Debenhams launches plain English coffee menu which describes coffee in simple terms has been created in direct response to customer feedback that revealed over 70% of coffee drinkers have experienced ‘coffee confusion’ in cafes, bars and restaurants. No longer will coffee-lovers be in a muddle over mocha, caught out by cappuccino or embarrassed about espresso thanks to a plain English coffee menu launched by Debenhams on 29 October 2012.
The new Debenhams coffee menu:
Translating Fancy name (usually seen in high street coffee shops) into Plain English version (as seen on the new Debenhams menu)
Black coffee = Simple coffee – with or without milk
Caffe latte = Really really milky coffee
Cappuccino = Frothy coffee
Caffe mocha = Chocolate flavoured coffee
Espresso shot = A shot of strong coffee
Chrissie Maher, Founder Director of Plain English Campaign also welcomes the new menu: “Whether it is coffee, tea or hot chocolate, it needs to be in plain English so customers can make an informed choice. If they can read the menu clearly, they are more likely to try something new – and who knows – they may come back for more.”
The current status quo
Over 100,000 coffees are sold each week in more than 160 Debenhams cafes and restaurants across the UK and Ireland, selling double the amount of tea. Coffee now represents 67% of sales compared to tea which is only 33%. Of the three major hot beverage categories (coffee, tea and hot chocolate), coffee is the only one to have seen volume growth over the past three years. This suggests that it has stolen share from both hot chocolate and tea.
At risk of sounding pretentious (pretentious? Moi?) it remains to be seen whether confusing mystique is a key driver in out-of-home coffee consumption……
Wednesday, 31 October 2012
Tuesday, 30 October 2012
Late payments improving – Action for NAMs
The latest Late Payment Index from Experian®, the global information services company, reveals that UK businesses paid their bills nearly 1.3 days earlier in Q3 2012, compared to the same period last year. In July to September this year, firms paid their overdue invoices 24.88 days after agreed terms, compared to 26.17 days during the previous year (Q3 2011).
Food retailers showed the most significant improvement, paying their invoices 29.15 days after agreed terms, compared to 34.21 days in the same period last year.
Still a way to go...
Whilst suppliers will obviously be grateful for this average 5-day improvement by retailers, your finance department will remind you that invoices are being paid 29.15 days later than agreed. Think about it, you are delivering some SKUs daily, the retailer is holding average stocks of 2 weeks, and is getting cash from the shopper...
In other words it is vital, especially in this ‘post-recession’ era, to keep up the pressure for on-time payment.
Action:
Food retailers showed the most significant improvement, paying their invoices 29.15 days after agreed terms, compared to 34.21 days in the same period last year.
Still a way to go...
Whilst suppliers will obviously be grateful for this average 5-day improvement by retailers, your finance department will remind you that invoices are being paid 29.15 days later than agreed. Think about it, you are delivering some SKUs daily, the retailer is holding average stocks of 2 weeks, and is getting cash from the shopper...
In other words it is vital, especially in this ‘post-recession’ era, to keep up the pressure for on-time payment.
Action:
- Quantify the cost of financing agreed credit days
- Calculate the cost-benefit of paying settlement discount
- Calculate the cost of the additional late days (checking that you have had your fair share of the five day average improvement in days sales outstanding, from all customers!)
- Calculate the total cost of financing the credit you give your customer, and work out the equivalent in incremental sales required to cover the cost
(i.e. if you make 8% net on your customer’s business, you need incremental sales of £12,500 sales to cover each £1,000 you give the customer )
Monday, 29 October 2012
'Food-to-come' - What if McDonalds offered home delivery?
Despite the arrival of the newly revealed post-recession era, food-to-go services are still suffering real-world issues with traditional sales.
One answer might be the introduction of home delivery by giants like McDonalds and Burger King
Obviously a trade-off between delivery charge and the health benefit of walking to the nearest outlet, an issue not likely to factor significantly with the target audience…
The real issues might be quality-on-delivery and set-up of a new home-delivery business model
Quality-on-delivery
In home delivery trials in the US, Burger King claims to have solved the problem by developing what it calls 'proprietary thermal packaging technology,' which ensures the food won't arrive cold and congealed.
Home delivery already in place
McDonald’s already offers home delivery service to more than 25 countries including India, South Korea, Malaysia, China and Egypt and is trialling via a couple of outlets in New York. Due to people becoming busier and busier and highly competitive companies as Yum Brands (KFC, Pizza Hut), McDonald’s has begun offering a home delivery service. The 24/7 McDelivery service is a fairly new business model and is continuously expanding and has proved to be highly successful.
Given the both companies appear to have solved some of the basic problems, perhaps Home Delivery UK might be worth a what-if by key stake-holders?
Thursday, 25 October 2012
‘No-brainer’ inevitabilities...Generic medicine prices in Ireland
Radical changes overdue
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest it is inevitable that:
In other words, on current levels of consumption, a 50/50 split of generics and branded, and generics pricing being reduced even by 50%, the annual drug bill will be reduced to €1.4bn, minimum…
Time for a ‘what if’ on the sales impact of matching UK levels (generics usage = 80% and generics prices reduced by 92% )?
NB. What does this mean for those outside the market?
The above is an example of a market anomaly, with change becoming inevitable when you run the numbers, hopefully leading to better business forecasting. We shall include ‘no-brainer’ inevitabilities as a regular feature of KamBlog, to help clarify the obvious in unprecedented times.
All suggestions welcome!
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest it is inevitable that:
- The government will legislate to increase generics usage to something approaching the UK %
- Prices of generics will then be forced down to levels comparable with the UK (think legislation or encouragement of parallel importing, or both)
In other words, on current levels of consumption, a 50/50 split of generics and branded, and generics pricing being reduced even by 50%, the annual drug bill will be reduced to €1.4bn, minimum…
Time for a ‘what if’ on the sales impact of matching UK levels (generics usage = 80% and generics prices reduced by 92% )?
NB. What does this mean for those outside the market?
The above is an example of a market anomaly, with change becoming inevitable when you run the numbers, hopefully leading to better business forecasting. We shall include ‘no-brainer’ inevitabilities as a regular feature of KamBlog, to help clarify the obvious in unprecedented times.
All suggestions welcome!
New Supply Chain Finance Scheme - every little helps, but..
News that a group of 38 major UK companies, including Tesco, GlaxoSmithKline, Marks & Spencer, Diageo, Rolls Royce, BAE Systems, Centrica, and Vodafone, have signed up to the Government’s new supply chain finance scheme aimed at helping improve the flow of working capital for small businesses by piggy-backing on the customer's credit rating is a great step forward, but suppliers to retailers are still under pressure from financing trade credit.....
Implications
Implications
- Great initiative in that small/medium suppliers can benefit from the credit rating of larger customers
- But they still have to finance the credit, albeit perhaps not at penal interest rates
- The real issue is retailers taking 45 days+ to pay for goods that are often daily-delivered, with shoppers paying in cash…
- See Cost of credit calculation on Kamcity
- Work out the actual cost of giving credit to the customer
- Calculate the incremental sales required to cover cost of free credit i.e. say your net margin is 5%, then every £1,000 it costs to give free credit means you need incremental sales of £20,000 to cover the cost
- Substitute your figures in the above calculation and book an appointment with the buyer...
Amazon ebook VAT advantage removed - back to level-playing-field competition?
