Showing posts with label flatline. Show all posts
Showing posts with label flatline. Show all posts

Friday 28 March 2014

Shop where you borrow instead of buy - making do via the sharing economy...

                                                                                                                                  pic: Leila Berlin
According to The Guardian, the most popular items in Leila, Berlin's first "borrowing shop*" are the electric drills.

But it's not worth that person buying their own tools, said founder Nikolai Wolfert. "The average electric drill is used for 13 minutes in its entire lifetime – how does it make sense to buy something like that? It's much more efficient to share it."


Members can borrow anything from board games to wine glasses, fog machines to hiking rucksacks, juicers to unicycles. All they need to do to become members is drop off an item of their own.

Virtual tour of Leila here

Borrowing shops are under development in several Berlin districts, with similar projects being set up in Kiel and Vienna. In Berlin-Wedding, 80 artists are working with recycled materials to build Berlin's first "indoor treehouse", which will eventually serve as a "local public thinktank". In Neuk├Âlln, the Trial & Error culture lab organises swaps for artists' materials and fashion items.

At the more commercial end of the spectrum, Deutsche Telekom recently helped launch the social network, which allows neighbours to swap tools and services and sets up communal "toy boxes" in playgrounds around Berlin.

Whilst the idea of the "share-economy" is developing well elsewhere (i.e. Airbnb, which matches travellers to people with rooms to rent, and car2go and even M&S offering customers discounts in exchange for unwanted clothes, which are then donated to Oxfam) there is a sense that the shift away from ownership towards functionality is nowhere as tangible in Europe as in Berlin.

If you add share-economy drivers to consumers increasingly ‘making do’, it may begin to explain the difficulty of driving demand above flatline levels in many categories, everywhere…

And going back to drills, it is well known that drill manufacturers sell millions of ¾ inch drill-bits, not because people want drill-bits, but because they need ¾ inch holes, however produced...

In other words, the most insidious competition can be a product or service that replaces traditional ways of meeting needs. Therefore, training ourselves to focus on functionality and real need instead of want, can help us to anticipate and survive the shock of third-party innovation, hopefully….

* See video on how Leila works in practice here

Monday 24 March 2014

How the 2007-08 financial crisis happened - the Minsky explanation

As we are being told, the world is recovering from the global crisis – for a contrary view, ask the consumer in the street, or better still, check their shopping lists – it is perhaps time to agree the causes in order to avoid the consequences of a repeat….

If you think this might affect you personally but not the business, why not check The Grocer’s latest Top 100 grocery brands showing that in 2013, 33 showed negative sales vs. 2012, and 21 brands showed less than 3% growth, before allowing for inflation…..i.e. the Top 100 brands!

In other words, we are ‘deep’ in flatline, where any growth will be at the expense of competitors, by those players that are prepared to confront reality and act while others await a return to normal…

Opportunities await those that understand how we got here, recognise the symptoms as future warnings and get on with optimising our strengths, now.

American economist Hyman Minsky, who died in 1996, grew up during the Great Depression, an event which shaped his views and set him on a crusade to explain how it happened and how a repeat could be prevented, writes Duncan Weldon for the BBC. 

Minsky’s key ideas:

Stability is destabilising: Banks and firms assume that the good times will keep on going and begin to take ever greater risks in pursuit of profit. So the seeds of the next crisis are sown in the good time.

Three stages of Debt, as indicators
- Hedge stage:
Soon after a crisis, banks and borrowers are cautious. Loans are made in modest amounts and the borrower can afford to repay both the initial principal and the interest.
- Speculative stage:
As confidence rises banks begin to make loans in which the borrower can only afford to pay the interest.
- Ponzi stage: 
At this point banks make loans to firms and households that can afford to pay neither the interest nor the principal. Again this is underpinned by a belief that asset prices will rise.

Therefore financial crisis, again and again and again…

Armed with this insight, and using their own judgement coupled with a basic knowledge of retail finance, the business manager NAM can treat the economy as simply part of a ‘predictable’ business context, and get on with the opportunity, leaving doom and gloom for others…

Analysis: Why Minsky Matters is broadcast on BBC Radio 4 at 20:30 GMT, 24 March 2014.  Or catch up on BBC iPlayer

Sunday 6 October 2013

A Flatline Saturday Afternoon in Whiteleys Queensway...

Saturday 5th October 2013, 1400: Whiteleys Shopping Centre, Queensway, London W2 4YN,
Previously busy to crowded...

                                                                                            pics: Brian Moore

Meanwhile, 'up North'......

