Mercs & Perks, a basis for customer segmentation?

Shortly after The Wall came down in Berlin, we worked with a client in Russia, helping to raise the bar in retailing by investing in development of wholesale and retail standards as a basis for optimising emerging routes to consumer.

Given limited resources, we needed a way of selecting customers that would be most receptive to - at that time - state of art retailing techniques. In other words, we needed to distinguish between those retailers/wholesalers that had the right attitude in terms of growing their business but lacked the knowledge and skills, and those that were simply in it for the Mercs & Perks.

This meant we could focus on helping KAMs to develop customers’ skills in key aspects of retailing aiming at improving ROI, basket-size, sales/sq. ft., net margin, stockturn and shrinkage.

This made the customer more demanding of the right things, but even tougher for the competition...

Time for a really fundamental approach to customer evaluation?

Early morning avoidance of the Sainsbury's fridge-camera?

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Deep hair-conditioner - a lesson in brand dedication...?

Back in my marketing days in haircare, Peter, our hands-on sales director, always insisted on trying new product formulations personally, before signing off a brand for launch.

For those not yet into deep conditioning of the hair, the best treatment is a viscous waxy-like substance that needs to be liberally applied after a shampoo, and left in place for a couple of hours, ideally in warm steamy conditions.

Late one evening, having forgotten that he was due to report on the new formulation the next day, he hurriedly showered, shampooed and applied liberal quantities of deep conditioner before climbing into his pyjamas. Given that steam rooms were not a typical feature of even sales directors' homes at the time, Peter improvised by taking a Tesco plastic bag, wrapping it around his head and securing it firmly in place to accelerate the conditioning process.

By eleven he was settled by the fireside when his wife announced that having rained heavily all evening, the build-up of leaves on the flat roof of the garage had blocked the drain, causing floodwater to penetrate the upper floor. Peter hurriedly put on a raincoat over his pyjamas, donned his green wellies, grabbed a torch and climbed out onto the roof with a yard-brush, and began to rod the drain.

Not long after, a police car, silent and with blue light in off-mode, arrived in response to a report of an intruder by a concerned neighbour....

Peter's wife tried to explain, but the police decided that a personal account from Peter was necessary.

Eventually, having cleared the drain, Peter climbed back in the window onto the upper landing to be confronted by two bemused members of the local constabulary...

The next day, new product formulation sign-offs at Wella were henceforth delegated to the marketing department...

Time to take it for granted that not everyone can be taken for granted?

The Entertainer triples email revenues

One of the UK’s most innovative toy retailers, The Entertainer is using The Message Cloud to power smarter emails tailored for specific personas in their existing database, according to Direct Commerce Magazine.  The results, showing a 3x increase in email revenue and 120% lift in mobile sales are worth further analysis, via a tool that can be especially useful in categories where a parent buys on behalf of a child.

The real benefit is in moving from blanket e-mailing - alienation - then refining and converting your existing consumer email data to a 1:1, non-intrusive, more productive dialogue via your existing contact details. Then, having refined the method, a move to a pro-active gathering of additional email details has to provide a basis for further growth…

Time to check out the possibilities re what you already know...?

wow = WOW! when you realise just 25% of Amazon sales are in Books & Media...

                                                                                                Pic: Pacific Crest via Business Insider

Latest US figures show that e-commerce is still only a tiny part of the overall retail industry, representing a mere 7.2% penetration rate.

However, when you begin to overlay Amazon performance, the threat to other retailers is obvious, as they play catch-up in category after category in the biggest trading opportunity ever...

Are you sure you are doing enough to anticipate the obvious?

Geographical density: You realise they are No.1 when Amazon-man delivers your parcel along with one for next-door...

BHS Attracts ‘Multiple Offers’ As Deadline Closes

News of five potential bids raises a number of issues for BHS suppliers:

• Having parked the pension deficit, a new owner will need to assess the profitability of every outlet, and sell off those that are a drain on the business, before exploring the viability and potential of the current business model
• (There may be buyers among the secondary bidders seeking sites that are complementary to their current locations)
• Previous suppliers to BHS need to check out possible prices & terms disparities re their relationships with the new owners...
• …but deep down, the real issue will be the extent to which the brand has been damaged – terminally? - by the surrounding controversy…

More brands on Aldi’s shelves?

How about Nestlé, P&G and Unilever for starters?

Given the rate of growth of the discounters, primarily at the expense of brands, it was inevitable that major suppliers would begin to find ways of working with Aldi and Lidl in order to compensate for the sluggish growth of traditional retailers...

In fact, a new report by Miloš Ryba at the IGD, gives details of branded manufacturers such as Nestlé, P&G and Unilevers' increasing willingness to list their products on discounters’ shelves in Aldi Germany over the past 12 months.

Nestlé currently offers Nesquik, Smarties and Wagner-Pizza, while P&G lists Blend-a-med, Lenor, Pampers, Ariel, Always and most recently Head & Shoulders in Aldi...

Just last week, Unilever, joined them with listings of Knorr, Langnese-Magnum and Duschdas...

More details in Miloš' article, but the key message for all branded suppliers has to be the need to reassess trade and channel strategies in order to define a non-compromising role for their brands in outlets that will otherwise continue to grow at the expense of brands...

And if the big guys are managing the transition, it must be possible for others...

Morrisons second quarter of sales growth, a baseline for NAMs?

Today’s news of steady progression establishes a minimum standard for Morrisons’ NAMs in making their financial case for a fair share deal for both parties.

In other words, unless your brand has grown by at least 0.7%, you won’t justify an interview.

