With a sevenfold increase in the groceries it offers online in barely two years, ‘having completely met expectations and growing great’, in a flatline market, Amazon has to be growing at the expense of traditional grocers. Whilst some big-lunged suppliers and retailers may decide to await the outcome of possible government moves ref alleged tax issues, proactive suppliers will take a positive approach and follow the market…..
Managing Amazon-the-grocer
This means accepting the fact that Amazon are going to go all the way with food, offering the simplicity of 1-click ordering, pick-up/drop-off convenience on the back of a food range that knows no limits, and no-quibble returns, all tailored in terms of consumer tell-your-friend delight.
It also means staffing Amazon with NAMpower matched to potential, rather than history, of a quality that can scope out and deliver an omni-channel strategy that integrates with all other ways of buying your products, seamlessly…using the Amazon strategy as a template for all other retail.
How to recognise this Amazing NAM?
Big-thinking question: ask candidates how Amazon might finesse its home delivery within the M25…
Disqualifying hint: In terms of ways and means, given Amazon’s growth record and prospects, how long do you think it would take them to raise the £386m it would take to buy Ocado at today’s share price?
Showing posts with label Amazon. Show all posts
Showing posts with label Amazon. Show all posts
Monday 26 November 2012
Wednesday 7 November 2012
Amazon's nine steps to success - Bezos' formula
A great article in Londonlovesbusiness.com spells out Jeff Bezos’ secrets in driving a $48bn company growing at 26% CAGR.
Amazon's formula
Ranging from taking a long term view of 7 rather than 3 years, reducing customer service by getting it right first time, use of lower margins to build loyalty, managing detail, starting with consumer need and working backwards, innovating rather than copying, working hard to charge less, and rocking-the-boat to make a difference, the Amazon checklist provides a practical basis for optimising your relationship with the world’s largest online operator.
More importantly, by applying the same principles in-house, realistic NAMs will not only achieve a better match with Amazon, but could also evolve a simple, but effective customer-focused strategy going forward…
Amazon's formula
Ranging from taking a long term view of 7 rather than 3 years, reducing customer service by getting it right first time, use of lower margins to build loyalty, managing detail, starting with consumer need and working backwards, innovating rather than copying, working hard to charge less, and rocking-the-boat to make a difference, the Amazon checklist provides a practical basis for optimising your relationship with the world’s largest online operator.
More importantly, by applying the same principles in-house, realistic NAMs will not only achieve a better match with Amazon, but could also evolve a simple, but effective customer-focused strategy going forward…
More on Amazing Amazon
Thursday 25 October 2012
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)
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….
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…
Friday 28 September 2012
Facebook gets physical...via new gift service to sell real goods
According to the FT, Facebook has launched a gift-service that allows users to send novelty items to friends, via revenue-sharing agreements with its partner-retailers.
The Amazonian elephant in the room…
However, despite the advantage of background personal insight, Facebook missed a big retrospective-trick by failing to anticipate the need for physical location details and not requesting personal addresses when members’ originally registered with the social network. Furthermore, given Amazon’s 1-click innovator’s advantage, Facebook is condemned to forever playing catch-up to the online retailer’s speed, efficiency and database…
Fulfilment issues for trade-partners
Given that volume-gifting will be mainly low-priced novelty items, partner-retailers face the triple whammy of securing addresses, 'instant' shipping of low-value items and awaiting their share of revenue, in a world where fast single-step purchase is king…
For suppliers, the issue becomes one of being able to anticipate the volume and speed required should a novelty gift-item catch on big-time with the Facebook community (for openers, think hundreds of millions…fast!).
Overall assessment
Better for Facebook to revert to virtual, and find digital gifting-options that meet the same needs…(or even partnering Amazon…). This could represent a real opportunity for service-suppliers to evolve ways of digitising their offering via Facebook (i.e. ‘Have a Guinness on me for your birthday!’ NB. an example only…nothing beats the real cash-based shared-experience !)
(but meanwhile, no harm in Facebook seeking ways of harvesting physical addresses from their vast connected-community, just-in-case…)
The Amazonian elephant in the room…
However, despite the advantage of background personal insight, Facebook missed a big retrospective-trick by failing to anticipate the need for physical location details and not requesting personal addresses when members’ originally registered with the social network. Furthermore, given Amazon’s 1-click innovator’s advantage, Facebook is condemned to forever playing catch-up to the online retailer’s speed, efficiency and database…
Fulfilment issues for trade-partners
Given that volume-gifting will be mainly low-priced novelty items, partner-retailers face the triple whammy of securing addresses, 'instant' shipping of low-value items and awaiting their share of revenue, in a world where fast single-step purchase is king…
For suppliers, the issue becomes one of being able to anticipate the volume and speed required should a novelty gift-item catch on big-time with the Facebook community (for openers, think hundreds of millions…fast!).
