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:

1. 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
2. The embryo savvy consumer has morphed into a mature adult determined to settle for nothing less than demonstrable value for money, in most places
3. 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…)
4. January’s profit warning has forced Tesco to re-balance its business model, re-focusing on UK performance
5. 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…)
6. 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...
7. 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?)
8. 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….
9. 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)
10. 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...

In other words, no need to dust down the CV yet… 

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

Playing with your Clubcard data at Tesco?

                                                                                        pic: Tales from the playroom
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…

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…!

KAMs' Highs & Lows

Early in a career, KAMs have to decide whether they want a roller-coaster ride or prefer a gentle see-saw at the quiet end of the playground.

Apart from the excitement, the former takes courage and can be more rewarding, but the latter no longer carries any guarantees….

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 top 10 high street stores to haggle in?

Latest research shows that most high street retailers are responsive to haggling, to varying degrees…
In a poll of 2,544 people, Martin Lewis of MoneySavingExpert.com  found that most high street players will respond to haggling, with the following success-rate for determined shoppers.

The top 10 high street stores to haggle in
Retailer       &    Success rate (of those who tried)
1. Comet              78%            6. Asda             60%
2. B&Q                78%            7. Tesco            58%
3. Currys/PCW    78%              8. Wickes          56%
4. Homebase        69%            9. Sainsbury's 54%
5. John Lewis       63%           10. Debenhams 53%
Source: MoneySavingExpert.com

How this approach can help in negotiating with buyers.
Given that many buyers can sharpen their negotiating skills simply by dealing with more suppliers per day than a NAM can manage in a week, coupled with the fact that role-reversal can add insight re the other party’s position, then taking every opportunity to haggle at store level could be your way of raising your negotiating game to new levels of expertise. (See here and scroll down for Martin’s Top 20 haggling tips)

For a real immersion in your customer’s culture, why not start easy and gradually move down the haggling league table before selecting your customers outlets for your experiments?

Some precautions
Given the prevalence of security cameras, it might be worth donning off-duty clothing and a hint of make-up to avoid your next encounter with your buyer becoming a retaliation session…

Going for broke?
Finally, the retailer most resistant to haggling in the survey was Boots (it figures?) with a success-rate score of 29% - a real opportunity to refine your haggling skills, especially if you handle a different account…

Kellogg's new tweet shop - pay with social currency...

                                                                                                pic Retail-focus
According to a report in Retail-focus, Kellogg's have opened a new pop-up 'tweet' shop on Soho's Meard Street in London. The standalone store – thought to be the first to allow customers to pay by Tweet instead of money – marks the company's move into the savoury crisps market and is open until Friday 28 September.

The shop is lined with hundreds of packs of crisps, a 'try before you buy' snacking area, a 'community noticeboard' that captures social media reaction to the unique retail space, and a  packet of new Special K Cracker Crisps can be bought by Tweeting a message about the snack range.

A real fusion of brand, medium and consumer, without retailer intervention..

Another potential use for empty shops in the high street?

Sao Paulo, 120mile traffic jams (+kidnapping)…

Next time you are stuck on the M25 on the way to Cheshunt, spare a thought for your colleague KAMs in Brazil, where traffic jams of 120 -180 miles in Buenos Aires are routine, wjth the added threat of being kidnapped for those KAMs working for major suppliers..
Several years ago while running a workshop at local headquarters of a multinational client I was informed that my personal bodyguard was essential in order to avoid the inconvenience and cost ($50k) of having to pay my ransom in order to conduct the workshop without interruption.
However, the $50k was a mere trifle compared with what they would have had to pay to release their global chairman, who paid a surprise visit from Europe, transferred from the airport by helicopter, landed on the roof, and participated in the workshop for 30 minutes before flying back to Europe again, all before the local mafia discovered he was in the country!.

The secrecy left me only moments to add a couple of spontaneous pleas for more local-KAM empowerment, before attempting to continue the session as planned.
Nice to be appreciated, if only via the price of a ransom…

Tesco to build national network of online-only 'dark stores'

They are not open to the public but used to assist nearby shops unable to keep up with internet orders. Tesco already has four dark stores in London but internet boss Ken Towle said on Monday that another two would open in Crawley and Erith, near Dartford, and it was scouting other cities, including Birmingham and Manchester, for locations.

Future dark stores
Towle said Tesco's would need "tens" rather than "hundreds" of dark stores. Speaking last week, Tesco chief executive, Philip Clarke, said Tesco.com "provides all the growth we have in our core food businesses these days".

Where this is heading
Besides representing a threat to Ocado, Tesco with 50% of an online grocery market that will be worth 6% of total grocery spend by 2016 (IGD), the market leader is still at an early stage in its rebalancing of online-and physical store presence that will reflect online demand, with an increasing dark store weighting that will provide a means of reducing online overheads and help to subsidise the cost of home delivery.

In other words, it will always be difficult for online grocers to break out of the '£5-per-drop' mode, so lower-cost dark stores will help by releasing more of the retail margin to help cover delivery cost losses   (See posting below)

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:

• 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?

Going for scale
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… 

Time & Money - optimising the connection

A client once had the problem of the Board spending too much time in board meetings.
Questioning revealed that having spent an hour deciding whether the outside fire-escape stairway should be painted red or silver, the Board waived through a £1m trade-funding budget in five minutes….

Solution:
Even more time was spent agreeing the total annual cost of the combined annual packages of the Board, and the resulting cost per minute in board meetings. Once agreed, however, the agenda items were prioritised and allocated timings in terms of cost and value, making each session a little more productive.
WalmAsda however, did even better by removing all seats and conducting the board meetings stood up…

How Poundland makes its millions - the brand-issue for suppliers and retailers

Monday's Poundland item in NamNews resulted in over 250 downloads, indicating a high degree of NAM-interest and perhaps curiosity re possible 'trick-missing' in some cases.