Northern shoppers lead UK’s spending bonanza: Shock as London is outshone while confidence rises to post-crash peak 

...but nothing beats a store-visit...

Wednesday 3 July 2013

Opportunities in Deflation-Inflation Mix as Shops Slash Margins?

Ambient foods NAMs may be encouraged at ingredient cost increases finding their way to shelf-prices, resulting in average price increases of 2.5%, according to latest figures available from the British Retail Consortium and Nielsen.

At the same time, key non-food categories have experienced significant shelf-price deflation as retailers slashed prices in attempts to drive sales in falling markets.
As an indicator of severity, non-food deflation rates were as follows:
- clothes and shoes, 6.7% cheaper
- furniture and carpets, 2.4% cheaper
- TVs, DVD players, fridges, washing machines and ovens, 4.7% cheaper

However, as most mixed-goods retailers operate portfolio businesses, in that their overall interest, and that of the stockmarket is in overall profitability, then increased food sales can become a means of subsidising losses in non-foods…. 

In addition, having ‘allowed’ food price increases, the retailer may be tempted to seek financial support from suppliers that appear to be ‘more profitable’ as a result.

Whilst experienced NAMs will no doubt draw upon their repertoire of ways of saying ‘no’ to requests for non-specific subsidies (See How to say ‘No’), it may be more difficult to explain net profit margins of 7%+ in a supplier’s UK Annual report, compared with the retailer’s 3% or less in their P&L (See How to justify your bottom line).

However, imaginative NAMs will see real opportunities in promoting ambient food as a traffic builder to enhance shoppers’ access to non-food bargain offerings, and also use related food/non-food purchases as a means of driving the impact of retailers’ sales of more profitable foods to the bottom line, and claiming credit for the strategy….

Tuesday 30 April 2013

The Waitrose effect on house-values: a 'chicken or egg' issue?

According to an article* in The Daily Mail, Savills Estate Agents have examined how the cost of homes with a Waitrose in the same postcode compares to those in the rest of the same county.

The verdict was that the typical price of properties with a nearby branch was 25.3 per cent higher. For example, a home in Amersham, which has a neighbourhood Waitrose, typically costs £456,000, while the average for Buckinghamshire is £360,000. The situation is even more extreme in  London, where a local branch can add 50.3% to average prices....

Obviously 'quality of neighbourhood' comes very high on retailers' shopping lists when searching for new store locations, so it could be said that Waitrose tend to build in neighbourhoods where house prices are already at a premium...a good example of the chicken/egg conundrum often faced by NAMs in their attempts to distinguish cause and effect in the day-job... Either way, as the recession continues, it could be said that grocery sales even in 'Waitrose' areas will become increasingly vulnerable to discounter-appeal, the Aldi effect, eventually resulting in a downward pressure on house prices?

Accordingly, in relating house-price sensitivity to 'outside factors', it could be beneficial to get personal and explore the impact of continuing triple-dip recession (you don't really believe that 0.3% increase represents growth in the economy??) on a NAM's biggest asset...

Taking an investor's approach to house valuation, where a house is deemed to be worth twenty times its annual rental i.e. a 5% yield, the Amersham example at £450k would require a rental of £1,875/month to make it a viable investment.. In other words, it could be said that housing in the UK is overvalued, and in the event of continued economic flat-lining, house prices will eventually fall to a 'proper value'...

In most countries outside the UK & ROI, houses are regarded as homes, places to live, and not investment assets, and their use of a conservative 20x multiplier means they have been less susceptible to housing bubbles...and the consequent impact on spending.

All of this means that there is a potential 'housing-correction' in the UK pipeline that will prolong the flat-line demand, and this 'straight-curve' needs to be factored into NAMs' forecasts, in spite of political re-assurances to the contrary....

It follows that opportunities lie in wait for those NAMs that live in 'reality mode' while others await a return to normal.... 

Wednesday 9 January 2013

Everything is negotiable, when the chips are down…

Keith Ewing, owner of Number Eight Clothing in Stirling, commented that Independent retailers need to "put their heads above the parapet", as his shop was nominated as one of the UK's "top 100 inspiring shops" for 2013 by Draper's magazine. He listed rent-reviews, online, buying and display as key needs in independent retailing.