According to The Guardian, Amazon is to be stripped of its huge tax advantage in the UK (VAT 20%) on the sales of ebooks after the European commission ordered Luxembourg (VAT 3%) to close a VAT loophole. Luxembourg will be forced to increase its VAT rate to 15% on EU digital sales. This was inevitable (see Kamblog) especially given Amazon’s 90% share of the UK ebook category.
In my opinion, what is more important for publishers and other suppliers to Amazon was a reference to base price equality in the original Guardian article…..
Contract terms with Amazon
According to The Guardian, an Amazon contract they have seen says: "If the base price exceeds the base price … provided to a similar service then … the base price hereunder will be deemed to be equal to such lower price, effective as of the date such lower price comes into effect." In other words, if Amazon discover that a retail competitor is being given a lower price, they will apply that price to current dealings and claw back any difference, from the time the lower price was charged.
Like all retailers, we believe that Amazon are entitled to set and agree trading terms in advance and apply conditions that they will enforce where necessary. It is the responsibility of suppliers to ensure that they quantify the terms and implications of all deals with retailers before entering into contractual agreements...
Application of base-price-equality to all retailers, retrospectively...
In the case of Amazon’s ebook base-pricing comparison, the issue for all suppliers is even more important. There is nothing to prevent the same principle being applied to the rest of Amazon’s business, or indeed, to any retailer buying from suppliers.
Action for suppliers:
In my opinion, what is more important for publishers and other suppliers to Amazon was a reference to base price equality in the original Guardian article…..
Contract terms with Amazon
According to The Guardian, an Amazon contract they have seen says: "If the base price exceeds the base price … provided to a similar service then … the base price hereunder will be deemed to be equal to such lower price, effective as of the date such lower price comes into effect." In other words, if Amazon discover that a retail competitor is being given a lower price, they will apply that price to current dealings and claw back any difference, from the time the lower price was charged.
Like all retailers, we believe that Amazon are entitled to set and agree trading terms in advance and apply conditions that they will enforce where necessary. It is the responsibility of suppliers to ensure that they quantify the terms and implications of all deals with retailers before entering into contractual agreements...
Application of base-price-equality to all retailers, retrospectively...
In the case of Amazon’s ebook base-pricing comparison, the issue for all suppliers is even more important. There is nothing to prevent the same principle being applied to the rest of Amazon’s business, or indeed, to any retailer buying from suppliers.
Action for suppliers:
- Check your base-price per customer, and do a numbers-based ‘what if’ on the lowest price being applied to your entire customer portfolio, retrospectively (its not going to go away)
- Forget ‘trade secrecy’ and assume all customers know everything (remembering that it only takes one staff member…)
- Check that a true-like-with-like comparison is being made, and be able to calculate and demonstrate your rationale (the numbers will count in the end...)
- Find ways of lowering prices to customers to the same level for the same level-of-access to consumer, or find ways of terminating the ‘lowest price’ customer (pay the retailer for work done on your behalf)
- In the meantime, ask for proof of lower prices elsewhere, to avoid the mistake of defending the wrong case, and thereby giving the retailer additional scope for claw-back (hear the buyer out, and answer the objection)
Wednesday, 24 October 2012
Premier Foods - joining up the dots in retrospect...
As you may remember, as long ago as the 5th October 2012, KamBlog analysed Premier Foods options and advised you to watch this space to see the dots joining up in retrospect… (Steve Jobs warned that you can't connect the dots in life by going forwards, it's only in retrospect that you begin to make sense of the bigger picture..)
Walking away from a £75m bread contract
Premier Foods’ decision not to renew their £75m own label bread contract with one of the major mults is all part of a move to reassess each part of its business and sell/walk-away when the figures don’t add up. This in turn is driven by a need to drive up the share price by improving its Return On Capital Employed (see KamBlog – Premier Foods).
Next moves
In a low margin, high overhead category, Premier now have to place the £75m with another mult on better terms, or suffer an increased overhead burden, probably resulting in sell-off of bread-related assets to restore profitability.
Meanwhile, by demonstrating their willingness to walk away from unprofitable deals with retailers, Premier have done a favour for other suppliers, besides causing their share price to rise 4¾ - 6pc - to 83½p, yesterday.. voila!
Going back to the future
The key idea here is that these moves were obvious on the 5th October, to those NAMs that were prepared to explore the greater business context, and then attempt to anticipate the implications for their category and customer relationship. Running the what-if numbers then reveals the urgency…
As Steve Jobs proved many times, by using historical dot-joining to establish the big picture (including the numbers) he was able to anticipate future consumer needs and design accordingly…
Apple’s resulting output provides the evidence all around you...
Walking away from a £75m bread contract
Premier Foods’ decision not to renew their £75m own label bread contract with one of the major mults is all part of a move to reassess each part of its business and sell/walk-away when the figures don’t add up. This in turn is driven by a need to drive up the share price by improving its Return On Capital Employed (see KamBlog – Premier Foods).
Next moves
In a low margin, high overhead category, Premier now have to place the £75m with another mult on better terms, or suffer an increased overhead burden, probably resulting in sell-off of bread-related assets to restore profitability.
Meanwhile, by demonstrating their willingness to walk away from unprofitable deals with retailers, Premier have done a favour for other suppliers, besides causing their share price to rise 4¾ - 6pc - to 83½p, yesterday.. voila!
Going back to the future
The key idea here is that these moves were obvious on the 5th October, to those NAMs that were prepared to explore the greater business context, and then attempt to anticipate the implications for their category and customer relationship. Running the what-if numbers then reveals the urgency…
As Steve Jobs proved many times, by using historical dot-joining to establish the big picture (including the numbers) he was able to anticipate future consumer needs and design accordingly…
Apple’s resulting output provides the evidence all around you...
Tuesday, 23 October 2012
‘Amazon makes UK publishers pay 20% VAT on ebook sales’ – the real issues!
According to an article in The Guardian, Amazon is apparently forcing British publishers to cover 20% VAT on ebook sales, even though the company must only pay 3% to Luxembourg where it is based.
At NamNews we are not in the business of either praising or criticising retailers, merely attempting to clarify business relationships as a basis for fair-share relationships between suppliers and retailers.
How VAT works
Experienced NAMs will appreciate that in practice, VAT is an on-cost, and is paid by the shopper, i.e. in the case of an ebook selling at £10, VAT inclusive, the shopper is paying £1.67 in VAT, resulting in a net retail price of £8.33.
This VAT is the retailer’s output tax.
The retailer collects the VAT, and in turn pays the supplier/publisher the net price (allowing for retail margin etc) +VAT at 20% i.e. assuming a retailer’s margin of 30%, the retailer pays the supplier £5.83 + 20% VAT = £5.83 +£0.97 = £6.80.
The £0.97 is the retailer’s input tax.
The retailer subtracts their input tax from their output tax and pays the difference to the government. i.e. in the case above, the retailer pays the government £0.70.
International tax implications
As you know, it is not the business of the supplier to ensure that the retailer pays its required VAT. That is a matter between the retailer and the VAT people. In the case of Amazon, the article suggests that they are collecting at the 20% rate and paying at 3%. This will inevitably become an issue for Amazon as the ebook sector grows and UK VAT authorities possibly attempt readjustment to UK rates and clawback.
The fact that suppliers are fulfilling their obligations by paying at the full UK VAT rate means that they will have no issue with the VAT authorities.
This means that publishers can focus on optimising the ebook pricing model that, thanks to Amazon scale and easy-buying facility, has allowed ebooks to be charged at approximately the same price as hard-copies, rather than what would be justified by the almost zero incremental production costs of the electronic versions.
