New Tesco 'dark stores' in Practice?

The Telegraph's report of Tesco's decision to open customer-free stores (called Dark Stores) is a major indicator of the growing success of their online home-delivery operation. Remember when they and JS decided to enter online retailing, JS made the 'fatal' error of attempting to set up a parallel virtual store network to serve online demand, thus making it difficult/impossible for the new venture to cover the additional overheads fast enough for the City. Meanwhile, Tesco decided to 'make do' with their existing store network, allowing their online-pickers to share store access with real shoppers. As a result the project broke-even early. Given that Tesco currently gets 475,000 orders online per week and 3.4 million visitors to Tesco.com, the company are now obviously at a stage where bespoke stores will allow them to optimise space and customer service.

However the new 'dark stores' raise a couple of issues for suppliers:
1. (Tesco spokesman: '…not the same point-of-sale advertising…' This means there could be some other form of product-prompts in the aisle, (in cases of Out-Of-Stocks?) and how might it differ from normal store POS? One idea might be to colour code shelf-edge price labels to reflect (darkness permitting!) gross margin or favoured suppliers…?
2. Role of Brand: if the brand is meant to attract the customer into the store, there to be confronted by the private label equivalent (better/cheaper than brand) and the possibility of a switch-sale, the supplier's use of shopper-marketing in the aisle can help to reduce the odds on losing a sale to a private label. The dark-store environment removes that facility…

This suggests that suppliers need to find a way of opening a 'dark-store dialogue' with Tesco in order to attempt to maintain the status quo as the business shifts online... This means gathering evidence via store visits.
One way might be to sneak into the store under cover of darkness?

Retail sector facing ‘another bloodbath’

Insolvency trade group R3 are expecting 23 more high-street names to disappear in the new year, adding to the 22 retailers that went into liquidation last Christmas.

"Rising unemployment and decreased spending in the lead-up to Christmas coupled with heightened creditor aggression in the new year leaves the retail sector facing another bloodbath."

Last year retailers deliberately delayed starting insolvency proceedings until the New Year, hoping they would regain money over the festive period, creditors also held back, hoping they would receive higher returns because of increased takings over Christmas. This year it is expected that increased unemployment and the January rise in VAT will prove to be the final straw for an additional retailers.

Apart from the obvious need to conduct a what if on your customers going bust (If a customer goes bust owing you £150k and you make a net profit of 5%, you will need incremental sales of £3m to recover lost profit), it is not difficult to spot the warning signs:
- ROCE below 10% and falling
- Net Margin below 2% and falling
- Credit period creep (taking longer to pay)
- Reguests for cash-based trade funding
- Lack of compliance
- Your own gut feeling….

The key is to recognise the obvious, and then get in ahead of the liquidator. Otherwise you come last in the list of favoured creditors (ie ahead of suppliers will be claims for VAT, Utilities, Corporation Tax, Council Tax, Banks, Liquidator Fee, Pension Fund, Employees, Landlords….)

A pro-active use for empty prime retail space?

EA Sports Active, a Wii Sports type game with a variation on high impact work-outs, can be a win-win way of repopulating empty prime retail space. EA Sports Active launched in the spring and has sold over a million units in North America. An add-on (More Workouts) was launched last week.

EA Sports Active have opened stores in San Francisco and Boston where people can book a session with an "ambassador" or just walk in and have a play. Their breakthrough initiative is based on the idea that encouraging people to try the product via 'workout' would capitalise on their research showing that 80% of their consumers were recommending EA Sports Active to their friends. They knew that they had a good product but their challenge was getting the word further out there and really differentiating it from the other products. They point out that the stores are "like living billboards" in some of the world's most desirable shopping locations…..

Apart from extending the marketing reach of suppliers in appropriate categories, this idea could reach beyond the weekend and provide a 24/7 proactive shop-window for your brand.

Have a thoughtful work-out weekend from the Namnews Team!

Welcome hot-calling at home?

Wegmans Chain: In the US if Wegmans have a product recall they use their loyalty card data and mass telephone everyone who bought the product – they were the first to do this in the US

Whilst a number of other chains have copied them, nothing beats being first.....

Landlords' No-brainer Pragmatism Saves Blacks Leisure

Blacks' landlords running the numbers were left with two options today
According to the British Property Federation, landlords felt the choice was between the Company Voluntary Agreement where they agree to pay a maximum of six months' rent on its outlets in return for cancelling its long-term lease obligations. Blacks will remain liable for rates until the property is re-let or until the lease expires (12 years), or a 'pre-pack' administration - where the business collapses and is then sold immediately out of administration following a pre-arranged deal to shed unwanted assets - which could have left landlords with nothing, plus an obligation to pay rates on empty properties.

Paying the rates is a huge issue as it's one thing landlords not taking any money in, it's another them opening their own wallets and paying out. It could be six months until these shops are retenanted, or it could be five years….
These are moves that both local Councils and landlords will have to consider taking in order to help rebuild the retail trade.

The future of Blacks Leisure and more than 4,000 retail jobs were sdecured today after landlords gave their 'overwhelming' (75%) support for the rescue deal.

Incidentally, before parking the problem with the 'greedy' landlords, NAMs & KAMs should bear in mind that this Blacks Leisure hit will be taken solely by the landlords - many of whom are owned by the public and its pension funds.....

An Offer You Cannot Refuse?

Picture: Pacemaker

Cross-border shopping in Northern Ireland can not only offer €/£ parity, but also cheaper prices on goods that are 18-20% dearer in the South, according to the Irish Times.(See article for more extreme examples)

Whilst Irish politicians' pleas to shoppers not to travel North are obviously falling on deaf ears, the real issue for retailers and suppliers is the growing demand for UK multiples and suppliers to reveal the profitability of their Irish operations in their annual reports.

Otherwise their claims that the price discrepancies are simply due to the higher costs of doing business in the Republic will be increasingly undermined.

Ultimately, a government under unprecedented domestic pressures could attempt to force disclosure via the tax route…..

Bolland's step forward to M&S, a step back for Morrisons?

The high street retailer confirmed on Wednesday the Netherlands-born Mr Bolland would replace Sir Stuart Rose, the group’s executive chairman, in the New Year, remaining at Morrisons until 31/01/2009….

Serious implications for Morrisons in that the move to employ Bolland was a radical step that worked unexpectedly well. He has been there long enough to lay down the template, but had too short a tenure to ensure smooth succession.

All supplier bets now off, all initiatives short-term, and big pressure on the shares
A sovereign wealth fund approach as the price drops?

Back to the drawing board….Ken?, Ken?

Supermarkets underestimating problems of breaking into the banking market?

How about bankers underestimating Supermarkets?
Today's contributors to the traditional banking backlash against supermarkets might consider the following:

• Major multiples don't do 'underestimating problems'
• Shopkeepers operate in an output-focused, numbers-based, 'no-nonsence', customer-orientated environment
• They aim at sharing cost-savings and value with repeat-visit, life-time-value shoppers
  Their loyalty schemes give them more usable customer-insight than a bank would be trusted to handle
• They constantly strive to enrich the shopping experience
• They operate systems that can turn 50,000 lines 25 times a year, with 95+% onshelf availability
• They play the money markets with daily takings and 30+ day's credit from suppliers, some earning upwards of £200m per annum in the process
• They start with a gross margin of 25% and still make 5% net
• They come with none of the traditional banker 'trust-baggage'
• They are fully staffed during the 'lunch-hour'……

Traditional banks don't seem to appreciate that the game has changed, changed utterly…underestimating the threat posed by new players that learn fast, and don't take prisoners…..!