NAMs could help by sharing their negotiating expertise with appropriate retailers, as follows:

In practice, independent retailers can help themselves to survive by adapting the supplier-approach to business development:
  • Cutting-costs: rent and rates are currently too high in these unprecedented times. Landlords and local government know this and are vulnerable to the ‘walk-away’ threat by retailers. In other words, retailers should calculate the level of rent and rates (seek help from commercial architects that can provide a broader view) that make the business viable, and renegotiate on this basis, ideally via a combination of lower rent and a ‘per cent of sales’ model, to force landlords to share the business risk.
  • Driving sales: develop a strong online strategy by mining your customer records and collecting email addresses going forward in order to extend your reach beyond a shop visit. Optimise supplier help by negotiating better prices, terms and supply arrangement and especially instore merchandising in exchange for customer stats and enthusiastic/ innovative collaboration. Suppliers want you to succeed as a counterbalance to major multiple retailers and are willing to negotiate flexible packages for the right customers.
Being a business consultant to the retailer can optimise the trade partnership and broaden the NAM’s expertise in managing other customers.

Sharing negotiating expertise can help....

Thursday 3 January 2013

2013: A year for realistic optimism?

With five flatline years behind us, and a high street littered with casualties, realistic NAMs should be finding it easier to factor in a further five years of the same....

If we accept that whilst politicians operate to a different agenda (re-election) and vocabulary (triple dip = flatline...) those of us still in business are here because we know that in times of zero-growth, any market gains have to be made at the expense of the competition.

This means always seeing our offering through the eyes of an increasingly savvy consumer that is unwilling to settle for anything less than demonstrable value-for-money, a consumer determined never again to outsource their purchase decision-making to marketers or retailers.

In these circumstances, it is vital to strip our offering back to the bare essentials, leaving a needs-based package that represents real value, measured by what people are prepared to pay, over and over again.
Using consumer need as the only real benchmark, realistic NAMs will assess the offering vs. what is available from competition, and will continue to cut until what remains represents true value, and more, to a consumer and ultimately the savvy retailer.

Achieving this level of confidence in our value means realistically factoring in politics, economics and banking into our business thinking, as we constantly strive to achieve acceptable financial rewards for risk in a market environment where the numbers do not appear to add up...first time.

In practice, this means realistically measuring all of our costs and being able to translate them into value that we represent to our customers, and being able to demonstrate our impact on their Balance Sheets and P&Ls...

In such unprecedented times, real opportunities exist in 2013 for those determined to be realistically optimistic, and are prepared to act decisively, while the competition await a return to the 'good old days'...

Meanwhile, a Happy and Positive New Year, from the NamNews Team! 

Thursday 30 August 2012

Discount stores boom as upmarket shoppers brag...

The economic quagmire has provided the perfect breeding ground for general merchandise discounters, who have expanded aggressively – more than filling the void created by the collapse of Woolworths in 2008. Analysts at the IGD predict the value retail sector will be worth £8bn by 2015.

Classless appeal
But the key to discounter success is their classless appeal. Mature NAMs will remember their first visits to Aldi Berlin in the early 1990s, and their bemusement at the shopper transport parked outside – ranging from students bikes to state-of-art Mercedes. As we all knew at the time, this could never happen in the UK….

City paying heed
The growing might of chains such as Poundland, Wilkinsons and Home Bargains means the City is starting to take notice. Stockbrokers Shore Capital believes discount retail is the fastest growing area of the whole market, with the strongest performers potential candidates for stock exchange listings or takeovers by quoted chains further down the line.

The forward working environment 
Given their arrival at critical mass in a flat-line economy, we reckon that discounters are merely at the start of a five year opportunity to gain share in the UK. NAMs need to second-guess the politicians: they have been telling us about imminent recovery for the past five years.
Having thus established politicians' credibility, with little change to EU/global economic conditions, is it likely that we can expect any real uplift in the next 5 years…?

Competition hots up...
The competitive landscape ranges from single-price chains such as Poundland and 99p Stores to general discounters such as Home Bargains and B&M Stores. But the rapid expansion of what were once regional, often family-run, companies means the retailers are now treading on each other's toes.

A zero-sum future?
This means that market will operate on a zero-sum basis with any share gains at the expense of not only other retailers but also of other discounters.
In other words suppliers have to prepare discounter strategies that are in harmony with  overall trade strategies, taking care to avoid inadvertent compromise or conflict.

This means that suppliers need to factor discounters more aggressively into their organisational structures and trade strategies, ‘permanently’…

Permanently? Bear in mind that the other characteristic is that discounters thrive in a downturn, but rarely surrender any gains in market share in a rebound… 

Thursday 16 August 2012

Tesco catchup in the UK - a need for context?

