Amazon Hires Tesco Veteran To Run Bricks & Mortar Stores

Tony Hoggett started his career at Tesco as a 16-year-old trolley boy. Over three decades he rose to become CEO Asia and then Group Chief Operating Officer, before starting his latest role in April this year as Group Chief Strategy & Innovation Officer.

NamNews Implications:

• Amazon can afford to populate their retail operation with best in class…
•  …and this is but one example.
• With a Morrisons takeover merely a dip into petty cash…
• Best conduct a what-if re Hoggett running an Amazon-Morrisons combo...
• ...and check how that fits your current trade strategies...

#AmazonMorrisons #GroceryTradeDisruption

Superdrug Takes Big Hit From Pandemic

Over the 12 months to 26 December 2020, revenues at the health and beauty retailer slid 14.8% to £1.11bn, with the group blaming the big drop in footfall on high streets around the UK.

NamNews Implications:

• Key with recognition of the importance of online is the fact that many rivals reached this conclusion a year ago.
• And know that online fulfilment cost reduces overall margin.
• Retail recovery will involve breaking the grocery ‘single trip’ habit * i.e. shoppers combining their ‘chemist’ trip with grocery trip for convenience…

#LockdownHealthBeauty

Tesco Hikes Transport Costs For Suppliers

According to trade publication The Grocer, the extra charges will apply to Tesco’s primary distribution rates, a service run by the retailer that brokers third-party hauliers to collect goods from supplier depots and transport them to its distribution centres.

Tesco is reported to have told suppliers that it will apply an additional 14% surcharge on primary distribution rates from next month until the end of the year.

NamNews Implications:

• Puts official inflation figures of 2-4% in perspective…
• We need to think ‘pound-in-your-pocket' inflation.
• i.e. suppliers and retailers now need to factor real supply chain cost-increases into pricing.
• Negotiation will simply determine who takes the hit first…

#Inflation #PriceIncreases #LockdownConsequences

Sales Growth Slows At Sainsbury’s; CEO Focused On Strategy Amid Takeover Activity

Including both the Sainsbury’s and Argos chains, the group’s like-for-like sales (excl. fuel) rose only 1.6% in the 16 weeks to 26 June compared to a rise of 11.3% in the previous quarter. However, the figure was better than analyst’s forecast of a 1.7% fall. This prompted Sainsbury’s to raise its annual underlying profit guidance from £620m to “at least £660m”, up from £356m last year when the business faced significant costs related to operating during the pandemic.

NamNews Implications:

• Sales growth slowing, yet up on 2019.
• But is it fast enough to remain independent?
• Bound to be a distraction for management…
• Especially with Asda under new ownership, Morrisons under takeover-scrutiny.
• Best for suppliers to anticipate takeover, by harmonising any major Prices & Terms at disparities, at least…More: https://lnkd.in/ePK6gGN

#PricesTermsDifferences #Takeover

Morrisons Facing Bidding War After Accepting Fortress-Led Offer Worth £6.3bn

Another private equity group, Apollo Global Management, is among the potential counter-bidders circling Morrisons.

NamNews Implications:

• Despite promises re future action…
• …a bidding war will result in a higher takeover price.
• Meaning that the purchaser will need to cover the additional cost.
• (and justify the level of investment…)
• It can be assumed that Morrisons are running a very tight operation (i.e. little scope for internal cost reduction)
• Therefore remaining options will then be:
• Sale & leaseback of the 85% owned retail estate (resulting in lower net margins because of having to pay rent for stores).
• Downward pressure on supplier prices.
• Or a mix of both…?

Government Holds Emergency Talks To Avoid Gaps On Supermarket Shelves

Officials from the Department for Environment, Food and Rural Affairs (Defra) are reported to have discussed potential solutions, including relaxing restrictions on drivers’ working hours and a temporary suspension of overnight delivery curfews, whilst increasing HGV training capacity for local drivers.

NamNews Implications:

• When the public sense shortages, stock-piling will follow.
• An emergency temporary stopgap would be to allow more EU drivers into the UK.
• Hopefully it will not take the government too long to recognise the obvious?

