Matt McKeown exceeds 70mph on his jet-powered shopping trolley in 2013, unconsciously signalling a return to weekly, then daily shopping trips, dragging large-space redundancy in its rear....
Sunday, 13 September 2015
Remember when monthly shopping breached the limit?
Matt McKeown exceeds 70mph on his jet-powered shopping trolley in 2013, unconsciously signalling a return to weekly, then daily shopping trips, dragging large-space redundancy in its rear....
Saturday, 12 September 2015
Wednesday, 9 September 2015
Last year’s trade strategy still feel right?
What is going on in UK retail?
Retailers and pundits are calling it ‘structural change’ meaning an economic condition that occurs when a market changes how it functions or operates, making yesterday’s forecasts and decisions inappropriate.
In practice, as you now know, this is one of the most fundamental retail changes in career history for most people.
- Radical changes in how people shop: need to buy anytime, anywhere, any way they choose, or else..
- Major mults locked into large space outlets – their retail estates at least 20% over capacity - that cannot be released via sell-off without compromising the balance sheet (the value of a store is based on sales of £1k/sq ft/annum, which no other business can legally deliver, +2% annual depreciation means a lifetime expectation of 50 years, all contributing to lower sell-off prices..
- Long tail of instore SKUs: with 80% of sales produced by 20% of the SKUs, means that current stores are at least 20% too large, a gap too great to cover via instore theatre and alternative usage, putting more pressure on the £1k/sq ft/annum KPI. This means that the Tesco cull has to be just the start…
- Online still indicating an unknown upside, and an equally unmeasurable downside for traditional retail
Where is it headed?
Radical change has to result in a re-alignment of market shares, only issues are how long and how fundamental... Pragmatic business people have to plunge in and commit now, in order to optimise resources and profitability, while others ideally await a return to normal...
Taking Nielsen market shares as a basis, why not ‘what if’ the possible re-alignment – crude, but probably better than assuming share maintenance or even reversion to better times?
Current share Share end 2017?
Total Mults 90.6% 88.0%
Tesco 27.9% 25.0%
Sainsbury’s 15.9% 14.0%
Asda 15.6% 14.5%
Morrisons 10.8% 9.5%
Aldi 6.2% 9.0%
Co-op 5.8% 5.0%
Waitrose 4.2% 5.0%
Lidl 4.2% 6.0%
Key dynamics:
- Drift of business away from large space retail, with lock-in + long tail causing profitability issues/write-offs
- Smaller, closer, more frequent shopping trips benefiting small local convenience players
- Growth of online - no space/tail issues - with click & collect diluting fulfilment costs
These changes represent both opportunities and threats. Threats for those who ‘wait & see’, but opportunities for the few who act now on incomplete information but can anticipate the inevitable consequences of fundamental change in their markets. The unprecedented forces unleashed in the market will not be limited to the market-share ‘tweakings’ indicated above – we are talking about fundamental change in market composition, the degree of which change will be determined by your category-customer-competitor mix…
What to do about it?
Back-to-basics review of relative competitive appeal vs. available alternatives – by definition this will re-evaluate brand capabilities vs. real consumer need, set against your company expectations of brand growth, time window, and appetite for risk, all assessed within a realistic – and objective – assessment of a current market context and its probable development
In other words, if your current trade strategy pinches a bit, perhaps our 3.5hr bespoke session can help secure a better fit?
More: contact me bmoore@namnews.com
Sunday, 6 September 2015
Saturday, 5 September 2015
Friday, 4 September 2015
Co-op reforms not quite paying Dividends, but...
For years the training ground for young, ambitious NAMs, with a typical two year tenure 'to understand how it works', anyone claiming 100% insight at the end of the induction-period was promptly sent back for another two years, to appreciate the extent of their naivety in presuming to make sense of this unique business model, ever...
In practice, it took a crisis that would have destroyed normal PLCs to demonstrate the inner strengths of an organisation that for years aimed at breaking even, and obviously came in with a 3% loss at year end, in contrast with 'normal' retailers that aim for a 5% Net Profit that inevitably results in 2.5%...
