015

Gambling on loyalty Cards - insights by Steve Gray

In response to our post on Loyalty Cards, Steve Gray has added the following insights:
  • There is inherent value in the loyalty programme itself - millions of consumers like collecting points (Clubcard, Boots, Nectar etc) and go out of their way to do so. The programmes more than wash their face for the retailers who deploy them
  • They also create a valuable asset for their owners : Nectar was sold for around £450m, if ever Tesco sold Clubcard (as opposed to dunnhumby) it would be worth something similar or more
  • There is, as you say, additional value from the data - it can be used to deliver a more personalised shopping experience (via range, promotions and personalised offers)
  • Currently, supplier-partners aren't really able to help retailers to "build a comprehensive picture" as they tend not to have any useful data on individuals (supplier data tends to be anonymised research from small sample groups). This might change as brands start to invest more in direct to shopper programmes, more retailers enable digital coupon redemption and sales tracking other than via their closed loop programmes
* Its high time the plastic was replaced by a phone or by linking to the customer's debit or credit card - not a technology barrier but slow uptake as few retailers have people who know how to get this done easily.

Gambling on 'Loyalty' Cards........?

Given Tesco's difficulties in selling Dunnhumby, it might be useful to assess loyalty cards' risk/reward relationship...

Retailers who expect loyalty cards to build consumer loyalty are missing an important trick. Loyalty cards simply provide access to possible consumer need via a record of purchasing behaviour, within a context of key data on the named cardholder. The gamble is not whether the retailer can cover the cost of maintaining the card, but rather whether the organisation can creatively drill into the resulting data, discovering and distinguishing real need from ‘want’ and then organising resources to manage and meet consumer expectations, cost effectively.

In fact, loyalty is the long-term result of meeting and exceeding consumer expectations consistently and to the satisfaction of named individuals, better than others. Whilst it can be safer for traditional marketers to conceal the consumer within the anonymous confines of a market segment, real-world marketing seeks out and responds directly to named individuals, actually welcomes the encounter with a real consumer, strives to establish an increasingly enriching dialogue, and thus provides a means of validating category assumptions, creatively.
The high cost of establishing and maintaining this level of interpersonal contact demands that the consumer be sufficiently satisfied to willingly come back for a repeat purchase, with minimal encouragement (i.e. cost).

In practice, the loyalty card completes the jigsaw of the consumer purchasing decision, helping the retailer to complete the full circle, back to the Mom’n’Pop grocer who stayed in the game by playing the loyalty card intuitively, limited only by personal memory capacity and being ‘open’ to consumer-need opportunities, 24/7. This flesh and blood family grocer earned and protected his access to 500 families via a keen sensitivity to total need, delivering a tailored response in a carefully monitored environment, resulting in a slow demise.
So too, loyalty cards provide a means of helping to restore the human touch at store level, helping to eliminate the anonymity of the shopping experience, and ensuring repeat visits by satisfied users, with minimal drift to other providers. Whilst a data-based retailer can attempt to meet consumer needs unilaterally, partnership with like-minded suppliers can help the customer capitalise on the combined equities of brand and store.

By definition, a supplier who enters such a relationship without full commitment, all the way to the point of purchase, contributes brand equity as a means of attracting consumers into the store, only to have them succumb to the attractions of store franchise in the aisle. In turn, the retailer is at risk from poor execution of the total store offering in that each time the consumer encounters the face of the retailer at checkout, any inconsistency in personal performance versus expectation is in danger of eroding that newly acquired store equity.

The supplier-partner can help by assisting the retailer in building a comprehensive picture of the brand’s named-consumer, combining consumption behaviour with the retailer’s knowledge of how that consumer behaves in store, monitoring in-home satisfaction and helping to encourage the resulting repeat visits to the store. Having cooperated in sharing experience within the supply-chain, it is time for both parties to repeat the process within the demand-chain.

In the meantime, this ‘useless piece of plastic’ can be a passport to the heart and mind of a named consumer and, carefully managed, can underwrite a long-term revenue stream.

Unless one is gambling everything on a quick win...............?

Tuesday 13 October 2015

Tesco's Price Promise revamp: simple, immediate, and a fair–share pointer for retail and supply?