#LorryDrivers #FoodShortages #StockPiling

Asda Launches ‘Express Delivery’ Service

This offers home delivery within an hour. However, unlike some other providers, the UK’s third-largest supermarket is making its full online product range available for rapid delivery.

NamNews Implications:

• If Asda customers are prepared to pay delivery fees (£8 plus) for Asda’s service…
• …this becomes a pointer for other mults.
• Suppliers need to ensure their supply chain responses are up to these standards.
• And add Fancy, Getir, Weezy, Gorillas and Jiffy to their strategies...

#QuickCommerce #AggregatorsPurePlaysRetailers

Grocery Market To Slow Sharply In Short Term; Online, Discount And Convenience To Remain Fastest-Growing Channels

In its annual retail food and grocery channel forecasts, IGD predicts that the unprecedented 8.5% growth seen in 2020 will slow to 1.7% in 2021 and then to 0.9% in 2022, as shoppers economise and the eating out industry reclaims sales. However, this sharp decline is expected to be followed by a period of modest recovery that will see the market grow by 8.1% to £229.1bn over the next five years. 

#PredictionsByChannel #GroceryChannelShares #5YearPredictions

Asda To Adopt Hybrid Working Model

The 4,000 staff who work at Asda House in Leeds and George House in Leicester will be able to choose where they work, including home, in the office, or even at a store or depot.

NamNews Implications:

• A pointer for all suppliers and retailers.
• 4,000 Head Office staff will be able to choose where they work, including home, in the office…
• …or even at a store or depot.
• Radical and permanent.
• Welcome to the new normal…
• Just one of today's 17 NamNews bulletin-items

#NewNormal #WorkingFromHome

Optimising the risk and uncertainty of 2021

 

Most people are heading towards a 10-day break that will be anything but traditional. After a traumatic, challenging year many would have used this as a period of reflection and mental adjustment to the year ahead.

However, this coming post-lockdown year will be different.

A nine month restraint on trade has severely fractured the UK economy, causing untold damage, sometimes terminal, to sectors like traditional non-food retail, hospitality, and travel both commute and tourist, via rail, air and sea. The resulting decimation of demand means there is a need for fundamental resets of business models, a subject of separate NamNews coverage in the New Year.

All of this with an overhang of Brexit uncertainty to further complicate the mix.

Companies will struggle to cope with this toxic mix to varying degrees, all reflecting their risk profile and that of their people. In other words, they will act in ways determined by the extent to which they are risk-seeking, risk-neutral or risk-averse…

They will attempt to apply a mix of fire-fighting to survive, trying to be certain about a medium-term that is anything but, and at the same time needing to apply some type of long term strategy.

All of this without being able to derive much benefit from analysis of unprecedented historical performance.

In terms of how 2021 will affect you and your business, think uncertainty, short supply, inadequate resources of time, money and people. This uncertainty will encourage risk aversion in companies playing it safe whilst awaiting a return to ‘normal’...

But the fact that so many businesses will react in this way means there are opportunities available for those that are risk-seeking, willing to take a calculated chance based on inadequate data, making sufficient sense of the uncertainty that they can take meaningful action.. Even companies and management that are risk neutral, willing to take some risk, can avail of some of the opportunities that an uncertain 2021 will provide, in a world of super-savvy consumers unwilling to accept anything but demonstrable value for money.

In other words, for those that are willing to emerge from under the duvet in the New Year, opportunities abound…

However, whilst it might seem reasonable to allow a ‘settling down’ period before making robust plans to cope, pragmatists know that even in normal times, business does not permit such luxuries.

Despite the unprecedented nature of what is still happening globally, regionally and locally, we have to make sufficient sense of the turmoil to survive and even grow a little in 2021. In attempting to so do, we can rely on the fact that many will ‘wait and see’, thereby providing proactive competitors with opportunities to optimise rivals’ ‘inertia’ in 2021…

In effect, we have to try to make the abnormal normal, and attempt to optimise the chaos via a lens of pragmatic realism… In fact, if our business world in 2021 seems in any way ordered, we are probably not looking at it properly.