How publishers can negotiate with Amazon
No-one is in any doubt that Amazon are tough negotiators, with increasing power to use their consumer-gateway role as a vital route to shoppers. Any extreme abuse of this privilege will eventually mean more trouble with the competition authorities than is worthwhile, despite the additional revenue...
Increasing supplier leverage
Suppliers/publishers can 'even-the-balance' by opening up direct ebook access to the ultimate reader, remembering that fulfillment, unlike with CDs and DVDs, can all be handled in-house, providing they make purchasing as simple as Amazon’s 1-click process, and a no-quibbles returns policy....
This means suppliers can use ebooks-direct to add value and personalise the offering (author insights etc) in ways that are probably not yet on Amazon's agenda....
The resulting say 30/70 split in direct/Amazon sales would surely provide some leverage in negotiation, rather than divert energies to concerns about Amazon’s tax issues..
Meanwhile, food NAMs might usefully contemplate the online implications of food-VAT being introduced….
At NamNews we are not in the business of either praising or criticising retailers, merely attempting to clarify business relationships as a basis for fair-share relationships between suppliers and retailers.
How VAT works
Experienced NAMs will appreciate that in practice, VAT is an on-cost, and is paid by the shopper, i.e. in the case of an ebook selling at £10, VAT inclusive, the shopper is paying £1.67 in VAT, resulting in a net retail price of £8.33.
This VAT is the retailer’s output tax.
The retailer collects the VAT, and in turn pays the supplier/publisher the net price (allowing for retail margin etc) +VAT at 20% i.e. assuming a retailer’s margin of 30%, the retailer pays the supplier £5.83 + 20% VAT = £5.83 +£0.97 = £6.80.
The £0.97 is the retailer’s input tax.
The retailer subtracts their input tax from their output tax and pays the difference to the government. i.e. in the case above, the retailer pays the government £0.70.
International tax implications
As you know, it is not the business of the supplier to ensure that the retailer pays its required VAT. That is a matter between the retailer and the VAT people. In the case of Amazon, the article suggests that they are collecting at the 20% rate and paying at 3%. This will inevitably become an issue for Amazon as the ebook sector grows and UK VAT authorities possibly attempt readjustment to UK rates and clawback.
The fact that suppliers are fulfilling their obligations by paying at the full UK VAT rate means that they will have no issue with the VAT authorities.
This means that publishers can focus on optimising the ebook pricing model that, thanks to Amazon scale and easy-buying facility, has allowed ebooks to be charged at approximately the same price as hard-copies, rather than what would be justified by the almost zero incremental production costs of the electronic versions.
How publishers can negotiate with Amazon
No-one is in any doubt that Amazon are tough negotiators, with increasing power to use their consumer-gateway role as a vital route to shoppers. Any extreme abuse of this privilege will eventually mean more trouble with the competition authorities than is worthwhile, despite the additional revenue...
Increasing supplier leverage
Suppliers/publishers can 'even-the-balance' by opening up direct ebook access to the ultimate reader, remembering that fulfillment, unlike with CDs and DVDs, can all be handled in-house, providing they make purchasing as simple as Amazon’s 1-click process, and a no-quibbles returns policy....
This means suppliers can use ebooks-direct to add value and personalise the offering (author insights etc) in ways that are probably not yet on Amazon's agenda....
The resulting say 30/70 split in direct/Amazon sales would surely provide some leverage in negotiation, rather than divert energies to concerns about Amazon’s tax issues..
Meanwhile, food NAMs might usefully contemplate the online implications of food-VAT being introduced….
Monday, 22 October 2012
Sainsbury's changes to non-foods payment terms...the bottom-line impact
According to The Telegraph, Sainsbury’s have extended its standard payment terms to 75 days for all non-food suppliers. In some cases, this will mean suppliers waiting more than twice as long for payment. In the unlikely event that a supplier decides to withhold supplies, or even attempts to negotiate a compromise, it is vital that such decisions be fact-based.
This means calculating the cost of the change in terms along the following lines: (check through the method with your finance people, and substitute your own figures)
Assumptions:
- Supplier has a net margin of 7.5% and sells £5m per annum to the retailer, payment in 40 days, net
- Cost of borrowing is 8%
Cost to supplier of giving 40 days credit:
- Number of times per annum the supplier is paid, on 40 days = 365/40
= 9 times, approx.
- Average amount owed by retailer = £5m/9
= £556k i.e. a permanent loan to the retailer, interest-free
- Cost of borrowing to give 40 days free credit = £556k/100 x 8
= £44.5k
Cost to supplier of payment extension to 75 days: i.e. 35 days extra
- Number of times per annum the supplier is paid, on 75 days = 365/75
= 4.9 times, approx.
- Average amount owed by retailer = £5m/4.9
= £1,020k i.e. a permanent loan to retailer, interest-free
- Cost of borrowing to give 75 days free credit = £1,020k/100 x 8
= £81.6k
- Therefore cost of additional 35 days = £81.6k - £44.5k
= £37.1k
For the supplier, this is the equivalent of incremental sales of £494.7k (i.e. £37.1k / 7.5 x 100, a 9.9% increase in sales).
In other words, to maintain the status quo in a fair-share relationship, the supplier needs a concession from the retailer of £37.1k, or will suffer a drop in net margin on the retailer’s business from 7.5% to 6.8% (i.e. £5m/100 x 7.5 = £375k - £37.1k = £337.9k/£5m x 100 = 6.8%)
Why not run the numbers on your business, using your figures in the above calculation, to explore the impact on your bottom line, and re-assess your negotiation strategies…?
This means calculating the cost of the change in terms along the following lines: (check through the method with your finance people, and substitute your own figures)
Assumptions:
- Supplier has a net margin of 7.5% and sells £5m per annum to the retailer, payment in 40 days, net
- Cost of borrowing is 8%
Cost to supplier of giving 40 days credit:
- Number of times per annum the supplier is paid, on 40 days = 365/40
= 9 times, approx.
- Average amount owed by retailer = £5m/9
= £556k i.e. a permanent loan to the retailer, interest-free
- Cost of borrowing to give 40 days free credit = £556k/100 x 8
= £44.5k
Cost to supplier of payment extension to 75 days: i.e. 35 days extra
- Number of times per annum the supplier is paid, on 75 days = 365/75
= 4.9 times, approx.
- Average amount owed by retailer = £5m/4.9
= £1,020k i.e. a permanent loan to retailer, interest-free
- Cost of borrowing to give 75 days free credit = £1,020k/100 x 8
= £81.6k
- Therefore cost of additional 35 days = £81.6k - £44.5k
= £37.1k
For the supplier, this is the equivalent of incremental sales of £494.7k (i.e. £37.1k / 7.5 x 100, a 9.9% increase in sales).
In other words, to maintain the status quo in a fair-share relationship, the supplier needs a concession from the retailer of £37.1k, or will suffer a drop in net margin on the retailer’s business from 7.5% to 6.8% (i.e. £5m/100 x 7.5 = £375k - £37.1k = £337.9k/£5m x 100 = 6.8%)
Why not run the numbers on your business, using your figures in the above calculation, to explore the impact on your bottom line, and re-assess your negotiation strategies…?
Friday, 19 October 2012
Optimising your E-xperience via the IGD’s: Trading in a Digital World. (Part 1)
With almost 250 delegates, all four major online grocers, Tesco, Asda, Sainsbury’s and Ocado, together with some key suppliers, shared online updates, plans and joint-opportunities with a multifunctional audience that buzzed throughout the session, and not only via text-questions to the speakers...
