Retailers hampered by lack of innovation?

If the test of innovation is a consumer’s willingness to pay, then it could be said that retailers have it all their own way. 

Whilst a brand owner can take nine months from initial idea until appropriate shelf-space is secured in a major multiple, for a retailer the source of a new idea can be a presentation by a supplier that morning, a hyper-efficient supply chain can have it on a shelf by noon, and by close of play that same day, the retailer is in a position to delist the brand or double the order…

Exaggerated, but you get the picture…  

Recent press reports suggest that retailers need to be more innovative.

In fact, the two types of innovation, products and channels, present different challenges for retailers in these unprecedented times.

The innovation challenge for retailers: products vs. channels

Product /service Innovation can be so easy for retailers

-       ‘Suppliers taking all upfront risk’

-       ‘Put it on shelf and let the market decide’

How private label can make a difference

In fact, with the right supplier-partners private label can be a means of making exceptional products available exclusively in a retailer’s outlets, with consumers having to return for any repeat purchases, willingly…

Traditionally, suppliers kept the best ideas for the brand and offered second-tier ideas to the retailer. However, one exception was a client I worked with many years ago, a leading yogurt brand. They took a more innovative approach to brand development: when the ‘Lab’ had produced six new flavours, the company would first offer all six to their own-label customer. Then, following  a month’s sales in Tesco/JS, the relative popularity of each flavour allowed the company to select the best three flavours for inclusion in the brand extension programme….(Tesco/JS were ok with this, given their innovator’s advantage and their different agendas)   

Different when innovating channels or changing channel emphasis

Retailing can be a zero-sum game, in that in general a retailer’s routes-to-consumer can be sub-sets of a fixed demand. In other words, the success of a ‘new’ channel can be at a cost to their main channel in terms of sales, for instance where online siphons off sales of many non-food categories from a superstore…    

Large outlet 'redundancy'

Although pop-up shops can make some outlet diversification easy, re-engineering a 100,000 sq. ft. outlet can take a little more effort…

Large outlet ‘redundancy’ was a natural consequence of increased shopper insight combined with improvement in supply-chain efficiencies, in that two facings and minimal stock levels can now do the work of ten facings and a week’s back-up stock.

Rescuing a superstore 

In fact, for the major multiples, the next moves are crucial, in that £50m investments in superstores cannot easily be reversed, without massive dilution of ROCE, and sell-off is not an alternative, in that a superstore’s traditional retail hyper-efficiency means that any alternative use of the building cannot match a superstore’s  financials…i.e. no one can afford to pay what the retailer needs...

Restoring its viability 

A more practical solution might be a combination of store-level assortment, extending the range of goods/services to include anything that can be legally sold to the public, and sub-letting some space to shop-within-a-shop specialist retailers.

How to attract, select and retain the right specialists?

Charge a minimal rent, and a percentage of sales, collaborate on purchasing, share insights on retail productivity, and earn some good press in the process…

This has to be an opportunity for suppliers willing to help a retailer to really innovate…

Seemple, right?    (i.e. seems simple....)

Innovation in retail multichannel management, an opportunity via the new Post Office?

In retail, increasingly innovation will be linked to the development of multichannel retailing, particularly as sales migrate to new channels, the role of multichannel director is emerging as the most likely route to becoming chief executive of a major retailer. 
Suppliers need to mirror the role-moves.

Need for innovation focus
Korn/Ferry Whitehead Mann have found that, despite profound change in the retailing sector, many were prioritising existing goods and services, rather than reinventing themselves with breakthrough ideas. 

This week’s guest-Kamblogger, Gary Coyle, a thought leader in the Postal sector, updates NAMs on upcoming consumer-access opportunities via the Post Office network.

Post Office rebirth
The UK Post Office network is in decline – 5,000 Post Offices have closed over the last 6 years with 8 million fewer weekly customer visits.  The Government have promised funding of £1.34bn over the next four years to help modernise and re-energise the retail network.

In fact, as the largest retail network in the UK, the Post Office now needs to innovate, take some calculated risks and be radical in its approach to adopting a new business model in order to optimise ever challenging consumer demands.

See Gary’s free white paper: Post Offices – Time for a Digital Reinvention as a Unique Route to Consumer? 

A Brief Encounter with priorities in a London hotel…

Arriving in London too early for an appointment in the West End yesterday, I decided to kill an hour by slipping into the lobby of a prestigious Mayfair hotel for a £10 latte and to informally check out how the global financial crisis was impacting other layers of society….

Flipping open my laptop to develop an idea for KamBlog, I was interrupted by a concierge who discretely whispered that working on laptops was not permitted in the lobby, ‘…causing possible offence to other guests busy negotiating multimillion pound arms deals at nearby tables etc, etc’

This gave me time to take in more of my surroundings…especially the higher than normal temperature, causing me to remove my jacket and drape it elegantly over a nearby chair.
Again I was approached by the concierge to let me know that gentlemen were not permitted to remove jackets in the lobby…

As I slipped back into my jacket, I reached for my mobile to check a real-world news update, when the concierge approached yet again.