Essentially, we believe it is imperative that the ‘pandemic’ be regarded simply as a catalyst and that the real damage to businesses and the economy has been caused by universal lockdown. This is a fundamental requirement for anyone wishing to take meaningful and productive action in 2021.

We then have to reduce our offering of Product, Price, Presentation and Place to its very basics, a ‘package’ that is equal to or slightly better than alternatives available, delivering to our consumer literally in any way the choose to buy, and resulting in sufficient satisfaction that they will willingly come back for more... (and perhaps even ‘tell a friend’)…

In effect, we have reached a position so fundamental that we need to go back to basics, as if entering a market for the first time, with a partial advantage of some basic knowledge of the category.

So, as we move into the final reflective-time mode of a final ‘traditional’ Christmas break, instead of trying to forget it all, we have an opportunity to spend a little time trying to reduce our business idea to its fundamentals, meeting consumer need by delivering more than it says on the tin, every time.

But above all, keeping in mind that in 2021 those that can manage risk will survive and can even thrive…

ROCE - the ultimate KPI Helping Sainsbury's grow their ROCE

NAMs needing to understand real profitability (their own or that of the customer) have to be able to calculate Return On Capital Employed. i.e. (see above diagram) putting a company's sales below and above the line, shows that ROCE is a combination of Profit on Sales, times Sales divided by Capital Employed. In other words, Margin x Capital turn.

You are either in a small margin, rapid rotation business (chilled produce) or a large margin, slower rotation business (Cosmetics).

You improve business profitability by improving the margin or speeding up rotation...

Taking Sainsbury's latest 2019 Annual Report, we have NamCalced their ROCE 1.97%, pre-tax Net Margin 0.82% and Stockturn 15.03 times, as follows (in millions):

Help Sainsbury's improve their ROCE (and thereby drive their share price) by a combination of improving their net margin, and improving their capital rotation, as follows:

Three of the calculators for NAMs in NamCalc!

Delay of a price increase - Cost & Value?

(Holding back a trade price increase for Asda, the cost and value for supplier and retailer)

You need a price increase to cover rising costs but have agreed with Asda to maintain current prices for 1.5 months following the new price introduction.

What is the cost to you and the value to Asda in terms of incremental sales?

Assumptions:

Annual sales to Asda = £660k
Your Gross Margin = 43.6%
Costs rise = 8%

You have agreed an 8% price increase to restore your % Gross Margin

You have negotiated a 1.5 month delay in implementing the price increase for Asda.

What is the cost to you and the value to Asda of the delay?

NamCalc Tool 13 below, demonstrates that an 8% price rise is required to restore your % Gross Margin.

It also shows that the 1.5 month delay costs you £3,720, and you would need incremental sales of £8,525 to recover your lost gross margin.

For Asda, with a pre-tax Net Margin of 2.1%, the £3,720 is equivalent to incremental sales of £177,142, a point worth making in negotiation…?

Click to enlarge

Just one of the 33 calculator-tools available in NamCalc

Settlement Discounts: How much to pay for earlier payment in unprecedented times...?

Given the current casualty rate in retail, getting your money in faster can help.

The issue then becomes: How much to pay the customer i.e. what discount off invoice will make earlier payment attractive to the retailer?

The following screen-pull from NamCalc illustrates the calculation for a 15-day reduction in payment period. 

[The exercise proves that a 0.5% discount is equivalent to a return of 12% on the money for the retailer. We also add in the incremental sales required by supplier and retailer to recover the settlement discount amount]

Just one of the 33 calculator-tools for NAMs available in NamCalc

When a customer goes bust...

Given these unprecedented times, some customers will not succeed...

Supplier NAMs that can anticipate the inevitable, can avoid the fall-out..

One way of increasing your team's sensitivity to the signals is to calculate the cost of profit recovery following liquidation. i.e. the extra sales you need to recover lost profit.