Yesterday’s news of Tesco’s improved 3.4% sales growth is encouraging but needs to be kept in context:
- UK refocus: The company has completely refocused on the UK market, and has been spending appropriately (£1bn) since January
- Inflation: With food inflation running at 3.2%, Tesco is only slightly ahead
- Market growth: With the overall food market growing at 3.9%, Tesco is slightly behind
- Competition: Rivals are growing faster (Asda +6.2%, JS +4.6%)
- Fundamental ratios:
            -  where Tesco are:     ROCE12.3%, Net Margin5.9%, Stockturn 17.9 times, Gearing 55.8%
- Fundamental ratios:
            -  where Tesco need to be: ROCE 15%, Net Margin 5.0%, Stockturn 25 times, Gearing 30%
- Outside help: At 3.4% growth rate, a tightly-run Tesco will need considerable supplier support to improve these ratios, and hold UK market share
-      ..especially if they decide to take the nuclear pricing option 

Bearing in mind that ‘It ain't over till the fat lady sings…’, Tesco cannot afford to optimise overseas opportunities until this UK issue is resolved

In other words, Tesco needs to deliver on the fundamental key ratios and hold 31% market share, with growth matching that of the market, before being able to ‘park’ the UK….

As a supplier, it is now time to decide the extent to which you are prepared to offer a little help…

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:
  • 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
All else is detail…

Tuesday 3 July 2012

Bankers & Politicians, the remaining ‘trust’ evaporates?

Given the latest global LIBOR banking scandal, with politicians playing belated catch-up, the one certainty is that savvy consumers are becoming more entrenched in their determination never to outsource their product-buying decision-making to third parties like suppliers and retailers, ever again. Apart from the ‘obvious’ irreversible damage to the City and traditional banking brands (and unprecedented opportunities for the Co-op bank, Tesco-bank and other retailers that carry little banking baggage. They simply need the skill to count reliably and meet consumer needs) this new ‘unprecedented turmoil means that suppliers have to increasingly deal, and be seen to deal, in business reality.

A wake-up call to end all wake-up calls?
This current wake-up call from 30 years of credit-fuelled demand has already lasted four years (!) and as a result we are embarked upon 10-15 years of flat-line growth, to be overseen and driven by increasingly savvy consumers, who will be satisfied with nothing less than demonstrable value for money…a new culture that is spreading back up the supply-chain…with de-stocking simply one symptom.
With EU unemployment at 15%, rising to 25% in the age segments that matter, consumers, suppliers, retailers and whole countries deleveraging (i.e. using money to pay down debt rather than investing/spending), there will simply be little or no basis for real growth, anywhere, for a long, long time.
The new business reality
This is the new business reality…an opportunity for anyone prepared to face up to it…
In fact, in the current climate business success, and even survival, is about being able to optimise reality.  Indeed, if you do not face up to reality in business, others will do it for you…  Hence the reason why bankers and politicians gradually increase their influence on a faltering business until they eventually officiate in its liquidation. And the LIBOR crisis is currently demonstrating the reliability and trustworthiness of both…
Like never before, reality now counts, bigtime, and the responsibility for dealing in reality is now in your hands, where it belongs, and should be kept

Q: Is this really the responsibility of NAMs & KAMs?

Thursday 3 May 2012

Argos: the writing is on the wall-chart…?

Home Retail Group's shares were down 13% yesterday, partly because of uncertainty about its ability to revive the current Argos model, combined with a decision to forgo the payment of a final dividend, and especially a fall of 9% in like-for-like sales at Argos….

As you know, investors rely on a combination of rise in share price and dividend in order to compare alternative investments. Faced with a two-thirds fall in share price, a company would normally offer a generous dividend to compensate and retain  shareholders.
But not when the company has already used available capital of £150m to buy back its shares, all to no avail…..

The Guardian’s Nils Pratley gives a number of reasons for Home Retail to be cautious in 2010-2011: the group's return on capital had fallen for three years in a row, along with operating profits, as had Argos' like-for-like sales, and a chart that says it all....

Future of the catalogue-showroom format?
Another Guardian article quotes retail analyst Nick Bubb as saying that the catalogue-showroom format had "died a painful death" everywhere else in the world barring the UK. "In the US, the discount stores such as Walmart and the online giants like Amazon destroyed long ago the convenience and range advantage of the catalogue showroom. Is it only a matter of time before the same pressures prevail in the UK?"

It is obvious that Argos is in trouble because of its categories moving online, and increasing competition from other “click and collect” services. Faced with this scenario, it would be logical to radically cut the capital base ( i.e. close 50%+ of the stores). Instead the company plan to close but 10 stores in the coming year.

