Cross-Border Shopping, Threats and Opportunities?

Recent market data suggests that the trend of cross-border shopping from the Republic to Northern Ireland may be abating, but will this trend carry over to the supply/wholesale sector? Irish retail analyst, John Ruddy, reports.

As the only EU territory with a land border with the UK, the Republic of Ireland has long been accustomed to the impact of changing exchange rates. Even before Ireland converted to the Euro, there has been an established trend of crossing the border to get the best value, with shoppers from both sides taking advantage of the geographic proximity to buy consumer goods at lower prices.

As has been widely reported, however, this stream has moved from a trickle to a torrent in the past 18 months. The combination of a weak sterling (against the Euro) and a sudden economic downturn has led to a huge upturn in shoppers from the Republic travelling North to Asda and Sainsbury’s, with the big two NI retailers at one stage commanding almost 3% of the ROI grocery market.

What was once seen as an inexorable rise, however, is now beginning to tail off. This is a result of exchange rate shifts (the Euro is 8% weaker relative to sterling than it was in August 2008, making Asda/Sainsbury’s prices still attractive, but not quite as attractive as before), but primarily because of a heavy bout of price competition between the retailers in the Republic.

Who wins?

More on the KamLibrary

KamQuip of the week:

"Government management of the economy:
If it moves, tax it. If it continues to move, regulate it. And if it stops moving, subsidise it".

- Ronald Reagan

Buyers are what we make them?

….over 200 retailers analised* to discover…

A chance typo today in an email from a researcher pal of mine raises the thought that perhaps a supplier’s treatment of buyers over the years has caused them to regress to a more primative stage in their negotiation behaviour?....

…or perhaps not?

* Anal: a stage in psychosexual development when the child's interest is concentrated on the anal region; fixation at this stage is said to result in orderliness, meanness, stubbornness, compulsiveness, etc.

Irish Government Propose New Grocery Code of Practice

The Irish Times today publishes details of a Code of Practice that would
- prohibit listing or promotions/displays fees
- require written agreement on retailer marketing costs or shrinkage allowances
- appoint a grocery-funded ombudsman
- allow public consultations response by the end of September!

Issue of statutory or voluntary left open for now, but given the fact that so many backs are closer to the wall than in the UK, coupled with the political pressures arising from a post-Celtic Tiger environment, means that it is highly likely that this code will be implemented on a statutory basis, with an Ombudsman to ensure that the Code's teeth are used.

A pointer for the UK?

Full copy of new draft Code of Practice here

The Inevitable Ombudsman - a way forward to Fair-Share relationships?

Fair-share negotiation is normally the final output of a mutually-beneficial supplier-retailer relationship.
Perhaps this could be a good place for the Ombudsman to start?
See Fair-share Negotiation Video
If you agree, why not pass on the link?

A Healthier, Tougher Phoenix Arising From The High Street Ashes?

Opportunities abound, but not an easy ride…

Firstly, for those still with us, it can be useful for a supplier check its appetite for the coming High Street challenges by updating its own risk-profile based upon 18 months experience of the recession. This means checking whether the company and team are risk-seeking (taking carefully calculated chances), risk-neutral (some risk-taking) or risk-averse (avoiding all possible danger of being successful).

Secondly, the retailers should be assessed vs. likely future and much tougher competition such as national hard and soft discounters and the major grocery multiples, as these players continue to re-populate vacant retail space in the High Street, in a variety of offerings and formats such as non-foods, financial services, home entertainment, food-to-go, and even food-service, with the blessing of local government.

For branded suppliers these developments are particularly threatening in that hard discounters with their surrogate labels at rock-bottom prices, coupled with major multiples using recessionary pressures as an opportunity to grow their own label offering, will change the traditional 50/50 brand/own-label balance in the process.

For these reasons, it is crucial for suppliers to re-assess their competitive appeal vs. available competition from the point-of-view of the new savvy consumer shopping in the High Street. This ‘new consumer’ may be older, less mobile, but given the emergence of the multiples in the High Street, the new consumer-shopper will be worked upon by retail experts and cannot be taken for granted again, ever….

Empty Property Rates as an accelerator of High Street demise?

In April 2008 the government introduced a new rate on empty properties (to generate additional revenue streams in the downturn!!), thus providing the final nail in the coffin for stressed landlords of shops in the high street. (See regional picture in latest Property Week report)
Add to this the fact that the ongoing demise of the high street is part of a continuing out-of-town trend, with no going back to normal.
Meanwhile, the consumer-shopper re-entering the market is being confronted by increasing numbers of empty shops, a constant reminder of recession and the need for cutting-back.
This means that more landlords will go bust, effectively walking away from the vacant properties, leaving the government with little or no empty property tax receipts, and the additional burden of maintaining vacant property. They then have to find alternative uses for the property, possibly via reconversions to domestic use, for those unwilling or unable to shop out-of-town…

Either way, for suppliers in impulse and related top-up categories, this represents significant loss of High Street presence. A need therefore to cultivate and build upon what remains of your High Street customer-base, realistically. This means budgeting for say at least a 15% reduction on High Street sales of 2007, permanently ( unless you can anticipate a direct transfer of this business to tour out-of-town customers, or alternative channels…??)

Answering to the Queen on the credit crunch?

Economic experts at the Bank of England have written to the Queen explaining why the credit crunch had not been predicted, a newspaper reported on Sunday. The reasons given can be a warning for KAMs in recession, and also point a way forward for those prepared to seize the opportunity.

Essentially, the three-page letter explained that apart from how cheap borrowing had encouraged a "feel-good factor", masking a global imbalance in savings and debt, wishful thinking combined with excessive pride had convinced financial wizards they had come up with a way to spread risk throughout financial markets," it added. "Everyone seemed to be doing their own job properly on its own merit. And according to standard measures of success, they were often doing it well," the letter said. "The failure was to see how collectively this added up to a series of interconnected imbalances over which no single authority had jurisdiction."
In other words, all of the colleagues involved in multilevel and multfunctional management of major customers, in a well-organised supplier-company can each be doing an expert job 'proudly' in difficult market circumstances. However, unless a collective view of management of the customer is taken by a respected KAM, a series of collective imbalances and knock-on effects could compromise the bottom line of the customer P&L.
The way forward is to achieve a risk-reward balance between supplier and customer ROCE aspirations, via effective coordination by the KAM.
As finance is the only language-in-common for all functions, it provides a way for a KAM to really take a collective view, and formulate a team-based customer strategy. This can be made more effective in terms of commitment by translating all aspects of the supplier-customer relationship into financial language. It is then essential to relate the conclusions to the needs of multifunctional and multilevel team members, in terms of cost and value, building respect and influence in the process…
Alternatively, why not allow all the 'customer-experts' to excel at their own 'thing', and await a call from the Palace?