Suppose a customer goes bust owing you £240k, and your Net Profit Before Tax is 3.4%, then via NamCalc below, you will need incremental sales of £7,058,823 to recover your lost profit!

Or would prefer to await a call from the liquidator?

Use of GMROII to demonstrate your value to Tesco

Gross Margin Return On Inventory Investment is probably one of the most valuable, yet underutilised tools in the NAM kit-bag today.

It follows that those that take the (small amount) of time to practice its use, automatically gain a competitive advantage over the competition, invaluable in these unprecedented times.

Essentially, GMROII is valuable because it links your product's Gross Margin for the Retailer, with the retailer’s stockturn of your product, instead of simply focusing on the Gross Margin.

For example, suppose the retailer sells £750k of your product per annum, enjoys a Gross Margin of 35%, and holds an average of 7 days stock of the product.

NamCalc (below) shows that the retailer is making a GMROII of 2,807% on the product. (any queries re the calculation, please let me know on bmoore@namnews.com).

Suppose the retailer is Tesco

Tesco’s latest Sales are £56.9bn, its internal Gross Margin is approx 21%, and it holds an average of 22 days stock i.e. £2.6bn in stock at any time.

Tesco’s GMROII on its total business is therefore 460%

[£56.9 x 0.21/2.6 x 100 = 460%]

Therefore your product’s GMROII of 2,807% is a significant contributor to Tesco’s business.

See details on the NamCalc screen-pull below. Each of the 33 calculator tools also has editorial detail explaining key uses/interpretations of the tool.

More details here

Radical change of business model: Kellogg’s Launches Brand-based Meal Delivery Service Via Deliveroo

Kellogg’s Kitchen Creations is a delivery-only meal service that has launched in East London offering vegetarian and vegan dishes.

Rather than selling bowls of its Rice Krispies or Cornflakes, the firm has hired chefs to create a menu of meals and snacks incorporating some of Kellogg’s popular cereals and cereal bars. [more]

• A two way route to Kellogg’s brands:
• - indirect via the delivered meals
• - a DIY incentive for recipients…
• …and not a whiff of cannibalisation.
• The fundamental issue is a branded food supplier is optimising its brands by incorporating them as ingredients in prepared healthy meals 'hand delivered' to consumers' homes.
• An entirely new relationship with their consumers that could transform Kellogg's business model and perception of the company and its brands.
• A incremental no brainer, one to watch...

The Importance of your Net Margin, when a customer goes bust...

Given that 75 Food Suppliers in the latest OC&C Top 150 Index 2019 (see The Grocer 21-9-2019) have Net Operating Margins of 3% or less, it is worth exploring the consequences of one of their customers going bust, owing them £150k...

On a 3% Net Operating Margin, the supplier needs £150k/3 x 100 = £5m incremental sales to recover the loss...

On a 1.5% Net Operating Margin, incremental sales of £10m!!

Just one of 33 calculator tools in the latest version of NamCalc

Tesco Trade investment: How to demonstrate your value to the buyer

Buyer: "Surely Tesco are worth more than a £10k investment, especially for a company your size?"

NAM: "Given your business model and latest net margin (2019 Tesco Annual Report) of 2.7%, our ‘mere’ £10k is equivalent to incremental sales of £370k for Tesco…."

As you know, apart from cutting costs, the only way a retailer can generate net profit is via incremental sales.

In practice, for a retail business on a net margin of 2.7% before tax, a net margin of £10k = 2.7% of sales.

So, £10k/2.7 x 100 = £370k, the incremental sales required to generate net profits of £10k.

Now, which would you prefer, my little £10k trade investment or having to generate extra sales of £370k in your category….?”