This time I interrupted him, and summoning up my best version of a Dublin 4 accent, asked him to please speak up, as I was having difficulty hearing him over the sound of the wh*res’ high-heels as they click-clacked across the tiled floor on their way to client meetings upstairs….

As I left the hotel I began to mull over the issue of priorities in these unprecedented times…

Better than sell-by dates - Edible RFID tags to monitor your food?

Andrew Sullivan’s blog pointed us at the idea of edible RFIDs. Pasted onto eggs, stamped onto fruit or floating in milk, they can warn you when your fruit is ripe, or when your milk has gone sour.

Scientists at Tufts University have now engineered silk into fully chewable food sensors.

The flexible sensors are made of gold antennae embedded in a purified silk film support. The gold bits are as thin as gold leaf found on some extra-fancy desserts, and can pick up the chemical changes of decomposition or ripening. The silk substrate--made of pure protein--is easily digestible. The whole sensor is flexible, and can curve according to the shape of the fruit.

The working principles behind the sensors are based on existing RFID technology--the difference here is that the sensors aren’t hard electronics, they’re flexible, edible stickers.

Applications

Apart from being able to track, monitor and accept/reject individual items throughout the supply-chain, the edibility factor means there is no risk to either health or the freshness-image of the store. Cross-contamination of other food will be eliminated, thus removing one part of the shrinkage issue for retailers, leaving more time to concentrate on reducing the numbers of shoppers who regard food stores as personal larders, a source of free food… 

Creativitywise, the real advantages of edible/flexible RFIDs have to be potential applications in other categories.

Ideas, anyone? 

NB. For starters, how about this Healthcare application?

Last year the team collaborated in publishing a paper in Science magazine showing how flexible electronics in the form of an "electronic skin" could stick to the skin and wirelessly track vital health signs.....now was it worth reading?

Unilever And GSK use of NFC: key potential pay-offs for enabled-stakeholders

Starting with 325 six-sheet digital poster sites in Reading, the key potential lies in the simplicity and scalability of NFC.

With over 130,000 poster sites in the UK, each offering an incremental route-to-consumer as each poster site becomes a new retail outlet, with advertisers gaining access to additional consumers data (name of NFC-enabled users, location, and shopping history) at ‘point-of-purchase’.
Advertising gains  

For advertisers, the combination of the low ‘chipping-cost’ of each poster with the ability to offer instant gratification gives a whole new meaning to impulse purchasing.

Moreover, the user-feedback data can be used to build ‘super-local’ highly accountable promotional campaigns using media-rich, high quality content that can only serve to drive store-level assortment for those retailers (and their suppliers) that want to stay in the game.

(For those unwilling to wait, yet needing some relative response details, some recent US data on the combined use of Bluetooth, WiFi, QR Codes and NFC to promote hotel room booking may help).

All told, it would appear that this new potential will only be limited by the availability of NFC-enabled phones and a possible privacy backlash if not handled carefully..
Raising the competition bar

For traditional retailers and brand owners providing only a token response to the savvy consumer’s need for individual attention via localised offerings, there is a real danger that their NFC early-adopter competitors may take NFC as the new ‘normal’, while traditional players insist on using up those bulk-buy mountains of  old posters and leaflets that seemed such a bargain only yesterday…

A Scandinavian Scotland – simply an export-opp for other major mults?

                                                                                                               map: The Copenhagen Post

To be or not to be Scandinavian, that might be the question soon enough for Scotland, if it decides to become independent. In which case, JS, Asda, Morrisons and the Co-op would join Tesco in having to factor in a balance of UK and overseas presence into their business strategies.

What they have in common
Scotland and its northern neighbours have geographic proximity, shared access to the same body of water, and the resultant multitude of historical links between Scotland on the one side, and Iceland, Norway and Denmark on the other. (More on social,political & religious similarities)

Advantages for Scotland

One final, crucial advantage of a Scandinavian over a British Scotland: it would no longer be in the Far North of the UK, but in the Southwest of the Scandinavia. The place would not have to move an inch, not even a centimetre, but it would sound less cold, dark and at the end of everything. Scotland’s new orientation could finally allow it to ditch some of the negative stereotypes that have been dogging it for far too long. It would no longer be colder, emptier and darker than England.

