Buy Now, Pay Less Later

An article in this week’s Sunday Times details an unusual price promotion in a German Furniture chain: Who’s Perfect, which could provide UK NAMs with a way of understanding some of the consequences of Negative Interest Rates.

Essentially, its Frankfurt store offers a white Halma corner sofa – the company’s bestseller – for €2,700, buying and paying now at full price, or have a 1% discount if paid after two years… 

This is because the store gets charged negative interest rates on its bank deposits, so it is preferable to leave the cash with customers for two years at a cost of 0.5% per annum…!

Logical to a point, but the promotion ignores the risk-factor involved with credit extension.

For example, can you imagine if, after all these years of begging, or even paying for earlier payment, you were to offer your buyer a discount for taking even longer to pay, at increasing risk to you, in these Imperfect times…?

Tailoring your brand portfolio to new retail realities...

As the multiples struggle to adjust to the consumer's shift to smaller, cheaper, faster, closer, more convenient and online shopping by selling surplus outlets and trying to manage lower productivity caused by redundant space in their estates by culling SKUs, the consequences for brands are hopefully obvious.

In other words, with less shelf space available, only strong brands can maintain their facings, unless you can prove otherwise....

Moreover, brands are further threatened by the fact that much of the multiples' growth is via private label (if in any doubt, why not dig into your in-house Kantar data?), and discounters' via surrogate labels.., all adding to the need for new retail strategies..

In the face of these 'permanent' market changes, it follows that branded suppliers need to re-set what may be a pre-2008 approach by re-evaluating the relative appeal of their brand portfolios to suit current retail realities.

Essentially, this means fundamentally re-assessing consumer appeal, by brand, by retailer, vs. available competition to ensure each SKU of each brand has a defensible rationale to justify its on-shelf presence in each of the multiples.

In practice, this will mean you will have a different brand portfolio for each of the multiples, with possible regional variations to match local need.

Finally, any of your brands that do not meet these criteria should be diverted to other channels, before the multiples do it on your behalf...  

Making every trip count...

Demonstrating your impact on Tesco averages

How your brand drives Tesco performance in latest figures

Latest results indicate that:

1. Tesco Group sales £54.4bn vs. Inventories of £2.4bn suggest a stockturn of 22.6 times/annum

Given your twice weekly delivery, and assuming smooth sell-through, has to suggest your SKUs are turning 100 times /annum, thereby driving Tesco stockturn...!

2. Tesco UK sales of £37.2bn vs. UK sales area of 41.5m sq. ft. showing selling intensity of £900/sq. ft./annum 

Calculating your SKU footprint (Average number of facings x number of units of facings backup on shelf x numbers of stores stocking) and then dividing the result into Tesco sales of your SKU per annum, has to show that your SKU is generating sales per sq ft of at least 2x Tesco average...

Just two ways of demonstrating your value in negotiation...

Tesco's latest result: the stand-out numbers for NAMs

Tesco’s return to profitability means that proactive NAMs can now incorporate latest operating profit into their discussions with buyers.

With UK sales of £37.2bn and operating profit of £505m, this means that Tesco is generating 1.4% operating profit on sales.

This can help in demonstrating the value of your trade investment, in that every £10k you give Tesco is equivalent to £714k in sales i.e. £37.2/1.4 x 100

This has to help for starters, while we await the full detail of the latest annual report...

A 3-in-1 Solution? (Redundant-space, Deterrence, Theatre)

Is delivery the new black? Three trends are changing the distribution landscape

A great article in realbusiness by Tim Robinson describes the changing image of logistics and fulfilment becoming the sexy end of retail.

The seemingly unstoppable growth of online shopping has put the spotlight on fulfilment and delivery in particular. Delivery options are now promoted in prime media space, a situation which would have been unheard of 10 years ago.

The article goes on to detail new ways of meeting consumer need fulfilment in terms of matching ease of purchase with ease of access to products. Read here for Tim’s update on technology, environment and the sharing economy.

The key point for NAMs is to see this raising of the fulfilment game in the same way that savvy consumerism spread back up the pipeline, making the buyer more savvy, demanding demonstrable value for money, or else…

In other words, as retailers struggle to meet the rising standards of home delivery, so these standards will spread up the supply chain and become the norm in supplier-retailer delivery..

If in any doubt, why not nip down to the despatch department and find out what your logistics colleagues think?

Lidl - the real threat?

This week, why not visit your nearest Lidl and think about the threat to the major mults? Even better, follow it with a call on a nearby Tesco to heighten the contrast…

See how long it takes for you to appreciate that the hard discounters becoming more like supermarkets is not the issue... Of course they will add to their offering, especially to cater for upmarket clients…

But suppose their real impact is in making the consumer-shopper value a simpler, more limited choice, and in the process convincing us that we cannot perceive – and don’t always need – the ‘extras’ provided by equivalent brands at 30% more…

Causing us to ponder whether we are changing the discounters, or they are changing us?