[Note for NAMs: If your company generates net profits of say 4.5%, the £10k trade investment in Tesco is equivalent to incremental sales of £222k. In other words, you need potential incremental sales of £222k to even begin the conversation…]

Source: NamCalc, a 34 calculation financial tool-kit for NAMs

Sainsbury’s Links Up With Euro Garages Again

According to The Grocer, Sainsbury’s recently began supplying its own brand sandwiches and salads, as well as ‘food for tonight’ items like ready meals, to a “small number” of Euro Garages sites. [more]

• Every little helps...
• ...and if a presence in a few Euro garages prove worthwhile...
• …then a full roll-out is inevitable...
• ...along with other possible routes to consumer.
• Time for suppliers in these and allied categories to capitalise on Sainsbury’s willingness to experiment…

Sainsbury’s And WH Smith End Food-To-Go Trial

Nine months after the trial began, a report by The Grocer revealed at the end of last week that Sainsbury’s-branded products were no longer stocked in the trial stores. In some cases, the supermarket’s food-to-go lines had been replaced by the Greencore’s ‘Munch’ range. [More]

• A good quality in retail is the ability to fail fast.
• Trying different initiatives also helps…
• …with the added benefit for retailers that footfall determines success/failure, ‘instantly’…
• NAMs that take this all on board, and propose initiatives accordingly…
• ...cannot go far wrong.

Asda Offers ‘Free Alcohol’ To Welsh Shoppers

A sign in the Asda supermarket in Cwmbran was meant to guide shoppers to ‘alcohol-free’ beer. However, it had been wrongly translated in Welsh to ‘alcohol am ddim’, which means ‘free alcohol’. The correct Welsh translation for alcohol-free is ‘di-alcohol’. [more]

• Well, so much for my Easter weekend in Cwmbran…
• BTW, our Gaelic word Crack was changed to Craic in 1990 – a need to differentiate good, clean fun from a dangerous new form of cocaine – and led to this spelling gaining popularity among those in search of compulsive but less addictive recreation…
• NAM insight: Best stick to plain English for promotional purposes, methinks!

GCA Finds The Co-op Breached GSCOP

The GCA has found the supermarket group had breached the Groceries Supply Code of Practice (GSCOP) on two counts. The retailer failed to provide reasonable notice to suppliers of decisions to de-list products and varied supply agreements unilaterally and without reasonable notice in the way it applied two specific charges. The Co-op Group has been ordered to introduce “major changes to its governance, systems and processes” [more]

• Problem identified, analysed and corrected…
• …with the promise of post-correction monitoring…
• …making it easier for suppliers to partner with the Co-op.
• A valued and important route to consumer…
• (coupled with a willingness by supplier-partners to report any future breach…
• …for the benefit of all stakeholders)

Latest Podcast from Hospitality Mavericks: Retail, Hospitality & Delivering Value to Savvy Consumers with Brian Moore

Michael Tingsager and Brian share key trade insights re Amazon, the Discounters, Shrinkflation/brand equity preservation, as they affect the past, present and future states of retail and hospitality. With many crossovers to be found between the two sectors, Brian provides in-depth advice for businesses looking to succeed in a world of corporate giants and savvy consumers.

  Click here for other Podcast sources

Hospitality Mavericks is a growing community of past and present business owners, franchisees, senior managers and experienced professionals with a love and passion for the hospitality industry - find out more here

For more insights from Brian, take a trial subscription to NamNews or
download a FREE copy of the latest monthly newsletter.

M&S Deal Could Cost Ocado A Large Chunk Of Customers

A survey of 250 Ocado customers carried out by analysts at HSBC found that 22% would no longer shop with Ocado if it did not sell Waitrose products, while 17% stated they would not use it if the Waitrose products were replaced by M&S lines.

David McCarthy, head of consumer retail research at HSBC, described the findings as “worrying” for the new Ocado and M&S joint venture. “A meaningful proportion of customers said that their loyalty is to Waitrose and that M&S is not an adequate replacement,” he wrote in a research note. [more for NamNews readers]

• Its called brand loyalty, folks…
• …whether it be supplier or retailer.
• Hopefully Ocado will have factored this into the equation in advance…
• …and can live profitably with the difference.
• Watch this space…

Fair-Share Trade Relationships: How to optimise via equal compromise...