Deep down, Tesco’s 5-point Brand Guarantee breaks some new ground for all stakeholders:
  • Instant discount at checkout – eliminates frustration of delay, next time memory-lapse, sense of lock-in
  • Own Label exclusion – eliminates difficulties of true like-with-like comparison of brand and ‘equivalent’ own label
  • Minimum 10 item basket: attempt to re-encourage ‘bulk’ shop?
  • Large stores + online only: Fine for once/week+ shoppers, but is it enough to re-attract daily, closer, smaller shoppers?
  • Only Big 4 match: Eliminates price as a differentiator vs. other mults in large space, but still at a price disadvantage to the discounters
The Big Issue will be the extent to which other mults target large space as a separate market, competing via other parts of the retail marketing mix (see slide for options), but maintaining price parity….  However, if other mults break ranks and drive down prices, the appeal of large space retail may grow, at the expense of the discounters.

Meanwhile, Tesco’s move demonstrates a major step forward in transparency at point-of-purchase, the beginnings of a fair-share dialogue with the savvy consumer that will hopefully encourage other mults to follow suit, with branded suppliers perhaps adding a little more than expected to the tin to cement the process…

…and fair-share supplier-retailer dealings an added bonus? 

Monday 12 October 2015

Gambling on 'Loyalty' Cards........?

Given Tesco's difficulties in selling Dunnhumby, it might be useful to assess loyalty cards' risk/reward relationship...

Retailers who expect loyalty cards to build consumer loyalty are missing an important trick. Loyalty cards simply provide access to possible consumer need via a record of purchasing behaviour, within a context of key data on the named cardholder. The gamble is not whether the retailer can cover the cost of maintaining the card, but rather whether the organisation can creatively drill into the resulting data, discovering and distinguishing real need from ‘want’ and then organising resources to manage and meet consumer expectations, cost effectively.

In fact, loyalty is the long-term result of meeting and exceeding consumer expectations consistently and to the satisfaction of named individuals, better than others. Whilst it can be safer for traditional marketers to conceal the consumer within the anonymous confines of a market segment, real-world marketing seeks out and responds directly to named individuals, actually welcomes the encounter with a real consumer, strives to establish an increasingly enriching dialogue, and thus provides a means of validating category assumptions, creatively.
The high cost of establishing and maintaining this level of interpersonal contact demands that the consumer be sufficiently satisfied to willingly come back for a repeat purchase, with minimal encouragement (i.e. cost).

In practice, the loyalty card completes the jigsaw of the consumer purchasing decision, helping the retailer to complete the full circle, back to the Mom’n’Pop grocer who stayed in the game by playing the loyalty card intuitively, limited only by personal memory capacity and being ‘open’ to consumer-need opportunities, 24/7. This flesh and blood family grocer earned and protected his access to 500 families via a keen sensitivity to total need, delivering a tailored response in a carefully monitored environment, resulting in a slow demise.
So too, loyalty cards provide a means of helping to restore the human touch at store level, helping to eliminate the anonymity of the shopping experience, and ensuring repeat visits by satisfied users, with minimal drift to other providers. Whilst a data-based retailer can attempt to meet consumer needs unilaterally, partnership with like-minded suppliers can help the customer capitalise on the combined equities of brand and store.

By definition, a supplier who enters such a relationship without full commitment, all the way to the point of purchase, contributes brand equity as a means of attracting consumers into the store, only to have them succumb to the attractions of store franchise in the aisle. In turn, the retailer is at risk from poor execution of the total store offering in that each time the consumer encounters the face of the retailer at checkout, any inconsistency in personal performance versus expectation is in danger of eroding that newly acquired store equity.

The supplier-partner can help by assisting the retailer in building a comprehensive picture of the brand’s named-consumer, combining consumption behaviour with the retailer’s knowledge of how that consumer behaves in store, monitoring in-home satisfaction and helping to encourage the resulting repeat visits to the store. Having cooperated in sharing experience within the supply-chain, it is time for both parties to repeat the process within the demand-chain.

In the meantime, this ‘useless piece of plastic’ can be a passport to the heart and mind of a named consumer and, carefully managed, can underwrite a long-term revenue stream.

Unless one is gambling everything on a quick win...............?

Friday 9 October 2015

IGD Big Debating points to ponder over the weekend?