Overall assessment
Better for Facebook to revert to virtual, and find digital gifting-options that meet the same needs…(or even partnering Amazon…). This could represent a real opportunity for service-suppliers to evolve ways of digitising their offering via Facebook (i.e. ‘Have a Guinness on me for your birthday!’ NB. an example only…nothing beats the real cash-based shared-experience !)
(but meanwhile, no harm in Facebook seeking ways of harvesting physical addresses from their vast connected-community, just-in-case…)
Monday 24 September 2012
Home Delivery charges - a one-way subsidy?
Given that picking, bagging and making a home delivery costs supermarkets up to £20, the £5 charge actually represents a subsidy for the service.
This leaves the retailer with four options:
Some retailers may see significant scaling up of home deliveries as a possible solution, with the milkman’s street-agreements as a way forward (in the final days of home delivery of milk, dairies agreed solus access to individual streets in order to make individual milkmens’ routes profitable), a practice that might cause issues with the competition authorities, nowadays…
A radical business model?
However, for radical thinkers, the way forward may be via a significant scaling down of store sizes and numbers to better match a shrinking need for physical presence as online increases. With less physical overheads, the average retail margins of 25% could be used to fund home delivery, thereby evolving a new retail model that fully acknowledges a future balance of online and physical retailing.
Otherwise, Amazonian third party online retailers will emerge to take up the space, profitably…
This leaves the retailer with four options:
- Absorb the loss: impossible on current retail margins, especially as the online/physical shop ratio increases?
- Charge more for instore purchases: An increasing an unacceptable burden on those that want/need to shop instore.
- Charge £20 per delivery: a significant turn-off for many online shoppers?
- Or radically increase the minimum order size: a likely mismatch with real shopper need?
Some retailers may see significant scaling up of home deliveries as a possible solution, with the milkman’s street-agreements as a way forward (in the final days of home delivery of milk, dairies agreed solus access to individual streets in order to make individual milkmens’ routes profitable), a practice that might cause issues with the competition authorities, nowadays…
A radical business model?
However, for radical thinkers, the way forward may be via a significant scaling down of store sizes and numbers to better match a shrinking need for physical presence as online increases. With less physical overheads, the average retail margins of 25% could be used to fund home delivery, thereby evolving a new retail model that fully acknowledges a future balance of online and physical retailing.
Otherwise, Amazonian third party online retailers will emerge to take up the space, profitably…
Friday 31 August 2012
Google, Amazon, Apple and Facebook - the new big four in retail...
We shop on phones, compare on Google and ask our Twitter-mates what they think. Even more importantly, we also have the ability to complain to 100 friends when a supplier/retailer misses our expectation…
This revolution in shopping behaviour is causing traditional retailers and suppliers to play catchup with multichannel marketing, or else…
Whilst historical purchase data reveals what we bought, social media reveals why and indicates the future. Think about it, we have been waiting 30 years for this insight…now we have it, are we doing enough?
The real opportunity
In fact, do we accept that the real breakthrough hinges on the willingness and ability of the retailer to respond accordingly. For suppliers, the key issue is whether it is easier for traditional retailers to remodel the business based upon shopper-need, or for the new big four to fulfil the shopping transaction, profitably.
When I break from writing this KamBlog post to accept delivery of the Amazon book I ordered yesterday, at a 15% discount, while hesitating to drive to the nearest Tesco for a bottle of breakfast milk, somehow the answer suggests itself…
Just the first layer?
The multichannel e-commerce combination is obviously making it easier to buy, but I believe that as suppliers we are simply skimming off the first layer…
The real pay-off will result from re-engineering the entire brand offering to better meet consumer-shopper need, arriving at a minimal compromise between what a consumer is trying to tell us they require and our ability to provide the solution, better than the available competition.. In other words, building trust by delivering more than it says on the tin…always.
What this means for NAMs
This process includes adjusting our channel strategies to optimise their strengths, via NAMs that have the imagination to see that the accounts with real career-potential are the new retailers in emerging e-channels.
Sure, making real change in uncertain times is an uphill struggle, especially having to negotiate more with your own colleagues than with the customer.
However, given that we learn more from risk, mistakes, uncertainty and overcoming resistance (a buying signal?), numbers-based NAMs that are prepared to swim against the tide somehow move faster...
This revolution in shopping behaviour is causing traditional retailers and suppliers to play catchup with multichannel marketing, or else…
Whilst historical purchase data reveals what we bought, social media reveals why and indicates the future. Think about it, we have been waiting 30 years for this insight…now we have it, are we doing enough?