However, apart from being a great idea-source (I managed to limit my note-taking to 8 pages, more in later postings), the presentations touched on some of the key issues affecting the development of online for both suppliers and retailers that are perhaps not aired sufficiently, but have material impact on personal development within the supplier-retailer environment…
‘The poor relative syndrome’
Essentially, in common with many new business initiatives, online can be a small but patently important development for a company. In a flat-line market online provides high-growth, innovation, novelty and excitement compared with the traditional business. However, it is often seen as a relatively high risk diversion, with many risking a ‘wait and see’ mode. In other words, if successful, online will have many parents, whilst if it fails, it will morph into an orphan. As such, online tends to be insufficiently funded and hampered by inadequate resourcing, especially in uncertain times...
The need to sell from within…
For these reasons, much depends on the drive and enthusiasm of those involved in online to constantly ‘sell’ the online idea and achieve results by persuasion, taking on full responsibility, with little designated authority…(rather like the role of a traditional NAM, a resident expert in achieving change against impossible odds...)
Selling is vital to ensure that online is integrated into mainstream business strategies, taking each of the key business functions and ensuring there is an online equivalent, with dedicated personnel, all sharing the opportunities and insights, enthusiastically, in the face of traditional priorities, envy and deep down, fear of change.
How to sell the online idea
Realistically, online will need to be sold, and sold convincingly by those who hope to make it yield its full potential, fast…
In other words, think of your company as a reluctant buyer, leaving you but two ways of attracting attention of the rest of the business – curiosity and fear. By making a ‘buyer’ of ideas curious to hear more or fearful of inaction, we destabilise their status quo, leaving them susceptible to change.
Fortunately the novelty of online provides enormous scope for making colleagues curious, whilst the continuing downward spiral of categories such as CDs, DVDs, Games, Magazines and Newspapers provides ample evidence of the dangers of inadequate corporate response to emerging technologies….
Keep in mind that online supporters in retail have similar issues
A key point of the conference for me was that colleagues in online retail share the same in-house issues. In other words, you will find your equivalent within your major customer needs support and can assist in return, in helping online realise its full potential for suppliers and retailers.
For me this was demonstrated by the fact that each retailer ended their presentation with specific steps on how to optimise the online supplier-retailer relationship, encouraging supplier-colleagues to find ways of innovating within a new online retail environment, signalling a willingness to identify and implement genuine fair-share synergies with like-minded suppliers.
Missing E-opportunities?
To avoid further delay, it is now time to play catch-up by attending events like the IGD digital session, and helping your traditional colleagues come to terms with how fast the E-food train is already travelling...
We may be some years away from a ‘beam me up, Scotty’ facility, but in the meantime, there is little harm in exploring appropriate ‘what-if’s’ for your business model…
Meanwhile, why not go online and have an E-xtatic weekend, from the NamNews team!
However, apart from being a great idea-source (I managed to limit my note-taking to 8 pages, more in later postings), the presentations touched on some of the key issues affecting the development of online for both suppliers and retailers that are perhaps not aired sufficiently, but have material impact on personal development within the supplier-retailer environment…
‘The poor relative syndrome’
Essentially, in common with many new business initiatives, online can be a small but patently important development for a company. In a flat-line market online provides high-growth, innovation, novelty and excitement compared with the traditional business. However, it is often seen as a relatively high risk diversion, with many risking a ‘wait and see’ mode. In other words, if successful, online will have many parents, whilst if it fails, it will morph into an orphan. As such, online tends to be insufficiently funded and hampered by inadequate resourcing, especially in uncertain times...
The need to sell from within…
For these reasons, much depends on the drive and enthusiasm of those involved in online to constantly ‘sell’ the online idea and achieve results by persuasion, taking on full responsibility, with little designated authority…(rather like the role of a traditional NAM, a resident expert in achieving change against impossible odds...)
Selling is vital to ensure that online is integrated into mainstream business strategies, taking each of the key business functions and ensuring there is an online equivalent, with dedicated personnel, all sharing the opportunities and insights, enthusiastically, in the face of traditional priorities, envy and deep down, fear of change.
How to sell the online idea
Realistically, online will need to be sold, and sold convincingly by those who hope to make it yield its full potential, fast…
In other words, think of your company as a reluctant buyer, leaving you but two ways of attracting attention of the rest of the business – curiosity and fear. By making a ‘buyer’ of ideas curious to hear more or fearful of inaction, we destabilise their status quo, leaving them susceptible to change.
Fortunately the novelty of online provides enormous scope for making colleagues curious, whilst the continuing downward spiral of categories such as CDs, DVDs, Games, Magazines and Newspapers provides ample evidence of the dangers of inadequate corporate response to emerging technologies….
Keep in mind that online supporters in retail have similar issues
A key point of the conference for me was that colleagues in online retail share the same in-house issues. In other words, you will find your equivalent within your major customer needs support and can assist in return, in helping online realise its full potential for suppliers and retailers.
For me this was demonstrated by the fact that each retailer ended their presentation with specific steps on how to optimise the online supplier-retailer relationship, encouraging supplier-colleagues to find ways of innovating within a new online retail environment, signalling a willingness to identify and implement genuine fair-share synergies with like-minded suppliers.
Missing E-opportunities?
To avoid further delay, it is now time to play catch-up by attending events like the IGD digital session, and helping your traditional colleagues come to terms with how fast the E-food train is already travelling...
We may be some years away from a ‘beam me up, Scotty’ facility, but in the meantime, there is little harm in exploring appropriate ‘what-if’s’ for your business model…
Meanwhile, why not go online and have an E-xtatic weekend, from the NamNews team!
Tuesday, 16 October 2012
Walmart bases training on British military academies!
According to People Management, Walmart has turned to British military leadership training expertise at Sandhurst, Lympstone and the Ministry of Defence’s Staff College to speed up the development of its managers in America.
However, before eager NAMs reschedule their weekend leisure, the retailer’s leadership training does not include assault courses or shooting exercises, instead it emulates other areas of military academy learning.
Promoting on performance, the academy also works to push people beyond their current capabilities, so attendees are not just trained for their current job, they are trained for the next rank up and the one beyond that and for two more levels beyond that.
In other words, rather like our NamNews training, where even new NAMs are treated like CEOs, as many of today’s ROCE-based leaders will confirm, by personal example…
However, before eager NAMs reschedule their weekend leisure, the retailer’s leadership training does not include assault courses or shooting exercises, instead it emulates other areas of military academy learning.
Promoting on performance, the academy also works to push people beyond their current capabilities, so attendees are not just trained for their current job, they are trained for the next rank up and the one beyond that and for two more levels beyond that.
In other words, rather like our NamNews training, where even new NAMs are treated like CEOs, as many of today’s ROCE-based leaders will confirm, by personal example…
Monday, 15 October 2012
Coupon promotions in uncertain times, how Risk Intelligence can help
News that coupon redemption is increasing and moving up the social and economic scales may call to mind that coupons have been known to have been ‘too successful’, on this the 20th anniversary of the Hoover Free Flights fiasco. Those with long memories will recall when Hoover's free flights promotion was launched to a wide-eyed British public in August 1992, it seemed too good to be true. Over the next 21 months, many Hoover customers discovered it was. It ended up costing the company £48m…
Anticipating coupon redemption-rates is but one of the uncertainties a NAM needs to be able to factor into the day-job and sleep nights.