  • Convenient vs. Convenience store the way forward
  • Big Space Redundancy: ‘Buy too much, Takes too long’
  • Click & Collect, with value add-on services, makes a difference?
  • Realistic reality-checking does not mean pessimism…
  • Customer-centricity needs to accommodate customer diversity
  • Can we tolerate individual loss-making channels within a holistically profitable model?
  • (Two hours before the first slide… Powerpoint beware..?)
  • Loss of consumer trust – retrievable or simply a feature of savvy consumerism…?
  • Back to basics, but in a modern way?
  • ‘Chinese consumers save 50% of their income…..’
  • Retailers & Suppliers: ‘Consumers won’t notice’ – serious?
  • Retailer price-matching can seem like ‘cartel behaviour’ to consumers…
  • Forget politicians, ask man in street for the real level of inflation…
  • ‘You never hear a child cry in Poundland’ – a pound request is an easy win for parents
  • ‘We sell products for a £1, not £1 products’
  • ‘Consumers are the smartest on the planet, give them right offerings in superstores and they will come’
  • ‘Sorry…..’

A chronological view from the back row of the IGD BIG DEBATE 2015…

Wednesday 7 October 2015

Tesco's new trading terms - a fundamental step towards fair-share dealings?

In an issue-packed day where most delegates had cause to re-set their business priorities, and test the limits of their networking skills in a pool of 650+ potential contacts, the IGD’s Big Debate presented a fundamental opportunity to update suppliers’ UK market context with the help of speakers that were prepared to face up to market realities and indicate their ways forward….

Nothing beats hearing it live, but a good second best (apart from a lost networking opportunity) can be achieved via a combination of the IGD’s Events App and reports from a packed press gallery.

Although spoilt for issue-choice, for me a pivotal item was Dave Lewis announcement of Tesco’s new trading terms.

Full details here, but essentially, Tesco has pledged to deliver a simpler and “fairer” business model for suppliers, by standardising their payment terms and settling bills from small and medium-sized firms quicker. 

When you consider that Tesco’s average days credit period is 42 days, which at say 5% cost of money and trade creditors of £5,076m (end Feb 2015), is worth £253m per annum, you will appreciate the pain this represents, given this morning’s announcement of a 55% fall in profits to £354m.

Whilst the new terms represent a major step towards fair-share dealings for Tesco – and a pointer for other retailers? - this is hopefully but the first move in acknowledging that trade credit should not be regarded as a source of working capital, but merely a way of covering a cash-flow gap between supply of a product and receipt of cash from a shopper. 

If that is the case, then Tesco need to budget for an eventual move to approximately 5 days average trade credit…

If this initiative catches the imagination of the public and thereby contributes to Tesco’s recovery, then other retailers will have to follow suit, or suffer loss of share…

However, whilst this will undoubtedly help suppliers, the real consequence will be the public-opinion spotlight then turning on major suppliers’ use of up to 90 days free credit from their ingredients, packaging and services suppliers…

Time for all suppliers to anticipate the obvious and begin their profit re-sets now?

Friday 2 October 2015

Tesco’s Carlsberg de-list – just another overcrowd inevitability?

Whilst both parties understandably remain silent on the specific reasons for de-listing most of the Carlsberg range, it seems obvious that the brand’s scale and importance required a carefully calculated decision.

We are patently not privy to the specifics, but here on the outside, NAMs need to explore possible rationale/scenarios as a basis for identifying the implications for their brands, and taking evasive action, where necessary...

Consumer need has to be a starting point
Logically, when compared with available alternatives, Carlsberg was deemed to have less relative appeal than other brands and own-label, from the perspective of Tesco shoppers.

In practice, this meant that Tesco shoppers believe that the brand’s combination of Product/performance, Price, Presentation/Promotion, and Place is less appealing than other members of the category.

Whilst the Carlsberg marketing team might beg to differ, the fact remains that their consumer-appeal message is not reaching Tesco, or did not survive the BCG assessment.

Retailer need comes next
Here Tesco must have assessed the brand’s combination of Product/on-shelf performance, Prices & Terms, Presentation (how well the offering is put across, at all levels) and Place/availability, all compared with available alternatives in making a decision based on relative competitive appeal.

Whilst this can be a relatively simple process, it has to be kept in mind that Tesco is changing radically in most aspects of its decision-making-process, with a different balance of traditional and new influencers in the mix, all operating under an intense City spotlight… 

At some stage, Tesco decided that Carlsberg was deficient, and made the de-list move.

Why this matters for NAMs
The issue for NAMs is not only the possibility of their brand becoming a casualty of the Tesco re-set, but also the inevitability of this culling process being applied by other retailers in an overcrowded, insufficiently differentiated market, as they strive to optimise their relative competitive appeal, with no facilities for taking prisoners.

The answer has to lie in making a fundamental assessment of your brand’s real pulling power with the consumer, and integrating this with an effectively communicated trade offering that emphasises your advantages, and eliminates anything that dilutes its appeal, before the buyer does the inevitable…