Given that the Telegraph article was also the subject of a 30-min prime TV programme (see 'Dispatches: Secrets of Poundland’ on September 17, Channel 4, 8pm) poundshop optimisation raises important issues for suppliers wanting to maintain their brand equity.

Coping with inflation
In order to maintain the £1 price-point, suppliers and pound-shops have reduced pack-contents over the years. This is about consumer expectation, not the letter of promotions' legislation. As you know the original idea of branding was to persuade the consumer that the contents were safe, consistent and matched or even exceeded the expectation created by the advertising.... Think of the impact on a loyal user of having the contents of a £1 Family pack reduced by 50% in five years.
We all know why it happens, but we need to focus more on the impact

Extra-value packs 
Pound shops sell a number of well-known brands with “50% Extra Free”, or even “100% Extra Free”, on the packaging. i.e. a pack of eight bars for £1,while the mults offer the same eight bars for £1 also, without the flash.   Again a potential bad taste...

Consumer perception as driver
The issue is not about morality or even the letter of the law, but is more about the negative impact on consumer perception, a serious dilution of hard-won brand equity.
In the process we risk converting a savvy consumer into a cynical shopper that nowadays has the incentive and means to express their opinions via the internet...

The way forward
Brand-owners need to meet trade needs, but not at a cost to brand equity. Brand equity has to remain sacrosanct, its all you've got... Also, the retailers face the same challenge in preserving shop brand equity whilst responding to shopper demands, a possible basis for joint consultation?

It all goes back to trust in business, the basis for everything, and worth a lot more than a pound...

Boots breaks the 'silence' as it agrees deal with China firm

Alliance Boots, under the terms of a strategic alliance agreement signed yesterday, announced that it will acquire a 12% stake in Nanjing Pharmaceutical Company Limited, through a private placement, for a total consideration of approximately £56 million (RMB560 million), making it the second largest shareholder with Board and operational management representation.

Boots China profile
Nanjing Pharmaceutical Company Limited, which is listed on the Shanghai Stock Exchange, is the fifth largest pharmaceutical wholesaler in China with sales of around £2 billion (RMB20 billion) in 2011.
Alliance Boots first entered the Chinese pharmaceutical distribution market in 2008 through its Guangzhou Pharmaceuticals Corporation joint venture, which operates in complementary geographies and continues its successful development.

A powerful stepping-stone...
In all, with this latest move Boots is aiming at gaining a 20-30% share of the Chinese pharmaceutical distribution market. Apart from the inevitable appeal of adding a retail element in China asap, this major wholesale step is a clear indicator that even without the Walgreens’ tie-up, Alliance Boots is determined to pursue its policy of increasing its global reach and scale.

This will not only make it more influential in the Walgreens-Boots mix, but will be another step in making the company one of the most connected and centrally-run health & beauty operations in the world, at least in the short and medium term, say five years.

Impact on suppliers
This increasingly scalable company will continue to be heavily geared in a global economic environment. As a result there will be increasing pressure on the company to provide an exit strategy for its stakeholders via re-flotation.

All of this adds up to increasing power and influence in its relationships with suppliers, a position that will inevitably cause it to bring issues like prices & terms disparities, and especially absolute cost-prices to the negotiation table.

Action
It hopefully goes without saying that any supplier wishing stay in the ring needs to factor the full global profile of W-B into the mix, fast.
….and if anyone, anywhere in your company still needs convincing of the obvious, why not run the numbers on Walgreens-Boots owning even 20% of global Health & Beauty retail & wholesale, with power to match…  

Jim Sinegal, Costco CEO & Founder, my personal memories

Watching broadcasts of last week's Democratic Convention, I was surprised and pleased to see a speech by Jim Sinegal that brought back memories of meeting him 20 years ago.

At the time, many of my long suffering clients had been barely tolerant of my constant references to the inevitability of this new business model, the membership warehouse club, entering the UK and undermining the wholesale trade.  Eventually in 1992, I rang Costco's home office in Seattle, explained my interest, and asked to speak to someone who might add some insight. I was transferred to CEO Jim Sinegal, who politely asked what I wanted to know....

Despite many years of working in the US, I am still astonished at their ease of access to key business people, especially in the retail trade.

Anyway, the call went well, and Jim said that if I was prepared to come to Seattle, he would give me some time. The following week I was shown into his office for what turned out to be 4.5 hours of the most down-to-earth and practical description of a business start-up I had ever experienced. He outlined his simple philosophy of demonstrable value for money, the need for tight cost-control, an obsession with the numbers, financial KPIs and performance at his finger tips, and how he had set up Costco on these principles. And all of this without a hint of arrogance, simply an obvious pride in achievement.

At lunchtime he offered to drive me to the nearest Costco branch and show me how it worked in practice... As we got into a new state-of-art Mercedes, he explained that his wife had given him the car as a birthday present that morning, and he was obliged to accumulate some appreciative mileage before getting home that evening....

At the Costco branch, Jim wandered around the aisles, exchanging first-name banter with staff and customers alike, quoted rates of sale and profitability of random SKUs and 'specials' and generally illustrated most aspects of his business model by example. I asked if I might take some pics, and was met with a polite refusal, one of their golden rules...

Throughout the session we exchanged views on the contrast with the European retail and wholesale trade, typical 'trading norms' and dynamics, key players and their philosophies and obvious gaps in the market.....

I was left with a firm conviction that Costco would make a big impact on the wholesale market in most countries.....

A week later a small parcel arrived special delivery, containing 50 x 35mm pics covering most aspects of a typical Costco branch which added much colour to my increasingly stark warnings to clients...

One year later, Costco opened in Thurrock....