Key learnings for UK mults
Indeed, this new perspective might then begin to influence the multiples’ approach to the UK consumer-shopper. Think of all the ethnic food and non-food enjoying a new appeal down south… The multiples’ management would surely benefit from a foreign tour of duty, with no disruption of the family, competing with Tesco from a totally new geographical perspective. Management would no longer have to fight for recognition of local need in UK policy, and store-based assortment would surely become a natural output of the new thinking…

Supplier benefits
Meanwhile, UK NAMs, apart from adding ‘foreign’ experience to their CVs, would surely benefit from having to conduct periodic store visits to deal with their newly vocal ‘scandinavian’ customers, until eventually their companies see the wisdom of appointing a dedicated team to operate at local level…

Buyer's birthday coming up, and short of ideas?

An app for the FT’s ‘How to spend it’ magazine (the Argos catalogue for the hedge fund classes, according to Atticus, The Sunday Times) is now available from the iTunes store. The free app helps you access a Gift Guide: 700 inspirational ideas via searchable content of 75 issues.

Alternatively, given these austere times perhaps a link to the free app might suffice?   

Sofa King Silly?

After nine years and one police investigation cheeky Northampton retailer The Sofa King has been told by the advertising watchdog that it must ditch its catchphrase "Where the Prices are Sofa King Low!"

In banning the advert, the ASA have fallen foul of the Law of Unintended Consequences, in that the Internet is now awash with references to the initiative (Google Sofa King and see the 24m results for yourself) In fact I hope that Northampton traffic authorities are ‘Sofa King well prepared’ that this weekend’s inevitable shopper invasion will not pose a problem…

This all puts me in mind of schooldays in Ireland when ‘rude’ books were guaranteed massive sales boosts as soon as they were banned by the authorities…

In fact, Ronnie Drew of The Dubliners folk group used to say that instead of making the Irish language compulsory in schools, the government should ban it, thus ensuring its enthusiastic application 24/7…

Have a couch-bound weekend, from the Namnews Team!

Making Settlement Discount Work

With the major multiples collectively owing UK suppliers approx. £10bn at any time and paying on average in 43 days, this free credit represents both cost and risk. With banks unwilling to lend, retailers can be a source of finance. As cash-machines that happen to sell groceries, retailers can even be willing to pay on delivery, if the price is right

Money-saving tips from America … road-tested by penny-pinching UK consumers

Ranging from eating beans rather than meat to filling up the car early in the morning when the air is cool, and the gas is dense, the Guardian Team give twenty tips a reality-check by running the numbers and evaluating any real saving…

Impact on the consumer

Whilst not all money-saving tips will yield real savings, in practice the act of re-evaluating all expenditure coupled with comparison-shopping is bound to heighten consumer appreciation of value-for-money and cause them to reduce/postpone their ‘excessive’ purchases.

How the Buyer will react

In the same way, buyers being consumers are likely to apply the same disciplines in the day-job. Whilst it is tempting for suppliers to react via defensive mode, realistically pro-active NAMs can benefit by being able to calculate and demonstrate the financial impact of their support package on the retailer’s P&L.

Calculating the cost and value of their free trade credit can be a useful first step….  

The death of games retail, a pointer for other 'directable' FMCG categories?

Last year, according to Digital Spy, the UK games industry saw a 7% year-on-year decline in the sales of physical software in 2011, and this slump is said to have deepened by a further 25% this year. Major retailer GAME saw a whopping 90% wiped off its share price last year after a string of troubles, and this week the firm announced plans to close 35 UK stores and shut down gameplay.co.uk.

Rise of networked gaming

According to Tiga, 71% of games start-ups launched between 2008 and 2011 in Britain were focused exclusively on networked gaming over digital, mobile, online and social channels, while just 10% intended to work on both network and retail titles. Overall, 67% of the UK games development sector is working either exclusively or in part on network gaming. Tiga quote: "A lot of (games developer) start-ups are focusing entirely on digital distribution and networked gaming. There is only around 20% that are focused on retail, which really shows that the tide has turned quite dramatically in distribution."

Initially driven by the advantage of eliminating ‘packaging’ the developers are obviously seeing financial advantages in going direct…

Application to FMCG

In terms of other non-digital categories, whilst the potential for going direct may not be as great as in gaming, the fact remains that a new generation of consumers are becoming accustomed to dealing direct with suppliers, and the delivery infrastructure is falling in place to facilitate the process cost-effectively.

All that remains is attitude, and perhaps a generation gap, or two…

Action for suppliers

Perhaps the time is now right to reconsider adding a little more facilitation to the firm’s web site, incorporate micro-payments, blend in all of those one-off social-networking initiatives , dust down the ‘consumer-advice’  department and use some of that retail margin to integrate the lot, rather like those ‘amateurs’ in home entertainment that have stumbled upon the most obvious approach to monetising a one-to-one dialogue with some of the most demanding and savvy consumers around..

Or instead, perhaps upping last year’s trade spend might be more effective? 

Optimising the Value of Trade Credit

How to calculate cost to you and value to the customer, of free trade credit
Make trade credit an integral part of the negotiation process, and not just another trade term...