However, the more your growth exceeds Morrisons average, the greater your appeal…

The key build on this position is to measure and compare Morrisons main financial ratios with your conservative estimate of your brand’s performance to show point-for-point how you are adding to the retailer’s comeback performance…

In other words, until Morrisons reveal more detail, work with the latest annual report and calculate their Net Margin, rotation, credit period, sales/sq ft and rate of growth, and then compare with your best estimate of your brand’s performance within the retailer.

For instance, you are already growing faster, like-or-like, so you have the buyer’s attention...

Next assess bottom line impact, your real contributor...

Typically, most mults, operate on an average 25% gross margin, will receive up to 20% of purchases in Trade Investment, average 43 days credit, turn their stock 25.6 times/annum and sell approx £900/sq. ft./annum.

Net Margin
Say Morrisons Gross Margin on your brand is 30%, with typical shrinkage (2%) and Store costs & Handling (15%), Overheads of 5%, you are contributing 8% to their bottom line…minimum.

If their GM on your brand is less than 25%, tip in your trade investment…

Trade credit
If you are giving more than 43 days credit, you are adding the additional cost savings to their bottom line.

Stockturn
If you are delivering your main SKU on a weekly basis, this looks like a stockturn of 50 times a year.

Sales/sq. ft./annum
Calculate your brands foot-print performance in Morrisons (number of facings x back-of-facings stock x SKU footprint x number of stores stocked) to give your selling area, and divide it into your annual sales to Morrisons to provide your sales/sq. ft., vs Morrisons average…

The above calculations will give you a conservative estimate of your positive impact on Morrisons performance…and hopefully a basis for indepth discussion on leveraging your brand's performance and optimising your trade investment in the aisle...

Where are Aldi & Lidl headed, profitwise?

Thinking back to the relative simplicity of the 800 SKU model, based primarily on surrogate label with a handful of anchor brands, coupled with low staffing levels and small outlets, it was relatively easy to beat the multiples on price and yet make adequate profits.

At that time, it was cost-effective to approach the multiples’ suppliers of private label, and piggy-back on key lines, without picking up origination and compliance costs.

However, now that the discounters are extending their ranges via more creative product introductions, it follows that they will need more expertise in terms of more support staff in R&D, Tech, QC, apart from picking up the burden of the usual ‘9 out of 10’ failure rate…

Furthermore, as they continue to grow share, consumer media will highlight any product defects, thus triggering the ‘tell a friend’ mechanism – 'if I like it, I tell one friend, disappoint me and I tell 10 friends…'

All adding further to the compliance overhead.

Given the fact that the mults continue to keep pressure on shelf prices, it follows that the discounters’ additional costs will dilute bottom line performance. Perhaps this will become an opportunity for an entrepreneur to re-discover the original 'hard discount' formula, and launch a competitor to Aldi & Lidl?

Leaving us all to ponder on where the legal responsibility for damage to consumers can be laid: retailer or O/L manufacturer?

Welcome to the high-cost world of ‘normal’ retail…

A wonky-chicken solution to excess drumstick demand?

Online clothing service for those that hate 'going shopping'...

Business Insider details a new online service that appears to eliminate one of the bugbears of a busy single-tasking (i.e. male) NAM's life - going shopping...

The Chapar, founded in 2012, is an online clothing-concierge service that offers its members "trunks" of curated items - including shirts, shoes, and knitwear - tailored to their taste and delivered next-day direct to their door.

Based on a combination of a short questionnaire, and phone consultation, a personal stylist sends a trunk of 12 items, of which 8 are usually returned...

For those who cannot wait, more details available on the Business Insider site...

A new way of shopping, but the issue for branded suppliers/retailers is how to factor a 66% return rate into an online business model...

Digital private label - your new competitor from Amazon

How its best-selling brands are driving AmazonBasics...

Bloomberg reports that the e-tailer is gleaning insights from it’s Amazonian product portfolio to produce own label equivalents of its best-sellers at up to 50% off.

It's AmazonBasics private label offering now includes more than 3,000 products based on their best-selling branded lines - from women’s blouses and men’s khakis to fire pits and camera tripods, all perfectly tailored to consumer demand.

Shoppers increasingly start on Amazon.com to search for products, bypassing Google and traditional chains’ websites.

So not only can Amazon track what shoppers are buying; it can also tell what merchandise they’re searching for but can’t find, allowing them to spec ideal products for their AmazonBasics offering.

The important issues for FMCG NAMs have to be how soon their turn will come, and what to do about it.

• Amazon are obviously working down a ‘best-selling’ league table, cherry-picking based on a combination of their sales and consumer searches
• They also have the luxury of trying single products, and discontinuing where necessary
• Suppliers would be unwise to miss any selling opportunities by refusing to supply Amazon
• Key for brand owners is to make their entire offering, access and fulfilment so attractive that they optimise direct purchase, without losing any potential via the Amazon route
• The difficult part has to be optimising your own data to bond with your consumer-shopper base, using Amazon as a standard…   

BHS - A Pound Shop Fails when the numbers don't add up...

Following its sale last year by Philip Green for £1, BHS – with debts of more than £1.3bn, including a pension fund deficit of £571m – had limited options… Rents on top 77 stores unchanged, rents reduced to 'market levels' on next 47 stores and 10 months trial for the 40 least profitable outlets, all to no avail....
A detailed timeline is available on the BBC site 

The key issue for NAMs is the extent of knock-on impact on other retailers that are battling under similar pressures...

In other words, time to check out the latest financials of your customer, and anticipate the inevitable, while your competitors dismiss the BHS issue as ‘another trade sector, nothing to do with us…’