There is a special kind of intelligence for dealing with risk and uncertainty. It doesn’t correlate with IQ and most psychologists fail to spot it because it is found in a disparate group of people such as weather forecasters, professional gamblers and hedge-fund managers…
A new book, Risk Intelligence: How to live with uncertainty by Dylan Evans , can be a NAM’s guide to the twilight zone of probabilities and speculation, a DIY tool to making decisions in all aspects of the role.
Four Steps to Calculating Probability
Essentially, risk intelligence is about having the right amount of certainty, and Dylan outlines four mental steps in estimating a probability and when assessing the truth or falsehood of a statement:
The book goes on to help readers improve their risk intelligence, think by numbers, make use of probabilities (the 100 percent rule), and even evaluate betting odds... In fact, with the right degree of application, the book will point you at everything a NAM needs to help cope with unprecedented times, or even anticipate the outcome of promotions…
In short, it debugs the process of using numbers and probabilities to clarify your thinking, helping you to risk excelling in the day-job, while others are unaware of the risk they are actually taking by awaiting a return to the ‘risk-free’ days of twenty years ago..
Anticipating coupon redemption-rates is but one of the uncertainties a NAM needs to be able to factor into the day-job and sleep nights.
There is a special kind of intelligence for dealing with risk and uncertainty. It doesn’t correlate with IQ and most psychologists fail to spot it because it is found in a disparate group of people such as weather forecasters, professional gamblers and hedge-fund managers…
A new book, Risk Intelligence: How to live with uncertainty by Dylan Evans , can be a NAM’s guide to the twilight zone of probabilities and speculation, a DIY tool to making decisions in all aspects of the role.
Four Steps to Calculating Probability
Essentially, risk intelligence is about having the right amount of certainty, and Dylan outlines four mental steps in estimating a probability and when assessing the truth or falsehood of a statement:
- First take stock of what you know about the issue (identify the bits of information you already possess that may bear on the issue)
- Next, for each bit of information, decide (a) whether it makes the statement more or less likely, and (b) by how much it affects the probability that you are correct
- The outcome of the process should be a hunch or feeling, the strength of which varies according to your degree of belief
- Finally, translate this feeling into a number that expresses that degree of certainty (use % i.e. 65% certain that this is the way forward)
The book goes on to help readers improve their risk intelligence, think by numbers, make use of probabilities (the 100 percent rule), and even evaluate betting odds... In fact, with the right degree of application, the book will point you at everything a NAM needs to help cope with unprecedented times, or even anticipate the outcome of promotions…
In short, it debugs the process of using numbers and probabilities to clarify your thinking, helping you to risk excelling in the day-job, while others are unaware of the risk they are actually taking by awaiting a return to the ‘risk-free’ days of twenty years ago..
Friday, 12 October 2012
Online retailing: Killing the killer-charge at checkout…
News that the OFT are ordering the removal of unexpected charges at online checkout, should not be news, and above all should not be necessary...
Alienating the first-time shopper
The issue does not affect the regular online user, who arrives at checkout knowing all the downside, may grumble at the extras, but completes the purchase.
The real problem is the fact that the online retailer, having gone to the trouble, expense and use of price to attract the suspicious, dithering first-user, and drawn them through the hoops of the online purchasing process, suddenly at checkout presents a surprise extra charge that causes them to hit the cancel-button and head for the shops...
Repeat purchase as the only KPI
Any brand owner can confirm that the upfront expense of attracting a new user can only be recovered if that consumer requires less persuasion to come back a second time, and may break-even on a spontaneous third visit to the brand. ‘Telling their friends’ may happen if the brand experience exceeds expectations…
Amazon, the real competitor
Apart from keeping in mind that if the OFT are getting involved, it is already too late, online retailers hoping to survive should re-check their biggest competitor, and hopefully conclude that Amazon’s entire offering is based on comfort, trust and re-assurance for every user, with 1-click purchase a reward for coming back a second time…
Amazon are not growing at 26% CAGR by accident, or by attempting to charge shoppers more than they bargained for…
Alienating the first-time shopper
The issue does not affect the regular online user, who arrives at checkout knowing all the downside, may grumble at the extras, but completes the purchase.
The real problem is the fact that the online retailer, having gone to the trouble, expense and use of price to attract the suspicious, dithering first-user, and drawn them through the hoops of the online purchasing process, suddenly at checkout presents a surprise extra charge that causes them to hit the cancel-button and head for the shops...
Repeat purchase as the only KPI
Any brand owner can confirm that the upfront expense of attracting a new user can only be recovered if that consumer requires less persuasion to come back a second time, and may break-even on a spontaneous third visit to the brand. ‘Telling their friends’ may happen if the brand experience exceeds expectations…
Amazon, the real competitor
Apart from keeping in mind that if the OFT are getting involved, it is already too late, online retailers hoping to survive should re-check their biggest competitor, and hopefully conclude that Amazon’s entire offering is based on comfort, trust and re-assurance for every user, with 1-click purchase a reward for coming back a second time…
Amazon are not growing at 26% CAGR by accident, or by attempting to charge shoppers more than they bargained for…
Thursday, 11 October 2012
Tesco Want Closer Links With Suppliers – Ready?
The Tesco presentation has been well covered elsewhere, and Philip Clarke’s full speech is available on the Tesco website.
However, in terms of ‘getting personal’, nothing beats the real thing. Best to have been a member of the audience and to have experienced the passion in person. Straight from the main man, a promise to work more closely with suppliers. These guys are really serious about more collaboration with the right trade partners in order to create a more personalised consumer offer, reflecting the current multi-channel environment and anticipating future demand.
In other words, Tesco feel the need to innovate and believe they can best do that in collaboration with suppliers.
Keeping the best for Tesco, on condition...
However, I would suggest that they feel the need to such an extent that they will go to third parties should suppliers be found wanting… This means saving your best ideas for Tesco, thereby potentially accessing 31+% of the UK market.
In return, it is vital to demand a fair-share relationship, based on a robust financial partnership, all wrapped up in a contractual agreement, of equal value to each side, in terms of both letter and spirit of the deal…
Getting there means being able to calculate the real cost to you, and being able to demonstrate the full financial value of your offering to Tesco, convincingly…
This time it is different
Tesco are serious, and they need serious trade partners. In going for broke with Tesco, you are going to make your biggest UK customer bigger.
It is therefore vital that you also secure a fair share of the action…
Incidentally, participating in the live personal experience is truly incremental.
It probably explains why the IGD Convention is a sell-out every year – a key issue being the location of a venue large enough to accommodate all applicants…!
However, in terms of ‘getting personal’, nothing beats the real thing. Best to have been a member of the audience and to have experienced the passion in person. Straight from the main man, a promise to work more closely with suppliers. These guys are really serious about more collaboration with the right trade partners in order to create a more personalised consumer offer, reflecting the current multi-channel environment and anticipating future demand.
In other words, Tesco feel the need to innovate and believe they can best do that in collaboration with suppliers.
Keeping the best for Tesco, on condition...
However, I would suggest that they feel the need to such an extent that they will go to third parties should suppliers be found wanting… This means saving your best ideas for Tesco, thereby potentially accessing 31+% of the UK market.
In return, it is vital to demand a fair-share relationship, based on a robust financial partnership, all wrapped up in a contractual agreement, of equal value to each side, in terms of both letter and spirit of the deal…
Getting there means being able to calculate the real cost to you, and being able to demonstrate the full financial value of your offering to Tesco, convincingly…
This time it is different
Tesco are serious, and they need serious trade partners. In going for broke with Tesco, you are going to make your biggest UK customer bigger.
It is therefore vital that you also secure a fair share of the action…
Incidentally, participating in the live personal experience is truly incremental.
