Thieving below the shop-radar

On a recent Saturday morning trip to Debenhams, I was bemused to find a consumer (not shopper) squatting down in the cosmetic department, out of sight of the demonstrators and counter-staff.

She then proceeded to liberally apply almost a 200ml bottle of upmarket skin lotion to the exposed parts of her child and herself, before returning the empty container to the counter, and nodding at the counter staff before departing into the bright sunshine…neither staff nor consumer knowing, and probably not caring, that her ‘sampling’ of a £29 bottle of upmarket body lotion would require incremental sales of £500 to restore Debenhams (Net Margin = 5.8%) to the square one that existed before her visit…  

One minute's noise reduction?

May we please have one minute's noise reduction to honour the passing of Ray Dolby?
Any further explanation means you don't need any further explanation...

Heating up the carbonated drinks category?

World’s first hot carbonated drink to go on sale for Y130 (76p) from October in vending machines across Japan. The innovative new product produced by Coca-Cola in Japan will be the first carbonated drink to be served hot.

The self-heating product is called Canada Dry Hot Ginger Ale and, though some of us may balk at the idea of a hot fizzy beverage, the producers say the result is “an intensely spicy, cinnamon and apple-flavoured drink”.

Those with residual knowledge of school chemistry may choose to busy themselves this weekend with a simple experiment to prove that dissolved gas comes out of solution faster from warm water than cold. The reverse is also true: Dissolved gas tends to stay dissolved better in cold water, thus showing why five years of research have gone into the technology behind successfully containing heat and bubbles in a can…. (The article also contains a download giving the full chemical background)

Incidentally, those who are interrupted in the assimilation of their heated carbonated drink may regret that evolution has moved us on from that stage when our former gills would have allowed us to copy our fishy cousins in absorbing miniscule amounts of residual gas from cooled liquid… 

Who owns the Consumer?

Building on Seth Godin’s idea about ownership of customers it can be useful to compare UK retailers’ shopper-insight with that of a brand owner…

Retailer’s knowledge of the consumer:
- Name, address, age, sex, family size
- Occupation, income
- Health, insurance cover
- Finances
- Shopping behaviour
- Pass-times/hobbies/travel-behaviour

Supplier’s knowledge of consumer:
- Little grey-haired old lady, living alone (with dog + 2 cats) on the outskirts of Oxford, 2 children having left home…

If knowledge defines ownership, who now owns the consumer..and sells everything a consumer needs…?

Moreover, are we as brand owners capable of managing a retailer’s degree of consumer-shopper insight?

M&S extension of credit period 'in line with industry standards'...

Britain's biggest clothing retailer has allegedly sent letters to its 500 general merchandise suppliers on September 5th outlining the new terms. About 50 are in Britain.

Freight-on-board suppliers' payment terms were lengthened to 75 days from 60 days and full-service vendors, which transport, store and deliver the goods, will have their payments times extended to seven weeks from five weeks.

Incidentally, some major retailers work with banks to negotiate preferential lending rates for their suppliers, where selected suppliers are able to borrow against their sales invoices to the customer to ease their cash flow. As you know, this 'factoring' process, whereby an invoice is 'sold' to a financier for a discount on the invoice value, represents an additional cost of doing business, and should be an essential part of your personal tool-kit in these unprecedented times...

In other words, depending upon your credit-worthiness, suppose a 50-day invoice is factored to pay in one day, and the discount is 2.5% off invoice, the cost can work out as follows:

Assumptions:
Supplier's 'normal' cost of credit from a bank is 8%, and the invoice is for £250k, payable in 50 days.
Therefore the supplier is paying 2.5% i.e. £6.25k for the use of £250k for 50 days, which is equivalent to £45.6k for 365 days i.e. 18% is the annual cost of the money

Suppose a retailer moves their credit period from 35 days ( i.e.10.4 times/annum)  to 49 days (i.e. 7.4 times/annum), then the additional cost of credit works out as follows:

Say cost of credit on £250k for 365 days @8% per annum is £20k i.e. £250k x 0.08
Then the cost of credit for 35 days is   £1.9k i.e. £20k/10.4
...and the cost of credit for 49 days is  £2.7k i.e. £20k/7.4
Therefore the additional cost of moving from 35 days to 49 days is £0.8k on a £250k invoice

So the real issue is whether you negotiate with the retailer, or the bank...

