Founders Of Morrisons Considering Buyout: what this means for suppliers

Essentially, Morrisons appear to want to step back from short-term accountability to the stockmarket, and run the business with a longer-term perspective without having to explain and justify each move to outsiders.

However, unless the family – a 10% shareholding - can raise between the £5bn to £7bn it would take to buy-back the company, using a combination of own resources and personal contacts/bank borrowing, it will be necessary for them to make the move via a private equity partner.

Given that Morrisons own 80% of their estate currently valued at £9bn vs. £5.5bn market capitalisation, a private equity partner would want them to spin off much of the estate to release the ‘hidden value’ therein, going against the family’s wish to be independent of landlords etc.

For this to go Morrisons way, they would need to acknowledge the redundancy of large space retail. This means finding other business-uses for ‘spare’ space to justify their retention, or sell off the property portfolio.

Either way, it seems obvious that Morrisons will need to focus on financial measurement and ROI justification on every aspect of the business, going forward.

An obvious consequence is that any supplier wanting to accommodate Morrisons new approach will need to speak the same financial language, fast….

Dumb Starbucks' shop opened In Los Angeles by local comedian…

 pic: Jonathan Alcorn/Reuters

According to The Guardian, the comedian Nathan Fielder has outed himself as the man behind a parody coffee shop called Dumb Starbucks that appeared to throw down a gauntlet to the real Starbucks, a TV stunt rather than an art installation or business start-up…

Long lines formed as word spread on the street and social media, prompting debate over whether it was Banksy-style pop-up art or an entrepreneur’s audacious attempt to simultaneously mock and purloin the Starbucks brand.

A fact sheet posted inside the shop claimed that by adding the word “dumb” it was technically making fun of Starbucks and so could use their trademarks under a law known as fair use.

It remains to be seen whether Starbucks get the joke and hopefully the coffee tastes as good as the real thing, but meanwhile some food for thought for others hoping to grow at the expense of the competition, in these flat-line times?

Thx Richard

Asda playing instore...?

Given increased supply-chain efficiencies, coupled with shopper reluctance to drive out-of-town, resulting in increasing redundancy of large-space retailing, Asda appears to be following Tesco’s lead in seeking to buy businesses that might complement their retail offering whilst absorbing overheads.

The Daily Express reports that Asda is rumoured to want to buy out the Early Learning Centre, given Mothercare’s struggles…

Apart from a good purchase price, the ELC would be a natural fit in terms of family offering, but could also add to instore theatre and enrich the shopping experience whilst keeping the kids amused.

Great news for toy suppliers, but a possible threat for NAMs in less exciting categories…? However, surely this presents an opportunity for extra creativity that might also be rolled out elsewhere?

Friday What-if: Why CVS Is Quitting Tobacco and the UK/EU implications

CVS Caremark Corp is a $123bn American retailer and health care company that has announced it will stop selling tobacco in October 2014, and focus on healthcare provision.

Respondents to Andrew Sullivan's blog add some interesting insights:

• CVS own Caremark RX, a huge pharmacy benefits manager (PBM), managing the prescription drug components of Medicare and other public and private insurance programs
• Pharmacy chains have been providing the care that more traditional medical practices cannot, with CVS clinics rising from 800 to 1,500 by 2015...
• CVS has between 30 and 40 partnerships with healthcare systems across the US
• CVS shares the retail-clinic space with Walgreens, Target and Walmart, and the CVS tobacco move could cause these three players to make similar moves re. tobacco, alcohol and even shotguns..
• Junk food and drinks have to come under the same spotlight as the healthcare market expands...
• The $2bn lost in tobacco sales will need replacing...

So, apart from some fundamental changes in US retailing, the key issue for UK/EU NAMs has to be the impact of McKesson and Walgreens expansion into Europe on CVS.

What-if CVS decide to copy the McKesson move and acquire some healthcare wholesalers, say Phoenix for starters?