It probably explains why the IGD Convention is a sell-out every year – a key issue being the location of a venue large enough to accommodate all applicants…!
Wednesday, 10 October 2012
When Major Customers Become Major ‘Share-holders’...
Yesterday’s news that a major pizza manufacturer fell into administration following the loss of a major contract, raises the issue of risk in dealing with large customers.
With the possible exception of those supplying M&S, major customers’ share of a supplier’s business tend to replicate retail market shares.
Fair shares in the marketplace
In other words, in the food sector, the major mults’ shares of a typical food suppliers business might be
- Tesco 30%
- Asda 17%
- Sainsbury’s 16%
- Morrisons 12%
With Health & Beauty, the shares would obviously be skewed in favour of Boots, sometimes taking a 30+% share.
To access the full potential of a product, this suggests that a supplier should aim at achieving these relative shares in the marketplace.
Dealing with a customer you like...
However, given the differences in relative compatibility*, a supplier can find that they ‘get along’ better with some customers, making it ‘easier’ to collaborate, resulting in that customer’s share becoming greater than its market share. This can sometimes lead to a point where it can represent more than 40% of the business, a position that is not desirable for supplier or retailer, given the consequences of termination for each party, including possible negative (and often undeserved) media coverage for the retailer..
Fair share and risk
Given the risk profile of the supplier (risk-seeking, risk-neutral or risk-averse) it is important to attempt to achieve and maintain ‘fair shares’ as per above.
In the event that a customer begins to ‘over perform’ it is obviously important to follow it all the way, at the same time diagnosing probable causes and attempting to replicate the process with other major customers. In which case the Ansoff Matrix on developing business, could provide a few pointers…
In the current climate, we may devote so much time avoiding the possibility of a customer going bust, we can run the risk of a customer being too successful, with equally catastrophic consequences…
* See qualities of a good trade partner
With the possible exception of those supplying M&S, major customers’ share of a supplier’s business tend to replicate retail market shares.
Fair shares in the marketplace
In other words, in the food sector, the major mults’ shares of a typical food suppliers business might be
- Tesco 30%
- Asda 17%
- Sainsbury’s 16%
- Morrisons 12%
With Health & Beauty, the shares would obviously be skewed in favour of Boots, sometimes taking a 30+% share.
To access the full potential of a product, this suggests that a supplier should aim at achieving these relative shares in the marketplace.
Dealing with a customer you like...
However, given the differences in relative compatibility*, a supplier can find that they ‘get along’ better with some customers, making it ‘easier’ to collaborate, resulting in that customer’s share becoming greater than its market share. This can sometimes lead to a point where it can represent more than 40% of the business, a position that is not desirable for supplier or retailer, given the consequences of termination for each party, including possible negative (and often undeserved) media coverage for the retailer..
Fair share and risk
Given the risk profile of the supplier (risk-seeking, risk-neutral or risk-averse) it is important to attempt to achieve and maintain ‘fair shares’ as per above.
In the event that a customer begins to ‘over perform’ it is obviously important to follow it all the way, at the same time diagnosing probable causes and attempting to replicate the process with other major customers. In which case the Ansoff Matrix on developing business, could provide a few pointers…
In the current climate, we may devote so much time avoiding the possibility of a customer going bust, we can run the risk of a customer being too successful, with equally catastrophic consequences…
* See qualities of a good trade partner
Monday, 8 October 2012
Tesco Bank - a double-edged sword for retailers?
News that Tesco is only months away from breaking into mainstream banking with current accounts signals the arrival of real competition in the banking sector.
This is a real opportunity to heighten savvy consumers' awareness of value-for-money applied to banking services, helping consumers to understand that voting with their feet can be an option in banking as well as all other aspects of their consumption.
Tesco tactics
The introduction of 'grocery tactics' like multi-buys, bogofs, money-off offers and, heaven forbid, loyalty points on debit cards, will all help to break down what remains of traditional banking 'mystique'.
Moreover, the inclusion of user-friendly like-with-like comparisons will encourage consumers to develop and use a basic level of numerical skills in choosing financial products, without having to second-guess the provider.
Traditional banks that do not follow suit will lose business to those that are not afraid to clarify their offerings.
The opportunity
There are 15 million Tesco Clubcard holders of whom 6.5 million are loyal and regular users. Tesco needs to converts only a fraction of them to make a sizeable dent in the other banks’ business.
All Tesco have to do is run an efficient, value-for-money service that delivers no-quibble financial products that just exceed expectation, at fractionally less than what it costs elsewhere...
In the process, Tesco might usefully benchmark itself against the Coop Bank, a competitor that is perceived to have emerged from the global financial crisis with its reputation untarnished.
But...
This is a real opportunity to heighten savvy consumers' awareness of value-for-money applied to banking services, helping consumers to understand that voting with their feet can be an option in banking as well as all other aspects of their consumption.
Tesco tactics
The introduction of 'grocery tactics' like multi-buys, bogofs, money-off offers and, heaven forbid, loyalty points on debit cards, will all help to break down what remains of traditional banking 'mystique'.
Moreover, the inclusion of user-friendly like-with-like comparisons will encourage consumers to develop and use a basic level of numerical skills in choosing financial products, without having to second-guess the provider.
Traditional banks that do not follow suit will lose business to those that are not afraid to clarify their offerings.
The opportunity
There are 15 million Tesco Clubcard holders of whom 6.5 million are loyal and regular users. Tesco needs to converts only a fraction of them to make a sizeable dent in the other banks’ business.
All Tesco have to do is run an efficient, value-for-money service that delivers no-quibble financial products that just exceed expectation, at fractionally less than what it costs elsewhere...
In the process, Tesco might usefully benchmark itself against the Coop Bank, a competitor that is perceived to have emerged from the global financial crisis with its reputation untarnished.
But...
The sting in the tail is that having sharpened their ability to assess value-for-money and gained more confidence with the numbers, the savvy consumers will then apply this incremental savvy to their regular shopping, and thereby raise the retail game in the high street.
A really incremental gain for Tesco, if they play their cards right...
A really incremental gain for Tesco, if they play their cards right...
Friday, 5 October 2012
Premier Foods - the split-up options
Following Premier Foods appointment of a new COO with a brief to help see the grocery and bread businesses managed as two distinct divisions in recognition of the different “opportunities and challenges” facing each business, it might be useful for NAMs to explore the options and possible actions available to the company. This could add insight on how the company will manage the trade and also help you anticipate the impact on competing brands.
Essentially, the company needs to increase its perceived value in the market and thus raise its share price. This will not only give it more autonomy but will also make it easier to sell all or part of the operation at the appropriate time..
The emphasis will therefore be on improving its Return On Capital Employed (ROCE), a driver of the share price.
Step 1
The first step has to be a split of bread and groceries, given that they are totally different business models.
Grocery: Here they need to continue emphasis on a limited number of power-brands and sell off anything non-core
Step 2
The company will then be in a position to apply the ROCE principles to what remains on the two businesses.
ROCE = Return on Sales x Sales/Capital Employed i.e. improve the margin and speed up the rotation of capital (factories + stocks, debtors and cash)
Companies are either in a narrow margin, fast rotation business, or they are in a higher margin, slower rotation business. This is why splitting the bread and grocery businesses is a long overdue no-brainer….
Step 3
First they need to focus on improving Net Margin by
Then comes increasing the Rotation of their Capital by
If all of this seems a bit theoretical, why not watch this space over the next six months? You will then be looking at historical moves, whereas some of the above points may help you anticipate and take appropriate action NOW, when it really matters…
Essentially, the company needs to increase its perceived value in the market and thus raise its share price. This will not only give it more autonomy but will also make it easier to sell all or part of the operation at the appropriate time..