Your choice, but at least an understanding of how to run the numbers puts you in a better position to negotiate, unless of course you prefer to operate in the dark.....?

Think you are Bluffing the Buyer? - The Myth of the Poker Face....

For those of us that think the role of KAM has become a game, with many of the attributes of poker, then latest research on the value of a poker face may save some disappointment in your next negotiation session…

A maxim of poker is to play your opponent, not the cards you’re dealt. A good player scruitinises opponents for clues: A slight wince may reveal that an opponent did not get a hoped-for card. Sitting up straighter could hint that he or she intends to make a big move. At the same time, a good player wears a poker face that reveals no hint of his or her true emotions.

But is it a myth? Can a social animal like a human really perform the sophisticated double task of keeping their face a mask while reading their opponents?

Holding a poker face is possible, but attempts to control the internal experience of an emotion “either fail to decrease or paradoxically increase emotion experience.” So trying to restrain your own nervousness while bluffing can only increase it, making it even more difficult not to reveal.

The research concludes that when it comes to identifying slight signs of emotion - the hints revealed by a careful player - someone trying to hold a poker face is more likely to miss them.

In other words, when next sat in front of the buyer and you are attempting to make a ‘take it or leave it’ offer, forget about trying to read the buyer’s reaction.

Instead focus on maintaining a poker-face regardless, hopefully causing the buyer to miss the subtle signs of your inner turmoil and anxiety at this ‘factory closure’ moment… 

Tesco builds flats above their shops

Bustling about in hard hats and fluorescent jackets, builders employed by Tesco are putting the finishing touches to a 60,000 sq. ft. Tesco store and 250 apartments that sit above, behind and beside it.

Living above the shop is very much back in fashion as supermarkets lead the development of thousands of homes in their latest tactic to secure new sites. As a consequence, the race for market share among the UK's largest retailers is inadvertently helping London chip away at a housing shortfall that equates to at least 32,000 new homes per year.

Tesco’s huge projects in Woolwich, Highams Green and Streatham are merely paving the way for a wave of supermarket-led home building projects which will flood across the south-east. More than 4,500 homes are being planned by the big five grocers in London alone over the coming years, according to property advisor CBRE, while construction market analyst Glenigan estimates supermarkets will be laying the foundations for more than 2,100 homes in 2014. After completing the development, Tesco remain the main tenant and occupier for years, so they have an added incentive to make sure these are developments of the highest quality.

In other words, a major innovative move, meeting a real shopper need…

The initiative has echoes of 7-11 practice in Tokyo of taking the ground floor area of high-rise apartment buildings, just to be close to convenience customers. In fact, there the idea has been so successful that 7-11 is referred to as ‘The Refrigerator’ by tenants living above the store in typically small Tokyo apartments where space is a premium. In other words, tenants can run stock levels of milk in their apartment to a minimum, knowing that top-up is merely a lift-run away…

On a personal note, having lived above my parents’ Mom ‘n Pop store for most of my childhood, nothing beats the convenience of nipping downstairs for an impulse refill when the need arises…

A no-brainer for the mults…

Fancy a historic store-check via Sainsbury's reopening of first supermarket site?

Sainsbury’s has gone back to its roots today with the opening of its new West Croydon Local store. The new convenience store, which is on London Road, is on the same site as one of Britain’s earliest ever self-service supermarkets. It was the first store to be converted to self-service in 1950. This innovation was the idea of Alan Sainsbury, grandson of founder John James Sainsbury, who decided to launch the format after visiting the United States to study retail. At that time most store were counters where customers gave staff their shopping lists and waited whilst their goods were packaged for them. This new format put the power in the hands of the shopper making it a much more enjoyable experience for customers.

The original self-service process (click for larger image)
   

Win a few, lose a few…?

