What the future of the petrol station looks like

Given the fact that, according to The Economist, although combined petrol and diesel consumption has grown by over 75% since 1970, the number of petrol stations has fallen by nearly 80%, with oil companies first replacing independent operators, in turn oil firms were undercut by supermarkets, which sold petrol at near cost to attract shoppers to their out-of-town sites.

Now that consumers are shopping faster, smaller, closer and more often, another threat looms, in that shoppers are less willing to shop out of town...  These changes probably account for the fact that the petrol stations that remain are selling twice as much fuel.

However, the problem remains for forecourt owners of how to maximise revenue streams from forecourts.

And therein lies the opportunity for NAMs...

Selling more to existing users:  
Apart from the obvious fuel, including super-charging of electric cars, and motor requisites and services, 'feeding' the driver comes second, with goods and services for passengers next.

Then comes food-to-go and top-up shopping for drivers and foot-traffic, as required. And not forgetting Amazonian facilities like click & collect, where appropriate.

In fact, according to The Telegraph, Shell are part of a joint venture with Daimler and others to commercialise hydrogen gas for powering hydrogen fuel cell vehicles, and have spent “quite a bit of money” since 2012 revamping 400 of its UK petrol stations – making them larger, adding parking spaces, installing DHL pick-up points – with plans to upgrade 50 more this year.

The company has two sites in Bangkok that sell only V-Power, Shell’s highest quality fuel, alongside a luxury cafe. Each customer gets two attendants – one to serve them and one to service their car. In Luxembourg, Shell operates the world’s largest petrol station, servicing up to 25,000 customers per day (Details and pics on The Telegraph site).

In other words, all possible ways of meeting all possible needs, to optimise the space...

However, one key limitation has been the flat-site heritage where the original (lateral?) thinking - in an era of plenty of low-rent space - decreed that petrol stations had to be single storey, drive-in/out locations.

What is now required is the application of some vertical thinking, in terms of a re-modelling of the site in terms of underground car-parks, and multi-storey buildings, thus allowing the unit to become a multi-service pod that really serves the local market...

So some short term, medium and long term opportunities for creative NAMs...that can combine the best bits of lateral and vertical thinking, without missing a beat...

Head Of Walmart China Taking Over at Asda

This morning's surprise news that Sean Clarke has been appointed CEO from 11 July, indicates a probable change in stance for Asda in its dealings with suppliers:

*   Sean started his retail career in 2001 with Asda where he served as Commercial Finance Director. He then served as Chief Financial Officer in Japan and Germany before moving to Walmart Canada, where he also worked in a CFO role
*   …any doubts about the importance of financed-based argument to the new CEO?
*   …and the rest of the team…?

Sales per Sq Ft as a Primary Retail Indicator?

Given that rental levels and Business Rates are based on sales area, and with retail rents in prime spots in London’s Oxford Street reaching £1,000/sq ft/annum – equal to best-in-class grocery sales/sq ft/annum – it could be said that selling intensity i.e. sales/sq ft/annum is a pretty good indicator of retail effectiveness…

In other words, in the case of Oxford Street, a store achieving sales of £1,000/sq ft/annum is using all of its sales revenue to pay the rent, leaving costs of business rates of say £300+/sq ft/annum, cost of goods say 75% of net sales, overheads and store maintenance etc to be met from other parts of the business..

Incidentally, on a macro level, sales/sq ft/annum, can also steer a balance between investment in Bricks&Mortar and online – where space is infinite, and ‘free’ – helping to temper corporate  online enthusiasm as one begins to realise that fulfilment costs make online less profitable than well-run B&M…

Given that online space is infinite and ‘free’, a retailer contemplating switching resource to online development needs to have one foot firmly anchored to its Bricks & Mortar base, with its costs, in order to constantly re-evaluate the opportunity costs of developing its online channel vs traditional retail.