To give you some idea of the scale of the issue and the money involved, some 2012 sales figures:

CVS Caremark                    €90.5bn
McKesson-Celesio              €115.3bn
Alliance Boots-Walgreens    €80.7bn
A.S. Watson                       €14.2bn

Apart from pushing Alliance Boots-Walgreens down into third place, with the right acquisitions, CVS could even take the No.1 slot...

Watch this space... 

London's first pay-per-minute café facing closure?

Ziferblat is a social network in real life! At 388 Old Street, Shoreditch, London, EC1V 9LT, the café opens from 1000 to midnight, and charges 3p per minute.

For NAMs willing to try, you pick up an alarm clock on arrival, note the time, and check out on completion. Complementary snacks and coffee are available 'on tap' and even bespoke coffee if required.

However, rather than being inundated with 'smash & grab' free-loaders making it uneconomical, Ziferblat, the country’s first pay-per-minute café, is facing closure less than three months after opening because of a lease dispute. According to The Standard, Ziferblat’s role as a café where customers make their own coffee and food, but pay by the minute, means it falls into a legal grey area between being classed as a “shared workspace” and a venue “selling food and drink”.

Hopefully, ways can be found to live with the bureaucracy, avoid biting the dust, and allow the emergence of a new approach to food service...

Rebuilding consumer confidence - the brand role

Nielsen's latest Global Survey of Consumer Confidence reveals that in Q4 2013, 60% of Britons are seeking to reduce their electricity bills, 58% have cut back on expanding their wardrobes, 57% have cut out takeaways and 55% are switching to cheaper brands in the supermarket.

As reported in The Guardian, the poll of 30,000 people has uncovered the first dip in consumers' confidence since 2011. Chris Morley, managing director of Nielsen UK and Ireland, said: "British consumers are increasingly recognising improvements in the economy, but they are still cautious and likely to continue to modify their buying and consumption habits to save money"

It is obviously impossible and inappropriate for brands to attempt to shift the mood of the entire population, that being a job for the politicians (!). Better for brand owners to focus on that pool of loyal users, the ones that have remained loyal despite the pressures and blows to credibility (horsemeat etc), the consumers that continue to believe in your brand, albeit at reduced consumption levels.

Working from what you know works, it can be easier to encourage existing users to consume more, rather than trying to attract new users to the brand.

• A key first step is to reassess latest consumer needs vs. brand attributes
• ...and checking that the brand delivers more than it says on the tin, every time....
• Check post-consumption delight -who needs satisfaction...?
• Optimise consumption levels by ensuring 100% onshelf and multichannel availability 24/7 - why take a chance on preventing any potential consumer from accessing your greatest asset?
• Share with consumers other uses of the brand revealed by regular users
• Then begin to encourage existing users of your current brand to try another brand in your portfolio, capitalising on your mutual knowledge and emerging confidence in the relationship

When loyal consumers have experienced and have confidence in your offering on these two levels - existing and new products - it is time to build on the ability of satisfied, savvy consumers to tell their friends....

A slow approach?
Then how about taking a chance on delivery vs. promise, and allowing the other half of the 'tell a friend' mechanism to kick-in, whereby a delighted consumer tells one friend, whereas a complaining consumer tells ten eager listeners, via every medium available...much, much faster! 

Economic crash...

Source: The Slog

Ten fastest growing jobs in US at risk from automation

The Atlantic reports a recent Oxford University study by Carl Benedikt Frey and Michael A. Osborne that calculated the odds of "computerization" for the 600+ jobs that the US Bureau of Labor Statistics tracks. They range from 96% automatable (office secretaries) to 0.9% (registered nurses).

Here are the ten fastest-growing jobs and the odds that robots and software will replace them:

1) Personal care aides: 74%
2) Registered nurses: 0.9%
3) Retail salespersons: 92% i.e. shop-workers
4) Combined food prep & serving workers: 92%
5) Home health aides: 39%
6) Physician assistant: 9%
7) Secretaries and admin assistants: 96%
8) Customer service representatives: 55%
9) Janitors and cleaners: 66%
10) Construction workers: 71%

Obvious food for thought, given that NAMs do not feature on the list....