On balance, Argos needs to radically reform its business model, and suppliers with a heavy dependence on the company  need to conduct several what-ifs on possible options for their categories in these unprecedented times, fairly quickly…

Monday 30 April 2012

Flash Sale? The New Business Mantra

Flash sales are a time-limited offer of high discounts on big ticket luxury items. The system is a win-win for both retailers and consumers: retailers can build brand loyalty and at the same time sell surplus stock within a short span of time.

How they work
The offers are ‘abrupt’ and lasts for a brief time. It is also one of the safest deal takings. In other words you have to avail the opportunity as soon as you are offered the services. Consumers normally receive online offers including even invitations in the mail/emails, for offers averaging 50% off.
In the US, online sample sale site Gilt Groupe have launched an iPad app allowing users and buyers to access  flash sales of  luxury goods on its site.

Where flash sales are headed
A report by Business Insider estimate that flash sales will be a $6bn market by 2015.
Given the uniquely large supply glut in 2007, offline retailers of all stripes were likewise incentivized to convert their own inventories to cash positions, translating to even deeper discounts and fewer brand protections for manufacturers.
Into the void stepped flash sale sites to offer companies a novel strategy to off excess inventories while simultaneously creating an illusion of exclusivity.

Amazon’s flash sales
Amazon has launched a US private sale website for designer clothes, with members-only shopping and time-limited “flash” sales with discounts of up to 60%.
They opened the site called last year, competing with start-ups including Gilt Groupe and Rue La La that have won well-off young female customers with their brief sales and urgent marketing.
Amazon promised a rolling series of cut-price deals – available for 72 hours each – from more than 800 brands.

Achica - an online breakthrough
Achica, the members-only home and luxury lifestyle UK website, defied the retail gloom after the fledgling company reported strong sales growth as it expands in continental Europe.
With the homeware sector being one of the hardest-hit areas on the high street as people delay refurbishment projects and trim spending on non-essential items, Achica has bucked this trend by focusing on offering premium homeware goods such as Anglepoise lamps and Le Creuset kitchenware at discounts of up to 70% via “flash” sales, typically lasting for 48 hours.

Apart from obvious opportunities in categories at the upper end of the market, how about suppliers anticipating the spread of flash sales into other categories, and pre-empting the competition, proactively…? 

Wednesday 4 January 2012

Thinking straight for 2012?

With the most optimistic predictions indicating at best flat-line growth this year, our role in business still remains that of factoring in latest conditions and taking  action that will stand the test of 20/20 hindsight…
Apart from 'normal' competition, we need to cope with unprecedented forces at work in our markets including ‘making do’, delaying renewal/replacement, recycling goods via pre-owned, re-usable, second-hand sub-markets, with charity shops and pound-stores now becoming mainstream, all potentially reducing demand for our new products and services.   
All of these take on whole new meanings as savvy consumerism works its way up the pipeline.
We need to challenge everything to ensure we get demonstrable value-for-money, everywhere.
The age of credit is being replaced by selfishness as businesses struggle for survival by passing risk and cost back up the supply-chain via demands for extra credit, increased trade funding, anything that will improve competitiveness, all at the expense of other parties, any other parties… 
Realistically, in a flat-line market any growth has to come at the expense of the competition.
It is therefore time for really straight thinking in order to assess relative competitive appeal in the eyes of increasingly savvy consumers and  customers. We need to quantify cost and value by reflex, since without calculation and quantification, our reaction is simply emotional…
In fact, deep down, as everything changes and nothing changes, as always, we are on our own.
All we need is realistic optimism for 2012, in the firm belief that there is always room for a good idea.
All else is detail….

The Great British Understatement, a way of coping with 2012?

Slogging through the jungles of Africa in 1873, Dr David Livingstone recorded an extraordinary example of a species that has since become almost extinct:

The Great British Understatement.
The intrepid explorer was suffering from pneumonia, malaria, foot ulcers, and piles so savage he could barely walk. The roasting heat was punctuated by sudden torrential downpours. Many of his porters had run away, and he had been forced to pull out most of his rotting teeth. He had been attacked by leeches, slavers and hostile African tribesmen. Lurking in his gut was a blood clot the size of a cricket ball that would shortly kill him.

In his tent, by the light of a candle, Livingstone picked up his pen and, using berry juice because he had run out of ink, he wrote these magnificent words:
“It is not all pleasure, this exploration”.

The Times 27th Dec 2011
Ben Macintyre