The only drawback was the fact that some shoppers took self-service literally, and thus ushered in the era of shrinkage…

When less is not more: How small packs work out cheaper than bulk-buy deals

Product	Store	Big pack	Small pack
Cathedral City Cheddar	Asda	£6.98 (2x 350g)	£2.00 (350g)
PG Tips tea bags	Asda	£4.68 (160)	£2.00 (80)
Nescafe coffee	Asda	£11.50 (500g)	£5.00 (300g)
Clover spread	Asda	£3.70 (1kg)	£1.00 (500g)
Loyd Grossman Sauce	Tesco	£2.79 (660g)	£1.00 (350g)
Napolina Olive Oil	Tesco	£6.49 (1 ltr)	£3.00 (500ml)
Mild cheddar	Sainsbury’s	£3.10 (400g)	£2.05 (270g)
Filippo Berio Olive Oil	Waitrose	£7.59 (1 ltr)	£5.49 (750ml)
Absolut vodka	Waitrose	£19.60 (700ml)	£9.00 (350ml)
Scottish Still Water	Sainsbury's	79p (750ml)	45p (500ml)

                                                                                                         
Source: Daily Mail survey

The mismatch tends to happen when supermarkets cut the price of small packs for a temporary promotion – or to match reductions at a rival. Whilst the mix-ups are understandable, the real issues are the impact on the savvy consumer-shopper and probable distortion of demand.

However, apart from an inevitable spike in small-pack sales for the duration of the price-cut, retailers need to monitor the effect of the resulting suspicion and lack of trust in terms of impact on shopping behaviour for the remainder of the shopping trip.

For suppliers, the issue is more about the extent to which the shopper blames the brand, rather than the store...

…and since you are probably picking up the promotion-tab, perhaps it is time to add multi-size analysis of unit prices to your promotional checklist in assessing the ROI on the initiative…? 

Pop-up Britain - Piccadilly flagship for pop-up shops

Popup Britain, the retail arm of national enterprise campaign StartUp Britain, has opened a flagship store in Piccadilly to offer 30 retail start-ups a week-long opportunity to sell their products.

At No.231 Piccadilly, 20 paces from Piccadilly Circus, pop-up shops are given an opportunity to check out what difference a prime, albeit temporary location will make for their business idea...
Last week's pics express it well:

                                                                                                     pics: Brian Moore

A variety of retail ideas, but the prize for innovation has to go to the SWIG Hip-flask company, a space near the door, and a bespoke title to mark the occasion at Swigadilly Circus...

Worth a pop-in on your next West End store-check? 

OFT: Furniture stores used fake prices - the anti-marketing strategy?

As any supplier knows, the combination of efforts required to grab a consumers attention, in the most overloaded media environment ever, attempting to communicate with the most savvy consumer-shoppers on the planet, served by 24/7 access to price-comparison facilities, as short of time as they are of money, getting awareness of the fact that their needs for a solution - not a product - could be met by your offering, attracting them to the right store in terms of range and offering that is a better combination of Product, Price, Presentation, and Place than is available via comparable competition, persuading them that fulfilment will meet expectations, and getting the money represents a monumental achievement!

To then fritter away the achievement via a cheap intelligence-insulting price deception, is incomprehensible....

This has to mean that these retailers are bypassing the savvy consumer-shopper pool and are in fact aiming at the remainder, those folks that know no better, probably have less discretionary spending power, but do have the means and ability to complain to their friends, and even to the OFT...

At least it makes the rest of us look good.....!

Personal one-hour supermarket delivery service launches in London

Pocket Shop, a start-up website, has launched the ultimate in fast grocery deliveries – promising to have top-up bread, eggs and milk in the hands of London customers less than an hour after they click ‘send’.

Its Amazon-based system works by allocating online orders to one of Pocket Shop’s team of 20 trained buyers around the capital, using a GPS-based algorithm similar to those employed by taxi-ordering smartphone apps. Pocket Shop could scale the business by using crowdfunding techniques to recruit more part-time buyers.

A text message alerts the buyers, directing them to the nearest Tesco or Sainsbury’s supermarket. An app on the buyers phones then displays the customer’s shopping list with instructions on the optimum way to navigate the aisles. The company offers a ‘superstore’ range of 150,000 products at prices comparable to shopping in Local and Metro convenience stores. Waitrose and Marks & Spencer will be included soon, the company claims.

A key issue might be long term profitability in that the major mults claim that home delivery costs £20/delivery compared with a £5 charge… In other words, although Pocket Shop apply a product mark-up and a 1-hour delivery charge of £6.50, they presumably have to pay the buyer…

But if it works, and think saturation of Greater London for starters, then this represents the ultimate in personal convenience, for those willing and able to pay. Having reached critical mass the concept could morph into a personal pick-up service for dry-cleaning, prescriptions, and even pensions…

Then time for Amazon to move from back office to front of store?

Helping Amazon make a profit - what will make a difference?