Now that’s the type of competition the mults – and their branded suppliers - don’t need…

Waitrose raises the Private Label bar - a threat for all brands?

News that Waitrose is rolling out 'Waitrose 1' premium label across 500 food products, replacing some premium ranges but adding ‘new and improved lines’ raises some issues for suppliers:

• Given that Waitrose tops the league table for best place to buy private label (Which? report 2015, 47% of products tested achieved best-buy status) this represents an extra emphasis on premium own label
• Bearing in mind that Aldi came 2nd, Sainsbury’s 3rd and Lidl fourth in the same survey, it is likely that other mults may take the Waitrose move as an incentive to upgrade their private label offerings
• With all mults in the same large-space, out-of-town boat, their growth will be at the expense of other mults...
• Price-cutting on brands has not worked and has impacted bottom lines...
• ...and private label remains the only real differentiator for the mults
• This could mean we are entering a new type of food-based private label quality-war, which if it works, could spread to other categories

Dyson preparing to hoover up the re-chargeable battery market?

News that Dyson will spend £1bn – plus a UK grant of £16m in last week’s budget - on battery development over the next five years has to serve as a warning that this innovative disruptor is on the move again…

Following a 2015 acquisition of Satki3, a U.S. maker of solid-state lithium-ion batteries for $90m, having previously invested $15m in the Michigan firm, Dyson is ready to invest in the firm’s discovery that it has found a way to produce batteries with twice the energy storage potential of standard lithium-ion models, at a half to a third of the cost.

A step too far?
I still blush when I recall a very early competitive brainstorming session conducted for a defunct supplier where we concluded that whilst a see-through vacuum cleaner model might appeal ‘in the shop’, the first-use viewing of gathered dust would soon alienate most consumers…Dyson obviously knew better...

• While the immediate application for new batteries would probably be in Dyson’s existing cordless products, they have potential uses in everything from electric cars to tablet computers
• In other words, imagine the disruptive appeal of twice the energy storage potential of standard lithium-ion models, at a half to a third of the cost...

Tesco Takes On Discounters With Seven New Value Own Label Ranges, So?

                                                                                                                                pic: Marketing Week

News that Tesco stepped up its fight against the discounters yesterday by launching a host of new value-orientated own label ranges in the fresh produce and meat categories raises some questions:

• What are the chances of Tesco value-labels possibly being perceived as 'cheap' versions of the Tesco brand, a downward stretch, whilst discounter surrogate labels look equivalent to brands in quality, an upward stretch?
• Same quality, same price, different perception...?
• ...and the ultimate question being: Which customer is more likely to say “Wow”?

Sainsbury’s Confirms Offer for Home Retail - the next steps and imlications

News that Sainsbury’s moved a step closer to sealing the takeover of the Home Retail Group/Argos on Friday, by tabling a formal offer for the business after rival bidder Steinhoff International pulled out, raises a number of implications...

NAM Implications:

• Whilst as yet, there is no obviously sign of an amply-proportioned lady vocalist preparing to take centre-stage, this looks like a done-deal...
• Obviously the competition authorities will play their part - delay & distraction - but management’s immediate focus has to be on squeezing costs and generating synergies from the mix…
• This has to result in well-heralded store closures - otherwise why bother to acquire - and if this means 300 Argos being transferred into nearby space-to-spare Sainsbury’s branches, so be it
• Ultimately, the Sainsbury’s-Argos combination has to perform better than the separate entities
• ...meaning opportunities for visionary suppliers

Driving Demand, Government-style...

Unit-pricing: The 'missing' ingredient in price comparison

The latest Which? Report highlights the 'up to' 4x premium shoppers pay for the convenience of pre-sliced and pre-portioned foods. The price disadvantage of buying smaller sizes of other essentials is also highlighted.

Whilst retailers can obviously point out that in most cases the unit price is displayed on the price-label to facilitate like-with-like price comparison, the only problem can be the fact that many consumers do not understand the meaning of unit pricing, apart from the mental gymnastics required in breaking down 100g, kilos and volume-equivalents in the case of liquids.

In effect, the unit-price serves little useful purpose and may even add to the confusion of the shopper...and given that confusion leads to suspicion, it can be seen that the real casualty is trust in the retailer...

On-shelf education could be applied via a standardised category league-table of price per 100g comparisons, in very simple language...

Patronising? No way. We are not talking about degrees of intelligence, merely accepting that a busy, distracted shopper is only giving 10% of their attention to true comparison, based on a reasonable level of trust in the retailer...

Allowing the current confusion to continue can lose both trust and shopper...

Of course teaching consumer-shoppers to understand unit pricing makes the consumer better-informed and more difficult to mislead...

Welcome to the new world savvy consumer!

Professional NAMs already take that risk by helping the buyer to make valid like-with-like comparisons, thereby making them more demanding, but the current climate demands a fully informed supply chain.

Helping the 'buyer' to buy can help...

Aldi/Lidl - Home of the missing 'Wow'?