Having bitten this particular bullet - aiming for and delivering a moderate profit, and even mentioning ROCE in despatches - the organisation last year addressed the cumbersome governance structure and made it more merit-based, and even more democratic via a 1 man, 1 vote modification.
This made it more tolerable to adopt other normal retailer moves aimed at cutting waste and improving profitability. In fact this morning's Independent lists the jettisoning of non-core businesses, such as the pharmacy chain and the much-loved farming business, using some of the savings to fund an 8.5% pay rise for staff.
Even the 'Divi' appears to have been replaced by the immediacy of discount vouchers at point of sale...
In fact, anyone that has heard Richard Pennycook's IGD presentation of the turnaround, realises that the Co-op is truly on the way back, in part evidenced by their ability to survive the current price wars in UK retail, better than most...
All that said, perhaps it is time for Co-op NAMs to step back a little from the fire-fighting, and consider using the ROCE, Net Margin and Capital Rotation tools that provide an effective working platform for their Big Four colleagues, all adapted to the realities of a Co-op attempting to morph into responsible capitalism.
At the very least, this approach will provide practical career-move training in how to optimise one of the mults a few years later. However, in the meantime, this change in MO will pay dividends in terms of job satisfaction...
In practice, it took a crisis that would have destroyed normal PLCs to demonstrate the inner strengths of an organisation that for years aimed at breaking even, and obviously came in with a 3% loss at year end, in contrast with 'normal' retailers that aim for a 5% Net Profit that inevitably results in 2.5%...
Having bitten this particular bullet - aiming for and delivering a moderate profit, and even mentioning ROCE in despatches - the organisation last year addressed the cumbersome governance structure and made it more merit-based, and even more democratic via a 1 man, 1 vote modification.
This made it more tolerable to adopt other normal retailer moves aimed at cutting waste and improving profitability. In fact this morning's Independent lists the jettisoning of non-core businesses, such as the pharmacy chain and the much-loved farming business, using some of the savings to fund an 8.5% pay rise for staff.
Even the 'Divi' appears to have been replaced by the immediacy of discount vouchers at point of sale...
In fact, anyone that has heard Richard Pennycook's IGD presentation of the turnaround, realises that the Co-op is truly on the way back, in part evidenced by their ability to survive the current price wars in UK retail, better than most...
All that said, perhaps it is time for Co-op NAMs to step back a little from the fire-fighting, and consider using the ROCE, Net Margin and Capital Rotation tools that provide an effective working platform for their Big Four colleagues, all adapted to the realities of a Co-op attempting to morph into responsible capitalism.
At the very least, this approach will provide practical career-move training in how to optimise one of the mults a few years later. However, in the meantime, this change in MO will pay dividends in terms of job satisfaction...
Thursday, 3 September 2015
Tesco PLC's Balance Sheet Re-set: why selling South Korea may not be enough
Following today's confirmation of the sale of its South Korean operation to MBK Partners, and according to The Motley Fool, Tesco is now in the final stages of its asset sell-off aimed at reducing its adjusted net debt of £8.5bn by the £5bn Moody’s rating agency believes is necessary to meet stock-market expectations.
Ideally, asset sales will yield:
- South Korea £4.2bn
- Dunnhumby between £700k and £1bn
Given global stock-market uncertainties it is possible that these sales may not yield sufficient sums, in which case Tesco will have to resort to seeking more cuts within the business and/or attempt a Rights Issue to raise cash.
Rights Issue Risks
Whilst the latest share price is a daily reminder of stock market opinion re Tesco’s potential, actually asking shareholders to invest more in a falling share price - via a Rights Issue - would not only cause investors (and analysts) to take a really fundamental view of Tesco’s prospects of a successful turnaround in terms of re-balancing the business, but also question the retailer's ability to regain market share in a flat-demand market, re-assess their competitive edge vs. available alternatives and question their ability to compete with newer retail players.
And this apart from a Rights Issue yielding less as their share price falls in the current stock-market turmoil…
This leaves further cost-cutting in the business, a possible re-set of the product re-set, and a more aggressive approach to selling off redundant space, at any price…with no sign of a fat lady singer anywhere…
Ideally, asset sales will yield:
- South Korea £4.2bn
- Dunnhumby between £700k and £1bn
Given global stock-market uncertainties it is possible that these sales may not yield sufficient sums, in which case Tesco will have to resort to seeking more cuts within the business and/or attempt a Rights Issue to raise cash.