By the same token, Amazon’s decision to take the ‘retro-step’ of opening B&M bookshops can be seen to be state-of-art in that, using online sales results as a basis for B&M assortment, allows them to stock the most–demanded 4,000 titles – in 10% of the space a traditional bookshop needs in order to carry a minimum assortment of 40,000+ titles…

In terms of personalising the shopping experience here on earth, as shopper perception of shop-floor assistance can be based on staff numbers/sq ft,, minimum wage legislation can make adding people to the aisle an increasing burden. However, if a retailer hopes to go even further in terms of being different to online – using real people – by employing demonstrators and sales assistants, it is imperative not only that a non-pressured balance be arrived at in terms of salary and commission, but also that the combined costs of these expensive resources be calibrated against square footage…see GMROS and GMROL in KamTips.

Having calculated the sales and sales costs per sq ft for the whole organisation, it is then possible to examine different components of the business in terms of their relative contribution to overall performance.

For instance, a store by store comparison of sales/sq ft/annum will indicate which outlets are merely ‘showing off’, while others do the real work…

Seriously, it is obviously important to have show-room outlets in key parts of the country as  physical anchors for the online business, but if these outlets generate lower than average sales/sq ft, they become a drain on the business, besides starving other outlets of necessary upkeep and maintenance.

Think about it, the greater the difference between a flagship outlet and a ‘worker-store’ the more confusing for the shopper, besides raising the problem of which version to feature in the advertising, with a local real-life store visit possibly contradicting shopper expectations generated via national media…

Moving from store by store to in-store department by department comparison, adds more insight, making category comparisons a no-brainer in terms of determining a balance of resource and investment.

In fact, using this approach of developing a basis for measuring the sales/sq ft of the entire organisation, and then tracking the contribution beyond category to every SKU, on & offline to that overall performance becomes possible, even essential…

Having done so, tracking supplier Trade investment by sq ft performance allows a retailer to rank individual brands/categories and suppliers, whilst Gross Margin by the same measure shows relative contribution by SKU, eventually justifying the calculation of net profit/sq ft.

In fact, with GMROII barely out of the closet following 15 years of ‘digestation’, it is perhaps time to explore the possibility of the next phase of the process, Net Margin Return On Inventory Investment, providing even deeper insight into the retail value of brands.

Finally, if suppliers se major customers moving towards everyday use of these measures, it follows that incorporating a similar approach to assessing brand contribution per sq ft/annum, has to provide a joint-basis for possible synergies…

All else is detail… 

Muhammad Ali R.I.P. - A Personal Memory

Saturday morning's sad news of the death of Muhammad Ali, calls to mind my personal encounter with this great man, on his first product-endorsement tour of the UK.

Back in 1971, Ali agreed to work for a week promoting Ovaltine (his first product endorsement) via an extended train trip around the UK, stopping at every station that was near a supermarket, inviting the local managers on board to meet the champ and disembark at the next station, inspired for life, in many cases.

We even managed to secure an interview on the new Michael Parkinson TV chat show, an episode that has been repeated many times since.

To our surprise, we found Ali to be a modest, even shy man, with immense presence, whose can-do attitude proved to be an inspiration personally and to other members of the team.

As fans will know, an exhibition dedicated to the great man opened in March 2016 at the O2, and because of illness, Muhammed Ali was not able to attend the opening session, but he sent a mock-epilogue to commemorate the event, which can now serve as a memorial I believe he would have wanted:

'I would like to be remembered as a man who won the heavyweight title three times.

Who was humorous and who treated everyone right.

As a man who never looked down on those who looked up to him.

And who helped as many people as he could.

As a man who stood up for his beliefs no matter what.

As a man who tried to unite all humankind through faith and love.

And if all that's too much then I guess I'd settle for being remembered only as a great boxer who became a leader and a champion of his people.

And I wouldn't even mind if folks forgot how pretty I was.

Be cool and look out for the ladies!'

Muhammad Ali R.I.P. - Saturday 4th June 2016

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?

                                                                                                                                     pic: Brian Moore
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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…