The emphasis will therefore be on improving its Return On Capital Employed (ROCE), a driver of the share price.
Step 1
The first step has to be a split of bread and groceries, given that they are totally different business models.
- Bread is a fast moving, high rotation (daily), high wastage (10+%), short shelf life (days/weeks) and narrow margin business, especially supply-side, whereas
- Grocery is slower moving, low rotation (2 monthly), lower wastage (2+%), long shelf life (1-2 years), more generous margins supplier and retailer
Grocery: Here they need to continue emphasis on a limited number of power-brands and sell off anything non-core
Step 2
The company will then be in a position to apply the ROCE principles to what remains on the two businesses.
ROCE = Return on Sales x Sales/Capital Employed i.e. improve the margin and speed up the rotation of capital (factories + stocks, debtors and cash)
Companies are either in a narrow margin, fast rotation business, or they are in a higher margin, slower rotation business. This is why splitting the bread and grocery businesses is a long overdue no-brainer….
Step 3
First they need to focus on improving Net Margin by
- Increasing their selling prices and sales (more advertising on fewer power-brands, up-skilling the negotiators)
- Reducing the levels of discount and promotional expenditure ( did I suggest it was going to be easy?)
- Reducing the levels of sales and distribution costs (hence hiving off the bread business, and need for special vigilance on trade funding and compliance)
- Driving volume, especially bread but also grocery power-brands ( move to more responsive social media )
- Changing the product mix to focus more on higher margin items, (consumers permitting…)
- Minimise ‘specials’ in terms of tailor-made deals/trade arrangements of any kind, (they just cost more…)
Then comes increasing the Rotation of their Capital by
- Driving the volume of sales as high as possible, using existing or lower levels of Fixed Assets (factories, plant), + Current Assets (stocks, debtors and cash)
- Getting paid faster via settlement discounts, ‘delisting’ any financially unstable customers
- Improving sales forecasts i.e. if they forecast 100% and achieve 95%, then 5% of sales become ‘passengers’ with their costs shifting onto the 95% that are sold, thereby hitting the bottom line
- Generally, improving their ability to convert business cost into revenue…
If all of this seems a bit theoretical, why not watch this space over the next six months? You will then be looking at historical moves, whereas some of the above points may help you anticipate and take appropriate action NOW, when it really matters…
Thursday, 4 October 2012
What next for the Tesco NAM?
Given yesterday’s long-heralded results, it might have occurred to Tesco NAMs that their best option might be a discrete pitch for the JS account management role. Better, however, to try to place Tesco’s results in perspective before making irreversible moves.
Essentially, for the past ten years Tesco have been going-for-broke in trying to achieve global presence, at an obvious cost to their UK business. The City have never really looked beyond the UK scene in assessing their potential, seeing overseas initiatives as high risk and costly.
Basis of global retailing
In the process, Tesco lost sight of one of the basic principles of successful global retailing – maintain profitable dominance of the home market. Otherwise, domestic issues arising from a major share and the resulting pressure on special interest groups become over-distracting in terms of pursuing global presence.
Putting Tesco in today's context
We have to remember the following:
Essentially, for the past ten years Tesco have been going-for-broke in trying to achieve global presence, at an obvious cost to their UK business. The City have never really looked beyond the UK scene in assessing their potential, seeing overseas initiatives as high risk and costly.
Basis of global retailing
In the process, Tesco lost sight of one of the basic principles of successful global retailing – maintain profitable dominance of the home market. Otherwise, domestic issues arising from a major share and the resulting pressure on special interest groups become over-distracting in terms of pursuing global presence.
Putting Tesco in today's context
We have to remember the following:
- The world is currently undergoing one of the most fundamental changes and unprecedented upheavals ever experienced, affecting the fundamentals of capitalism, let alone buying and selling…everywhere
- The embryo savvy consumer has morphed into a mature adult determined to settle for nothing less than demonstrable value for money, in most places
- The younger generation have bypassed ‘naïve’ mode and are coming ready-equipped with the views and technology of mature-savvy, with no baggage (think how few are watching TV or partaking of ‘mainstream’ anything…)
- January’s profit warning has forced Tesco to re-balance its business model, re-focusing on UK performance
- So, it has cost £1bn, and hit the bottom line, big deal…(Have you been into your local newly-focused Tesco lately, where even a little has helped…)
- They still have 30% share of the market, almost double the net margin of JS and the scale to make a difference to savvy shoppers...the ones who count...
- Rest-of-world business has always represented issues for Tesco, and in the current global climate, they are coping better than most (seen Carrefour's results lately?)
- The US is proving to be a slow burn, and draining global profits at £78m per annum, a small price to pay to establish their presence in one of the world’s most challenging markets. Tesco still represents ‘small & fresh’ in a market that tends to be ‘big & stale’, and needs to scale back, cut costs and achieve break-even, knowing that if they pull out now, no future CEO will ever stick her neck out and try again….
- Tesco have managed (by luck or judgement, who cares?) to avoid the big Euro-countries that are participating in a slow train-crash, with unimaginable consequences...(forget MSM, read the blogs)
- Meanwhile their CEE, and Asian businesses are ready to capitalise on any whisper of an upturn…and the UK abounds with opportunities for NAMs to help Tesco innovate, like never before...
Wednesday, 3 October 2012
Return on Investment in Business Trust, the real payoff?
At a time when our trust in the banking and political systems has all but been destroyed, and major retailers are struggling to meet City expectations, we are at a place where the letter rather than the spirit of the law defines business relationships, with the ‘small print’ confirming for many that we are all now on our own.
In an age of uncertainty, we therefore have to be mindful of both the letter and spirit of our agreements in formalising any initiatives. In other words, we need to establish basic business trust in an atmosphere of unprecedented suspicion and even fear…
The need for robust contracts
It goes without saying that in order to observe the spirit of a supplier-retailer ‘fair-share’ agreement it is critical to have a robust written contract as a basis for monitoring any inadvertent straying from what each party thought they were buying into when the deal was struck…the ‘gentlemen’s agreement’ has perished not for want of gentlemen, but because business stakes and costs have now reached unprecedented heights…
Why trust saves money
Essentially, if we do not invest, build and maintain a minimum level of ‘trading trust’ in the early stages of a supplier-retailer relationship then the extra work involved in second-guessing our trading partner’s intentions comes straight off the bottom line. In other words, like networking in these unprecedented times, the current business climate does not allow for the gradual, instinctive building up of the necessary levels of trust. Instead, taking trust as a desirable and essential outcome, we need to methodically accelerate the process, upfront.
Just the beginning…
Thus, from a position where trust started as a means of avoiding wastage of time and money in the early stages of the relationship, a way establishing our trust-credentials, mutual trust becomes an increasingly important, indeed vital ingredient over the lifetime productivity of the supplier-retailer partnership...
In fact, in my first brand management job, I appointed a Belfast firm as our agent in Northern Ireland for our only product, K2R Stain-remover. Following intensive negotiation, we agreed on a comprehensive Agency Contract and commenced trading. One night a few years later, the agent rang me mid-evening to let me know that a liquidator would be appointed at 0900 the following morning, but meanwhile, if I could organise some transport….?
Even I knew that the liquidator’s first act would be to chain the front gates, at which point everything inside would belong to the government.
I made a few phone calls and managed to have our £4,500 stock picked up before midnight.