In fact as Derek Thompson points out in The Atlantic article, computers are historically good at executing routines, but they’re bad at finding patterns, communicating with people, and making decisions, which is what managers are paid to do. This is why some people think managers are, for the moment, one of the largest categories immune to the rushing wave of AI.

Time for emphasising your skills at  finding patterns, communicating with people, and making decisions, and above all, avoid allowing the job to become dull, boring and repetitive, just in case...

Hat-tip to Andrew Sullivan

Self-checkout rage: Nearly one in five self-checkout shoppers steal goods at the bagging area...

In a survey of 2,664 people by VoucherCodesPro, reported in the Telegraph, one in five admit that self-checkout rage causes them to steal an average of £15 of mainly fruit & veg per month, although toiletries account 26% of items stolen.

The results suggest people steal regularly once they realise they can get away with it – with 57% of the thieves admitting they first took goods because they couldn’t work the machines, and 51% believing they are less likely to be caught.

Given that retailers introduced self-scanning/checkouts to reduce labour costs, it obviously negates the advantage to add a team of one-on-one 'helpers' to the self-checkout area...

One solution might be to try the Costco idea of spot-checks of bags vs. receipts which does not appear to cause offence...? 

Alternatively, why add this new 'route to theft' to 'grape-grazing', aisle-snacking and other methods that regular shoppers use to help retailers maintain high shrinkage levels...?

US shops that only offer food past its sell-by date

According to today's news in the Guardian that a man is to be put on trial in February after he was allegedly caught stealing from the bins behind an Iceland store in London, it appears that Freegans, or bin scavengers, are becoming a feature of the current flatline environment.

Paul May, a freelance web designer, is expected to argue in court that he does not consider taking the mushrooms, tomatoes, cheese, and cakes from the garbage outside of Iceland as illegal, because the food was  going to be disposed of and he needed it to feed himself, the Guardian reported.

Given that the Freegan movement started in New York a decade ago, it follows that the US should be first in opening stores that only offer food that is past its sell-by date.

Doug Rauch’s new venture The Daily Table, due to open in May, in Dorchester, Massachusetts, will be part grocery store and part cafe, specializing in healthy, inexpensive food and catering to the underserved population in Dorchester, Mass. What makes it controversial – at least at first glance – is Rauch’s business model: His store will exclusively collect and sell food that had crept past its “sell-by” date, rendering it unsellable in other, more conventional supermarkets.

But the real challenge, in Rauch’s vision, isn’t just getting that excess food to the people who need it. It’s convincing them that it’s worth eating.

Rauch is looking for a market-driven solution to food waste. The store will be a non-profit, but after an initial round of funding gets it started, he intends for it to be self-sustaining.

Interesting to see how long after the Freegan Garbage theft trial, the UK follows the US example with shops offering past sell-by food...

...and as an extension of consumers' tendency to 'make do', how much demand will be taken out of the market...

NB Update on Iceland Three case:
Following an outcry on Twitter and questions about the public interest value in pursuing a prosecution – with even bosses at Iceland expressing doubts – the Crown Prosecution Service today announced that it was dropping the case.

When online meets real world - how import restrictions are raising the bar...

With different motives, some governments are trying to slow down the development of imported online purchases.

As reported in the Financial Times, Russia, one of the world’s fastest-growing e-commerce markets, has imposed new customs regulations - submission of some original documents and credit card payment records - to hinder courier deliveries to private customers. DHL and FedEx are reported to have suspended express deliveries from abroad to individuals in Russia because of extra paperwork on all parcels for personal use, regardless of shipment value.

Currently just 2% of Russian retail sales are conducted online, but that is expected to rise to 5%, more than tripling the size of the online retail market by 2015, according to Morgan Stanley.