NAMs that manage to achieve fair share realationships with buyers can keep it so by focusing on the following 'rules':

Keeping the Deal in Place…

An ongoing Trade partnership requires that both parties respect the basic deal. In other words, over time they have reached a balance of risk and reward that satisfies the needs of each party. All further moves will take place on a reciprocal basis whereby a demand by one will be matched by a gain of equivalent value by the trade partner. Otherwise, the relationship becomes so one-sided that the partnership breaks down and each side loses. Systematic use of financial measures can help in optimising trade partnerships and provide a more reliable balance of risk and reward.

Corporate Customer Portfolio Role

Essentially, the process starts with establishing the customer’s role within the corporate customer portfolio, in terms of current and target Sales and Profit, lifecycle profile, and investment classification (invest, maintain or divest). The main focus can then be on achieving target sales and profit, only referring back to corporate performance when target sales and profit performance s deviate from that target.

‘Deal on the Table’ a constant benchmark

Here the customer and supplier are placed in market context, reflecting relative power in the relationship.

• Customer’s share of the supplier’s business (£ sales, %)
• Supplier’s share of the customer’s business (£ sales, %)
• Customer’s share of the category in total market: their appeal to the supplier’s competition and importance to the supplier
• Supplier’s share of Customer’s version of the category
• Size of deal for supplier (£, %) in this case current and annual target sales and profit (Gross and Net), reflecting scale and risk of loss of the business within supplier’s customer portfolio
• Size of deal for Customer (£, %) current annual and target sales and gross profit, reflecting Customer’s level of dependency on supplier

Current Terms and Conditions in the relationship

The supplier, operating on the premise that everything can be reduced to a financial cost and value, calculates the cost of each element of the relationship and the incremental sales it represents for each party. This includes credit period, settlement discount, stock levels, promotional support and all other parts of the supplier’s total offer package. The same terms and conditions should be translated into customer’s sales equivalents, using the customer’s published net margin as a multiplier. This will help to establish and demonstrate the value of the supplier to the customer. 

Maintaining the ‘status quo’

This total offer package represents the basic working relationship in terms of relative risk and reward between the two parties. If both parties seriously value and want to maintain the relationship, then any additional request or change in the deal by one party, will require a reciprocal move of equivalent value in order to maintain the equity of the business relationship, in other words, the ‘status quo’.

In practice this means that however the circumstances of either party may change, any such change and the resulting demands should be costed, valued and the results factored into the total offer package in order to ensure that parities have been maintained, and the supplier will continue to invest in the relationship.

Specifically, the implications of any new, ‘incremental’ or arbitrary demand or breach in compliance should be explored fully in terms of its impact upon the rest of the deal, and agreement reached on appropriate adjustments to the total offer package. Any reluctance to explore such options on the part of the buyer should be treated as an attempt to achieve an incremental gain at the expense of the supplier, and resisted.

Finally, it is obvious that this level of trade relationship relies heavily upon mutual trust and willing compliance. It is a deal between two organisations equal in respect for one another, if not in scale, and by definition has to operate on a multilevel and multifunctional basis, capable of surviving regular buyer-churn and fundamental changes in the market.

Otherwise, we are all in more trouble than we realise….

Feedback: ‘everything in a supplier-retailer relationship can be reduced to a financial cost and value’ We welcome any feedback quoting exceptions and will try to illustrate way and means of calculating cost and value. Please contact me with your exceptions and comments via Linkedin, or at bmoore@namnews.com

Booker And Tesco Ramping Up Benefits Of Merger

Speaking at an event this week, hosted by trade magazine The Grocer, Booker’s Chief Executive Charles Wilson revealed that significant benefits would be rolled out in three phases during 2019.

Phase one began last month with retail and catering customers being offered lower prices and better margins. The second phase is due to launch in the spring and will involve improving the quality of produce by switching to Tesco suppliers and specifications. A last phase in autumn will see the roll out of various Tesco services. [more for NamNews readers]

• All depends on how these offers and terms compare to those available from other wholesalers…
• …and if greater, inevitable switching of allegiance will follow.
• Meanwhile, NAMs need to reassess their wholesale customer classification in terms of Invest, Maintain or Divest…
• Watch this space.