Rights Issue Risks
Whilst the latest share price is a daily reminder of stock market opinion re Tesco’s potential, actually asking shareholders to invest more in a falling share price - via a Rights Issue - would not only cause investors (and analysts) to take a really fundamental view of Tesco’s prospects of a successful turnaround in terms of re-balancing the business, but also question the retailer's ability to regain market share in a flat-demand market, re-assess their competitive edge vs. available alternatives and question their ability to compete with newer retail players.
And this apart from a Rights Issue yielding less as their share price falls in the current stock-market turmoil…
This leaves further cost-cutting in the business, a possible re-set of the product re-set, and a more aggressive approach to selling off redundant space, at any price…with no sign of a fat lady singer anywhere…
Wednesday, 2 September 2015
Germany moves towards credit card usage in retail - at a price!
Cashback cull: Tesco halves Clubcard points for 2.8m credit card holders
According to The Telegraph, EU rule changes on the fees paid by retailers accepting payments via Third Party credit cards has been halved to 0.3% of purchases to reduce shelf prices.
In practice, credit card owners like Tesco either have to reduce the reward points on usage of their card in non-Tesco outlets, or absorb the losses on such deals.
Tesco have decided to reduce the rewards from £1 per £400 spend (0.25%) to £1 per £800 spend (0.125%), whilst retaining the £1/£400 spend in Tesco stores.
In practice, being a lead player, other retailers will follow Tesco, and savvy shoppers will probably switch to a more rewarding card for their non-Tesco purchases. This means that the viability of retailer credit-card schemes built on the assumption of access to the entire market, will become less profitable and/or will result in additional charges/points reduction to claw back losses...
However, the real downside is that any attempt at detailed explanation will only heighten consumer awareness of the miniscule rewards available via credit-card and loyalty schemes, with questions asked re what costs are involved and how much is distributed via rewards, in an increasingly suspicious mode on the part of consumers, especially those returning from their first holiday trip refusals to show boarding cards at checkout...
In practice, credit card owners like Tesco either have to reduce the reward points on usage of their card in non-Tesco outlets, or absorb the losses on such deals.
Tesco have decided to reduce the rewards from £1 per £400 spend (0.25%) to £1 per £800 spend (0.125%), whilst retaining the £1/£400 spend in Tesco stores.
In practice, being a lead player, other retailers will follow Tesco, and savvy shoppers will probably switch to a more rewarding card for their non-Tesco purchases. This means that the viability of retailer credit-card schemes built on the assumption of access to the entire market, will become less profitable and/or will result in additional charges/points reduction to claw back losses...
However, the real downside is that any attempt at detailed explanation will only heighten consumer awareness of the miniscule rewards available via credit-card and loyalty schemes, with questions asked re what costs are involved and how much is distributed via rewards, in an increasingly suspicious mode on the part of consumers, especially those returning from their first holiday trip refusals to show boarding cards at checkout...
Sunday, 30 August 2015
Saturday, 22 August 2015
Friday, 21 August 2015
Tesco setting a new KPI in fine wine appreciation?
The Guardian’s report on the retailer’s decision to close the Tesco Wine Community website on 28 August, and the slimming down of its in-store and online wine range are all part of chief executive Dave Lewis’s re-set quest to reduce the overall product range.
The key issue for suppliers is how these moves by the UK’s biggest wine retailer will impact alcoholic drinks’ off-trade sales, particularly as the website focused on blending wine-loving customers with other experts and wine-bloggers.
Therefore, the resulting vocal response should come as no surprise as disappointed members urge more enlightened retailers like Lidl to leap into the gap…
Think also of the tell-a-friend implications resulting from alienation of this special-interest network…
Seriously, whilst Tesco’s current priority has to be profit performance, its buyer-led drive to educate UK palates to more subtle appreciation of what really matters in wine selection may result in unintended consequences in terms of how discerning shoppers view the retailer's other post-cull categories…
Thursday, 20 August 2015
Boarding passes - still a storm in a glass tea-cup?