Incidentally, if you think the Russian restrictions are bad, Argentina goes one better, albeit in an attempt to cope with falling levels of foreign currency reserves…  Under the new rules, shoppers can make just two purchases each year from foreign online and mail-order companies. Any purchases beyond that will be treated as imports, and will require extensive paperwork such as a signed declaration to the customs office in advance, before they can collect their packages, for each international purchase.

Given their pragmatism, it is probable that Amazon will escalate their operation in Russia to restore the simplicity of its business model, and possibly an aggregator role to provide an Amazon  route into Russia for those who cannot, or will not, play in the customs ball-park…

…while the authorities have full access to internal traffic for tax purposes…

Optimising your next conference call

These conferences call experiences will probably strike a chord...

Given the potential savings on travel time, conference calls are worth getting right so why not check out Seth Godin's seven key principles?

And with a bit of the correct practice, perhaps even worth experimenting on the buyer?

Hedge Funds move on Major Multiples Store Portfolios

According to reports in The Sunday Times (p1 Business section, 26-01-2014) hedge funds have taken stakes in Tesco, Sainsbury’s and Morrisons with a radical plan to hive off their property empires.  In other words, American activist investors (Elliott, and apparently other activist funds have acquired small stakes in the three retailers) believe that, especially following disappointing Christmas results, the stock market undervalues the properties and that hiving off and flotation of the new property companies would release some of that value by appealing to a new type of ‘property-focused’ investor..

The plan is based upon a similar move last year by Loblaw.
(Morrisons are already exploring some property release, and Dalton Philips includes Loblaw on his CV...)

The ‘hidden’ value:
Retailer          Market capitalisation  Estate value   'Surplus'
Tesco                      £26bn                      £38bn             £12bn                                                                              
Sainsbury’s              £6.9bn                    £11.5bn          £4.6bn                                                                          
Morrisons                £5.7bn                     £9bn              £3.3bn

More details are available in The Sunday Times article.

Incidentally, for those in H&B, Elliott recently forced US drugs distributor McKesson to raise its bid for Celesio, in a deal now concluded.

Whilst the activist-investor route may well be resisted by the retailers, the idea of releasing value that could be part-returned to shareholders might appeal, thus propping up the share price…

However, in doing so, the retailers would lose some control, and also pick up an additional KPI based on maintaining the value of their retail properties, at a time when all three are focused on optimising like-for-like sales… However, if the hedge funds increase their stakes, then increasing shareholder value moves up the agenda, along with the aggravation...

For NAMs, all of this means that a renewed emphasis on financial performance, the value of trade investment and especially the ability to calculate and demonstrate the impact of all supplier-support on the retailer’s share price, becomes a critical requirement in the day-job…

Crossrail London excavations

'Any word on the 0715 to Cheshunt?'

Amazon Anticipatory Shipping, before you order...

                                                                   pic: Retail Wire
Following their Christmas drone-delivery idea, Amazon gained a patent last month for what it calls "anticipatory shipping,'' the Wall Street Journal reports.

Amazon, the Journal reported, says it may box and ship products that it expects customers in a specific area will want, based on previous orders and other factors it gleans from its customers' shopping patterns, even before they place an online order.

Among those other factors: previous orders, product searches, wish lists, shopping cart contents, returns and other online shopping practices.

Once in transit, the packages would theoretically wait at the shippers' or Amazon's warehouse hubs or on trucks until (and if) an order arrives. In some cases, partial street addresses or zip codes will be filled out with the remaining pertinent details — name, rest of address — completed once the order arrives.

Amazon has worked to cut delivery times as a way of encouraging more orders and satisfying customers, such as by expanding its warehouse network and making some overnight and even same-day deliveries.

Amazon didn't estimate how much delivery time it expects to save, or whether it has already put its new system to work, but the initiative clearly provides a new hurdle for those who regard Amazon as competition – and anyone who thinks that they are in the game by simply setting up an online service…