Graham Ruddick writes in The Telegraph that Amazon is Britain's most influential retailer, and quotes predictions that the company will be the ninth-biggest retailer in the world by 2018, despite having no stores and little profit.

This very useful and detailed article points out that the mighty Tesco has been forced to admit its biggest hypermarkets are outdated and overhaul its non-food range, Comet and HMV have fallen into administration, newsagents have installed lockers where shoppers can collect Amazon orders, and people are now reading books on their Amazon-made Kindles.

Even those retailers operating in sectors where Amazon has made little impact – such as food and fashion – are worried about what happens when it begins to take their categories seriously....

And yet, Amazon makes little or no profit, and will eventually run out of stockmarket patience… In other words, Amazon will have to meet City/Wall Street expectations in terms of ROCE, Net Margin, Stockturn and Gearing, in order to preserve its current share price.

Obviously from a NAM point-of-view, the key issues in terms of Amazon profitability are:
- Where are Amazon now?
- Where do they need to be?
- How soon?
- How can suppliers help?

Where are Amazon now?
Based on their latest accounts, Amazon key ratios are: ROCE: 4%, Net Margin: 0.9%, Stockturn: 8.6 times p.a. & Gearing: 65.4%

Where do they need to be?
Based on most other global retailers, they need: ROCE: 10%, Net Margin: 2.5%, Stockturn: 12 times p.a. & Gearing: 40%

How soon?
Whilst Amazon are obviously racing for scale and spread of categories, given global uncertainties, we would be surprised if the stockmarket did not ‘punish’ Amazon via the share price unless they show signs of delivering the above ratios in the next two years..
This means they are currently in the market for help from suppliers in driving ROCE. 

How can suppliers help?
See detailed approach here in Kamcity Library

NB. If Amazon really want to scale the dizzy heights, they need to aim at the Walmart ratios:
ROCE: 19.6%, Net Margin: 5.5%, Stockturn: 10.7 times p.a. & Gearing: 55.3%

NBNB. If you feel that these unprecedented times require a little more emphasis on demonstrating your financial impact on your major customer, why not email me on bmoore@namnews.com and find out how? 

A light-bulb idea that makes a real difference, free-of-charge...

Just when manufacturers were focused on LED light competition, and power suppliers were adjusting for lower consumption, Alfredo Moser, a Brazilian mechanic had a light-bulb moment and came up with a way of illuminating his house during the day without electricity - using nothing more than plastic bottles filled with water and a tiny bit of bleach to refract 40-60 watts of light into the room below, free….

First he makes a hole in a roof tile with a drill. Then, from the bottom upwards, he pushes a water-filled bottle into the newly-made hole. "You fix the bottle in with polyester resin. Even when it rains, the roof never leaks - not one drop."

In the Philippines, where a quarter of the population lives below the poverty line, and electricity is unusually expensive, the idea has really taken off, with Moser lamps now fitted in 140,000 homes. The idea has also caught on in about 15 other countries, from India and Bangladesh, to Tanzania, Argentina and Fiji.

Another case of consumers, strapped for cash, 'making  do' with cheaper alternatives...
Full light bulb details here 

'Ringing the Changes' scam

Given the low interest rates available on bank deposits, some consumers are resorting to the old 'Ringing the Changes' scam as a way of supplementing household budgets.

If there appears to be a little more shopper engagement than usual ahead of you in the checkout queue, the following may help to illustrate the process:

A fraudster buys a small value item and pays normally at the cash desk.  This is not part of the scam as such but makes what follows look more genuine.

The fraudster then asks the cashier if he can change 10 x £1 coins for a £10 note.

The fraudster hands over 8 x £1 coins and receives a ten pound note in exchange.

At this state the cashier realises that there is only 8 coins and informs the person he is 2 x £1 coins short.

The fraudster apologises and then suggests to the cashier he gives her £12  in exchange for a £20 note.

If the cashier agrees the fraudster hands the cashier back her £10 note along with 2 x £1 coins in exchange for a £20 note.  The fraudster then leaves the shop with the twenty pound note leaving the cashier ten pounds short.

The people carrying out the scam appear competent in distracting the cashier with chat and hand movements to temporarily distract and put them off their guard,

NB. Given recent escalation in the amounts involved and the resulting police involvement, we would caution NAMs to resist the temptation to practice their finance-based selling skills via a dummy-run. In fact, best stick to demonstrating the value of trade-funding…