Any airport operators and retailers in any doubt as to the depth of consumer feeling need only read the comments-section of the many news reports that continue to cover the issue. Unfortunately for airport retailers, it does not stop at the checkout...
This tip-of-iceberg boarding pass issue is now causing savvy consumers to bring their normal high street shopping behaviours into the airport. In other words, when mobile phones might have been left off as part of the pre-holiday wind-down process, price-comparison apps are being consulted to reveal price-gaps that are even wider than the ‘same as high street prices’ assurances being issued by airport retailers, as the issue escalates...
More importantly, with plenty of time to spare, airport travellers are able to indulge themselves in texting their feelings to friends. In practice this means applying the tell-a-friend rule: If a brand exceeds my expectations, I tell one friend, if short-changed, I tell ten friends...
Then think plane-loads of passengers continuing to spread the word at destination airports currently unaffected by this uniquely UK issue...
In other words, what was meant to be a shop-window for leading-edge retailers and brands is morphing into an outlet for pent-up frustration by vocal savvy passengers that fall out with the staff and vote with their feet...
Meanwhile, suppliers have to ask whether their brands’ presence in airport shops, and possibly the innocent target of consumer anger, is worth the damage, cost and growing inconvenience of travelling by air...
Tuesday, 18 August 2015
Morrisons sale of C-Store Chain - a phoenix chicken under new ownership?
Details are obviously sparse at this stage, but logically, at breakeven on sales of say £300m, it is probable that the 160-outlet chain will change hands for no more than £250m - a financial relief for Morrisons, and an exciting convenience-challenge for the new owners.
The issue for suppliers has to be where the M local chain goes from here.
Morrisons have already addressed the viability issue by selling off unprofitable outlets, but it is probable that some branches in high-rent areas will be prioritised in terms of driving footfall and basket-size to improve the bottom-line, before decisions are made re lease-forfeiture/closure, with attendant write-off costs.
The key will be to establish a consumer-franchise to capitalise on small, local and more frequent shopping. This means that, having refined the formula, the focus will be on extending into neighbourhood areas, ideally with lower rentals and possibly going a franchise route…?
Either way, suppliers might usefully support a chain that will make an interesting 160-outlet investment-backed convenience chain customer firing on all cylinders, and possibly even realise a ground floor opportunity in what could become a significant player as it rises from the ashes of structural change in the grocery sector…
The issue for suppliers has to be where the M local chain goes from here.
Morrisons have already addressed the viability issue by selling off unprofitable outlets, but it is probable that some branches in high-rent areas will be prioritised in terms of driving footfall and basket-size to improve the bottom-line, before decisions are made re lease-forfeiture/closure, with attendant write-off costs.
The key will be to establish a consumer-franchise to capitalise on small, local and more frequent shopping. This means that, having refined the formula, the focus will be on extending into neighbourhood areas, ideally with lower rentals and possibly going a franchise route…?
Either way, suppliers might usefully support a chain that will make an interesting 160-outlet investment-backed convenience chain customer firing on all cylinders, and possibly even realise a ground floor opportunity in what could become a significant player as it rises from the ashes of structural change in the grocery sector…
Sunday, 16 August 2015
Kids born in the 60s & 70s, and their clean dinner-plate neuroses?
His mother's insistence that no food went to waste has stayed with Colm O'Regan all his life. The ritual of dinnertime shaming and being made to finish his dinner will inevitably be repeated when he has his own children, he writes in this week’s BBC Magazine.
Some great insights but key was the fact that days spent in unsupervised outdoor pursuits soon burned off any excess calories resulting from clean plate ‘over-eating’, and more importantly, were vital in helping us manage uncertainty in a world without patterns...
First, we survived being born to mothers who smoked and/or drank while they carried us.
They took aspirin, ate blue cheese dressing, and tuna from a tin.
Then after that trauma, our baby cots were covered with bright coloured lead-based paints.
We had no childproof lids on medicine bottles, doors or cabinets and when we rode our bikes, we had no helmets, not to mention the risks we took hitchhiking.
As children, we would ride in cars with no seat belts or air bags.