The real opportunity
In fact, do we accept that the real breakthrough hinges on the willingness and ability of the retailer to respond accordingly. For suppliers, the key issue is whether it is easier for traditional retailers to remodel the business based upon shopper-need, or for the new big four to fulfil the shopping transaction, profitably.
When I break from writing this KamBlog post to accept delivery of the Amazon book I ordered yesterday, at a 15% discount, while hesitating to drive to the nearest Tesco for a bottle of breakfast milk, somehow the answer suggests itself…
Just the first layer?
The multichannel e-commerce combination is obviously making it easier to buy, but I believe that as suppliers we are simply skimming off the first layer…
The real pay-off will result from re-engineering the entire brand offering to better meet consumer-shopper need, arriving at a minimal compromise between what a consumer is trying to tell us they require and our ability to provide the solution, better than the available competition.. In other words, building trust by delivering more than it says on the tin…always.
What this means for NAMs
This process includes adjusting our channel strategies to optimise their strengths, via NAMs that have the imagination to see that the accounts with real career-potential are the new retailers in emerging e-channels.
Sure, making real change in uncertain times is an uphill struggle, especially having to negotiate more with your own colleagues than with the customer.
However, given that we learn more from risk, mistakes, uncertainty and overcoming resistance (a buying signal?), numbers-based NAMs that are prepared to swim against the tide somehow move faster...
Friday 24 August 2012
The doubling rule - why Amazon will outgrow Walmart, soon...!
The doubling rule, or Rule-of-70, provides a simple way to calculate the approximate number of years it takes for the level of a variable growing at a constant rate to double in size.
This rule states N = 70/rate-of-growth, where N is the number of years it takes to double.
More detailed maths treatment here
The same rule can be extended to the Rule-of-110 (trebling size) and the Rule-of-140 (quadrupling size).
Amazon example:
Given Amazon’s CAGR (Compound Annual Growth Rate) of 26%, the Rule-of-140 shows that based on its current sales of $48bn, its sales will be $192bn in 5.4 years.
By comparison, Walmart’s 2012 sales were $444bn, with a CAGR of 3.1%...
Amazing Amazon catchup here
Exponential growth really explained…
For more about how exponential growth and the Rule-of-70 can explain and impact every aspect of your life, upside and downside, we urge you to invest 10 minutes in watching the above vid. (4.5m views to date...)
Nothing will seem the same again…ever.
Tuesday 14 August 2012
An Amazonian window?
Yesterday’s news that Ocado is in risk of breaching its bank covenants, coupled with its fall in share price, could represent a takeover opportunity for Amazon
Loan covenant definition:
A condition with which the borrower must comply in order to adhere to the terms in the loan agreement. If the borrower does not act in accordance with the covenants, the loan can be considered in default and the lender has the right to demand payment (usually in full).
Minimum financial ratios
The borrower is required to maintain a certain level in key financial ratios such as:
- Minimum quick and current ratios (solvency & liquidity)
- Minimum Return on Assets and Return on Equity (profitability)
- Minimum equity, minimum working capital and maximum debt to worth (leverage)
Market impatience
Given that Ocado is forecast to make a loss of 1.5% in 2012 and 2013, it is unlikely that in the current climate, the markets will be prepared to tolerate any further delay in achieving acceptable levels of profitability.
Moreover, a leading retail analyst has warned that online grocer Ocado is in significant danger of breaching its banking covenants this year, owing to a toxic cocktail of a "pile of debt and falling market share".
Ocado’s dilemma
Essentially, Ocado has reached a point that often causes problems for an undercapitalised business needing to fund the development of critical mass.
They have broken the back of grocery home delivery in an M25 enclosure that has the potential population to provide a profitable opportunity for the right company.
The Amazon opportunity
Amazon meanwhile needs a way of adding groceries to its repertoire and showing it can match traditional providers in terms of service level, profitably…
We believe that taking over Ocado would provide such an opportunity.
As you know, Amazon entered the UK grocery market last year with a piece-meal ‘multiple-delivery’ model that failed to impress anybody other than those people who saw it as merely an opening gambit.
Moreover, in July last year it was mooted that the acquisition of Ocado might represent a good opportunity for Amazon, at a time when Ocado’s market capitalisation was £1bn.
With Ocado’s market capitalisation now having fallen to £365m, we believe that the likelihood of a bid is a running certainty…
NB If you want to catch up with Amazon see our free paper Amazing Amazon
Monday 13 August 2012
Just a virtual Hut?