There was nothing in our Contract covering early warnings, but implicit was an understanding that we would trust one another to do the right thing, when necessary…I have remained forever grateful for the insight...
In other words, by investing in the spirit of the relationship, the resulting overall Return on Investment in trust can provide a real payoff for all stakeholders.
Trust me, folks, it works…
More here
How to build business trust with major retailers here
In an age of uncertainty, we therefore have to be mindful of both the letter and spirit of our agreements in formalising any initiatives. In other words, we need to establish basic business trust in an atmosphere of unprecedented suspicion and even fear…
The need for robust contracts
It goes without saying that in order to observe the spirit of a supplier-retailer ‘fair-share’ agreement it is critical to have a robust written contract as a basis for monitoring any inadvertent straying from what each party thought they were buying into when the deal was struck…the ‘gentlemen’s agreement’ has perished not for want of gentlemen, but because business stakes and costs have now reached unprecedented heights…
Why trust saves money
Essentially, if we do not invest, build and maintain a minimum level of ‘trading trust’ in the early stages of a supplier-retailer relationship then the extra work involved in second-guessing our trading partner’s intentions comes straight off the bottom line. In other words, like networking in these unprecedented times, the current business climate does not allow for the gradual, instinctive building up of the necessary levels of trust. Instead, taking trust as a desirable and essential outcome, we need to methodically accelerate the process, upfront.
Just the beginning…
Thus, from a position where trust started as a means of avoiding wastage of time and money in the early stages of the relationship, a way establishing our trust-credentials, mutual trust becomes an increasingly important, indeed vital ingredient over the lifetime productivity of the supplier-retailer partnership...
In fact, in my first brand management job, I appointed a Belfast firm as our agent in Northern Ireland for our only product, K2R Stain-remover. Following intensive negotiation, we agreed on a comprehensive Agency Contract and commenced trading. One night a few years later, the agent rang me mid-evening to let me know that a liquidator would be appointed at 0900 the following morning, but meanwhile, if I could organise some transport….?
Even I knew that the liquidator’s first act would be to chain the front gates, at which point everything inside would belong to the government.
I made a few phone calls and managed to have our £4,500 stock picked up before midnight.
There was nothing in our Contract covering early warnings, but implicit was an understanding that we would trust one another to do the right thing, when necessary…I have remained forever grateful for the insight...
In other words, by investing in the spirit of the relationship, the resulting overall Return on Investment in trust can provide a real payoff for all stakeholders.
Trust me, folks, it works…
More here
How to build business trust with major retailers here
Tuesday, 2 October 2012
Playing with your Clubcard data at Tesco?
Tesco plans to develop 'products and games' to give Clubcard-holders 'simple, useful, fun' access to their own data, to help them 'plan and achieve their goals'. The retailer's aim is to build personalised access to customers' own 'data capability plans'.
The issue for Tesco has to be the impact of this new access and awareness on consumers, negative and positive. Latest legislation gives consumers access to their personal data, but this is inertia territory, with relatively few bothering to check how much a retailer knows about them.
This is a long way from deliberately turning a spotlight on the extent of that data, especially if it hits some of the main stream media on a 'slow news' day....
Making positive use of the insight via permission marketing seems more productive.
Pragmatic use of personal data
Many years ago, when data-storage costs were prohibitive, direct data-based marketing was focused on specialist B2B targets like doctors. At the time we happened on ‘lifetime value’ by accident, in that medical students were picked up on Day One at medical school, and left the database via the graveyard. Regular visits by medical ‘reps’ coupled with script-tracking gradually enriched the database over time.
Using the insight
This data-source was used as a basis for targeted mail-shots, personalising the message as much as we dared at the time. In order to optimise the persuasive effect, we focused on medical needs both functional and emotional, selected appropriate features of our brands and connected them via a benefit statement. Rep feedback and script-output then validated the process….
This meant making very selective use of the data on record with the sole objective of meeting doctor-needs.
We seldom felt the need, or dared to let the doctor know that we knew he had red hair…
Tesco might benefit from imposing the same self-restraint and emphasis on their use of Clubcard data…
Monday, 1 October 2012
Aldi poised to double UK stores, how they impact suppliers and shoppers
Aldi is planning to double the number of its UK stores to 1,000 over the next 10 years as cash-strapped middle class shoppers drove a fivefold increase in underlying profit to £102.9m last year. Having entered the UK in 1990, Aldi gradually responded to successive economic downturns by gradually expanding its UK base.
“We’ve seen a shift in the socio-demographics,” said joint MD Roman Heini. “Obviously we have kept the existing customers ... so we still have the C1, C2 and D customers but we certainly now also see more A and especially B customers in our existing stores and also in the stores we have opened this year so far.”
He believes Aldi is winning customers from “basically all other retailers”. Confirmed Aldi-watchers will have already seen this pattern develop in Germany and other countries. Examples of prices and deals here.
The win/lose pattern for suppliers was set 25 years ago...
Handling Aldi in 1985…
Twenty five years ago, given the inevitability of UK entry, my advice to UK clients at the time was to add Aldi to the customer portfolio of an experienced NAM, two years in advance of entry, with a brief to keep the board informed of how the company and competition were dealing with Aldi in Germany and other countries.
As a result, they were then ready to deal with the first call from Aldi UK, with prices, terms and a recently discontinued version of their brand packaging for launch in Aldi branches. This did not endear them to their marketing colleagues, but it did allow them to make defensible moves with the new retail model.
Mis-handling Aldi, bigtime…
Meanwhile, another client ignored the advice and promptly slammed down the phone on the first Aldi call…It was almost ten minutes before they received a call from the head of their German affiliate, demanding to know why they had been so rude to the company’s biggest customer in Germany!
Moreover, to show that there WERE hard feelings, Aldi UK put notices in their shop windows saying that as xxx company had refused to supply them with products that could be offered at lower shelf prices, they were obliged to offer better than average discounts on the competing brand…..a signal to other suppliers not to underestimate the influence (and potential) of new retail models…!
“We’ve seen a shift in the socio-demographics,” said joint MD Roman Heini. “Obviously we have kept the existing customers ... so we still have the C1, C2 and D customers but we certainly now also see more A and especially B customers in our existing stores and also in the stores we have opened this year so far.”
He believes Aldi is winning customers from “basically all other retailers”. Confirmed Aldi-watchers will have already seen this pattern develop in Germany and other countries. Examples of prices and deals here.
The win/lose pattern for suppliers was set 25 years ago...
Handling Aldi in 1985…
Twenty five years ago, given the inevitability of UK entry, my advice to UK clients at the time was to add Aldi to the customer portfolio of an experienced NAM, two years in advance of entry, with a brief to keep the board informed of how the company and competition were dealing with Aldi in Germany and other countries.
As a result, they were then ready to deal with the first call from Aldi UK, with prices, terms and a recently discontinued version of their brand packaging for launch in Aldi branches. This did not endear them to their marketing colleagues, but it did allow them to make defensible moves with the new retail model.
Mis-handling Aldi, bigtime…
Meanwhile, another client ignored the advice and promptly slammed down the phone on the first Aldi call…It was almost ten minutes before they received a call from the head of their German affiliate, demanding to know why they had been so rude to the company’s biggest customer in Germany!
Moreover, to show that there WERE hard feelings, Aldi UK put notices in their shop windows saying that as xxx company had refused to supply them with products that could be offered at lower shelf prices, they were obliged to offer better than average discounts on the competing brand…..a signal to other suppliers not to underestimate the influence (and potential) of new retail models…!
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