Riding in the back of a van - loose - was always great fun. We drank water from the garden hosepipe and NOT from a bottle.
We shared one soft drink with four friends, from one bottle and NO ONE actually died from this.
We ate cakes, white bread and real butter and drank pop with sugar in it, but we weren't overweight because......
WE WERE ALWAYS OUTSIDE PLAYING!!
We would leave home in the morning and play all day, as long as we were back when the streetlights came on. No one was able to reach us all day. And we were O.K.
We would spend hours building our go-carts out of scraps and then ride down the hill, only to find out we forgot the brakes. After running into the bushes a few times, we learned to solve the problem .
We did not have Playstations, Nintendo's, X-boxes, ipads, had no video games at all, no 200 channels or catch-up on TV, no DVDs, no surround sound, no mobile phones, no text-messaging, no PCs, no Internet or social networking.......... WE HAD REAL FRIENDS and we went outside, found them and talked to them!
We fell out of trees, got cut, broke bones and teeth and there were no lawsuits from these accidents.
We played with worms and mud pies made from dirt, and the worms did not live in us forever.
Made up games with sticks and tennis balls and although we were told it would happen, we did not poke out any eyes. We rode bikes or walked to a friend's house and knocked on the door or rang the bell, or just yelled for them!
Local teams had try-outs and not everyone made the team. Those who didn't had to learn to deal with disappointment. Imagine that!?
The idea of a parent bailing us out if we broke the law was unheard of. They actually sided with the law!
This generation has produced some of the best risk-takers, problem solvers and inventors ever. The past 50 years have been an explosion of innovation and new ideas.
We had freedom, failure, success and responsibility, and we learned how to deal with it all…….. !
So, the continuing unprecedented times are simply challenges and opportunities for many of us…
Some great insights but key was the fact that days spent in unsupervised outdoor pursuits soon burned off any excess calories resulting from clean plate ‘over-eating’, and more importantly, were vital in helping us manage uncertainty in a world without patterns...
First, we survived being born to mothers who smoked and/or drank while they carried us.
They took aspirin, ate blue cheese dressing, and tuna from a tin.
Then after that trauma, our baby cots were covered with bright coloured lead-based paints.
We had no childproof lids on medicine bottles, doors or cabinets and when we rode our bikes, we had no helmets, not to mention the risks we took hitchhiking.
As children, we would ride in cars with no seat belts or air bags.
Riding in the back of a van - loose - was always great fun. We drank water from the garden hosepipe and NOT from a bottle.
We shared one soft drink with four friends, from one bottle and NO ONE actually died from this.
We ate cakes, white bread and real butter and drank pop with sugar in it, but we weren't overweight because......
WE WERE ALWAYS OUTSIDE PLAYING!!
We would leave home in the morning and play all day, as long as we were back when the streetlights came on. No one was able to reach us all day. And we were O.K.
We would spend hours building our go-carts out of scraps and then ride down the hill, only to find out we forgot the brakes. After running into the bushes a few times, we learned to solve the problem .
We did not have Playstations, Nintendo's, X-boxes, ipads, had no video games at all, no 200 channels or catch-up on TV, no DVDs, no surround sound, no mobile phones, no text-messaging, no PCs, no Internet or social networking.......... WE HAD REAL FRIENDS and we went outside, found them and talked to them!
We fell out of trees, got cut, broke bones and teeth and there were no lawsuits from these accidents.
We played with worms and mud pies made from dirt, and the worms did not live in us forever.
Made up games with sticks and tennis balls and although we were told it would happen, we did not poke out any eyes. We rode bikes or walked to a friend's house and knocked on the door or rang the bell, or just yelled for them!
Local teams had try-outs and not everyone made the team. Those who didn't had to learn to deal with disappointment. Imagine that!?
The idea of a parent bailing us out if we broke the law was unheard of. They actually sided with the law!
This generation has produced some of the best risk-takers, problem solvers and inventors ever. The past 50 years have been an explosion of innovation and new ideas.
We had freedom, failure, success and responsibility, and we learned how to deal with it all…….. !
So, the continuing unprecedented times are simply challenges and opportunities for many of us…
Subscribe to:
Posts (Atom)