For those who may have been a little distracted by the 7 years preparation for the Olympics, The Hut sells fast moving consumer goods that are non-perishable with high levels of repeat purchase, and premium luxury products with higher average unit sales and strong consumer loyalty.
Investment and backing
The business has expanded greatly since their launch in 2004, and with the help of c£75m (raised over three years from both individual investors such as Terry Leahy and financial institutions).
Key websites
This investment capital has funded the organic launch of websites across a number of sectors including clothing, footwear, bags and accessories plus a number of acquisitions including gifts, health & beauty HB1, HB2, HB3 and sports nutrition, a total of 16 web-sites.
The Hut Group’s huge customer base is split between Consumer, Prestige and Lifestyle with fashion falling under both Consumer and Prestige
Making The Hut real for suppliers
The issue for suppliers is how to justify treating the Hut as a major customer, with a share of attention and NAM-talent far in excess of its actual size, when many suppliers allocate resource and talent based on historical size of business.
These same suppliers normally have no problem allocating their best brand managers to embryo products, leaving their lesser talent to maintenance marketing of established brands.
Treating retailers and brands ‘equally’
This all goes back to the need to treat customers as equivalent business units to brands of the same size, never forgetting that in the end brand equity is sacrosanct.
However, if a customer generates 10% of sales and profit, and a brand represents 10% of sales and profit, then surely they require equivalent resourcing, at least… The same holds for potential shares of the business
Finally, if anyone at board level lacking a sales background needs convincing, it might be worth pointing out that a major customer represents a gateway to the consumer, and is in a position thereby to concentrate or dilute the brand message, depending on how well it appears to fits with the store offering…
The Hut is already too real to either ignore or short-change in terms of resourcing…
Wednesday 8 August 2012
Virtual shops vs. bricks – some spacial implications?
With a 2012 anticipated 13.2% share of all UK retail trade, and growing at 14%, in a flat-line market, online retail has to represent an unforeseen alternative to ‘real’ retail space. In other words, given the relatively slow reaction of retail space development to market demand, it could be said that UK retail space is already 13.2% over capacity, in that online is taking 13.2% of all retail sales. Moreover this situation will get worse as online grows, especially as online can react ‘instantly’ to market demand, scaling up at relatively little incremental cost…
The real space requirement:
In addition, as shops become more efficient, generating increased revenue per sq.ft., coupled with suppliers’ increased distribution efficiency (smaller quantities delivered more often = increased availability, 100%, zero-defect), adding store-level assortment, matched to local need, it can be seen that even less physical retail space will be required.
Buying time:
This means that major retailers will attempt to diversify even more to buy time, as they slowly readjust to market demand in terms of reducing their physical space i.e. sell off redundant shops, whilst taking some comfort in the growth of their online business, without fully appreciating the cannibalistic element…
Besides which, with Amazon at 50% of all online, no one can rest easy…
Supplier action:
The real space requirement:
In addition, as shops become more efficient, generating increased revenue per sq.ft., coupled with suppliers’ increased distribution efficiency (smaller quantities delivered more often = increased availability, 100%, zero-defect), adding store-level assortment, matched to local need, it can be seen that even less physical retail space will be required.
Buying time:
This means that major retailers will attempt to diversify even more to buy time, as they slowly readjust to market demand in terms of reducing their physical space i.e. sell off redundant shops, whilst taking some comfort in the growth of their online business, without fully appreciating the cannibalistic element…
Besides which, with Amazon at 50% of all online, no one can rest easy…
Supplier action:
- Suppliers need to reassess brands in terms of their bricks vs. online balance vs. real demand
- Where physical in-store presence is required, the brand will need focused support and performance-based-reward to justify its footprint
- Where shoppers need to handle the brand, suppliers will have to make case for purposeful ‘show-rooming’ and reward the retailer appropriately
- Suppliers need to drive store redundancy via 100% zero-defect supply, and optimise space productivity until a level of retail space is achieved that is more in line with market realities
Tuesday 24 July 2012
Need your Amazon delivery yesterday?
With Amazon's increasingly accurate profiling, coupled with its move to same day delivery, how far are they away from being able to so predict your needs and ability-to-pay that they can anticipate your requirement and ship the day before you order…?
With a no-questions-asked returns policy, who cares if they (or you!) get it wrong sometimes?
The ultimate in permission marketing?
Fussy about surrendering so much to a retailer?
Then how about using your favourite grocer as a source for all your groceries (from womb to tomb) and non-food; buying, paying for and insuring your house, undergoing health-checks and sourcing prescriptions, collecting and spending the points, and availing of some cash-back at the checkout?
In fact, just steps away from arranging for your salary to be paid directly to the retailer’s new bank to fulfil all your spending needs…savvy?
Underestimating Amazon?
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