Pressure Mounting On Sainsbury’s Management As Performance Weakens

Industry data released by Kantar Worldpanel yesterday showed the chain was continuing to struggle up against its revived main rivals and the discounters. Sainsbury’s sales fell by 1% year-on-year over the 12-week period to 24 February with its market share slipping 0.5 percentage points to 15.7%. This marks an acceleration from the 0.3% fall in sales that the chain suffered in the previous period. [more details for NamNews subscribers]

• Time for Sainsbury’s (and their NAMs) to forget the CMA, and get back to the day-job…
• …in readiness for the inevitable takeover bid, given the falls in share price.
• As you know, share price recovery is driven by improved ROCE, in turn driven by margin and capital rotation…
• …Simples!

Making Sense of the Savvy Consumer in Flatline….

Given ten years of market confusion, consumers are now beginning to make some sense of the financial turmoil, are developing increasing confidence in their common sense when making purchasing decisions, and those who still have jobs are working longer and harder, and possibly for less money.

As a result, they are relating every £1 of ‘discretionary’ expenditure to their current and future earnings, assessing the opportunity-cost in terms of alternative uses of the money, like never before…

They are raising their own performance standards, and using them as a measure against which to evaluate every product and service offering, refusing ever to outsource their decision-making to marketers and retailers again.

In addition, mobile-isation of market-comparison has made it easier for the savvy consumer-shopper to evaluate alternative offerings objectively and accurately, and is guiding their expectations of performance in the process.

The New Savvy Consumers

Welcome to the new savvy consumers, the professional shoppers, discerning buyers who are simply seeking to obtain satisfaction of their needs in an open market, at a price that compares well with alternatives available, based upon simple common sense, and trust in no one....

As the newly emerging primary driver of demand, the savvy consumers have to be persuaded that their needs are being met, for a fair price, and that their purchases deliver more than expected in practice. In other words, this new consumer, if willing to spend, is unwilling to accept anything short of good value for money.

The destruction of consumer-trust

Consumer-trust, having been severely undermined by the bankers and politicians, is now at an all time low, in that consumers realise that they have been betrayed by the ‘pillars of society’, and they are no longer prepared to ignore the learnings….

As a result, they now believe that in the final analysis, they can no longer afford to risk outsourcing purchasing decisions to marketers and sellers of goods and services. In other words, the consumer is now using basic common sense to evaluate what they get for their money and is rejecting second-best….

A real opportunity for the good guys

If this is seems like more doom and gloom, then we are simply not expressing it properly…

In fact, we believe that the emergence of the savvy consumer is the most positive and exciting social development of the current cash crisis. We are now living through the evolution of a commonsense approach to buying goods and services by increasingly informed consumers, who are prepared to vote with their feet. This is a development that will obviously challenge traditional marketing and selling practices, but will provide significant opportunities for those suppliers and retailers that are prepared go back to basics, factor this new reality into their product offerings, and always strive to exceed consumer expectation…

In practice, this means that the consumer is providing an entirely new basis for suppliers to re-evaluate every SKU in their portfolios against available alternatives, and ruthlessly eliminate anything that does not clearly demonstrate a total match with latest consumer need, made available in a way that shoppers want to buy, better than the competition. It follows that the customer portfolio has to be re-assessed from the same point-of-view, again with the aim of identifying and cultivating trading partners that are capable of expressing the brand offering in a way that can meet consumer-shopper needs at point-of-sale, profitably.

This elimination of consumer-brand mismatch and product overlap from supplier portfolios will reduce supplier costs, allowing liberated resources to be invested in winner brands with increased emphasis upon consumer satisfaction, thereby selling more to current savvy consumers, and making it easier to sell new products to those increasingly trusting and loyal users.

In the same way, building trade partnerships with like-minded retailers has to present joint-opportunities to optimise common-sense market need, while others await a return to ‘normal’…