Morrisons - a Question of Courage?

Dalton Philips Source: Daily Telegraph

Morrisons had the courage to go outside, fast….

Marc Bolland, with no retail experience, had the courage to go back to the core Morrisons offering, and focus on making it work, fast.

Given the sky-high expectations, Dalton Philips, with an enviable track record in local and global retail (Brown Thomas, Walmart International and Loblaws), hopefully has the courage to keep it simple, focus on maintaining that Morrisons' momentum, and resist the impulse to fix anything before being absolutely certain it is broken, fast…

Needing a strong No 4 player in the UK, hopefully we all have the courage to help him succeed, fast?

Have a fearless weekend, from the Namnews Team!

Tesco- the (private-label) movie!

Weekend news reports indicate Tesco are in collaboration with Amber Productions in the launch of a multi-million-pound production arm poised to make films of books by a slew of bestselling authors.
Films under the joint venture will be initially available exclusively as DVDs through Tesco stores, online and through Tesco Direct. Tesco will focus solely on marketing and sales of the films under the partnership and will have no say in the content of the screenplays.

Tesco's new venture offers the usual blend of opportunities and threats for those involved.

Tesco can bring the following to private-label moviemaking: a fully segmented and databased audience via Clubcard, ability to package book, film & snacks, guaranteed distribution and facings, with minimal third party restrictions ref coordinated POS and instore merchandising
Tesco-partnership offers authors: "We are able to involve the writers at every stage, even with the casting decisions. And Tesco sells an enormous amount of books, of course; so for an author to have his DVDs on the shelf alongside his books and to sell them simultaneously sounds like a very good thing,"

Trade Issues for:
- Partner-studios: Tesco will provide security of financial backing, effective distribution, detailed feedback on audience reaction
- Competitors studios and distributors: big-hit movies possibly becoming a means of attracting movie-goers to the store, there to be confronted in the movie-aisle by Tesco private-label, as-good-as but cheaper alternatives.. Need to treat the independent HE retailer as a 'living billboard', fast! (See Cue Entertainment, January issue)
- Traditional Home Entertainment retailers: watch and learn from Tesco!
- Traditional cinemas: possibility of Tesco instore cinemas above stores in key areas?
- Suppliers of other categories: with its novelty and the impact of its instore theatre to support its private label movies, Tesco's new venture means suppliers need to fight even harder for Tesco mind-space (i.e. more need to analyse and demonstrate the contribution of traditional brands to Tesco profitability)

Finally, how soon will Tesco's new venture morph into Generation 4: Tesco Finest, better than national brands, but 20% cheaper?

Coping with the Savvy Consumer in 2010

Consumers are now beginning to make some sense of the past 18 months of 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…and providing major opportunities for pro-active suppliers.

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

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.

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.

Opportunities for pro-active suppliers

1. The savvy consumer is providing an entirely new basis for suppliers to re-evaluate every SKU in their portfolios against available alternatives


2. Ruthless elimination of anything that does not clearly demonstrate a total match with latest consumer need


3. Make it available in a way that shoppers want to buy, better than the competition.


4. Re-assessment of the customer portfolio from the same point-of-view


5. Aim at 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.


6. 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’…
   
   

Today's KAMtip: Size of Deal on Table?

Trying to plan and manage a negotiation session without a clear idea of context for the deal can be like being out on the ice, in the dark, with little idea of the depth of the water.
Calculating the following deal ingredients will help to establish the scope for concessions on each side
Size of Deal on the Table
• Customer’s share of the category?
• The customer’s share of our business (£, %)
• Our share of their business (£, %)
• Our share of their category (£, %)
• Size of the deal for them (Sales, Gross Profit)
• Size of the deal for us (Sales, Gross Profit)

The size of the deal for the customer in terms of gross profit on the amount sold will indicate the 'pool' of money from which they can make concessions.
Similarly. the supplier's sales and gross margin on the deal shows the potential size of concessions that can be made to the customer.

The rest is about matching, trading and fair share negotiation…

A Gap in the Banking Category?

“Banks have tended to treat loyalty not as something to be rewarded but essentially as something that can be exploited. They trade on inertia”
"Every business talks about putting customers first, but this really is at the heart of everything Tesco does"

Ex RBS, HBOS and Standard Life Benny Higgins, Head of Tesco Banking, in an article in The Sunday Times, sums up why Tesco and the grocers are going to capture a sector that still thinks banking is about banking. Bankers should reflect on the formerly 'specialist' petrol sector, where the 'shopkeepers' now have a 40% share…anyone still in doubt should check out the French petrol market where over 60% is sold via grocers.

Since buying RBS’s half-share in the Tesco-RBS joint venture in 2008, Tesco has set its sights on creating a fully fledged bank that will generate higher profit margins than its core grocery business. In a short time Tesco has attracted more than 6m financial-services customers, taken 8% of the credit-card market and become the UK’s sixth-biggest motor insurer. It also has more than 2,700 cash machines and says that they provide £1 in every £8 in circulation in the UK. In the past year, savers’ deposits have increased by 28% to about £4.5 billion.

Still small fry, but dangerous for bankers to underestimate Tesco's banking potential. The target market is Tesco’s supermarket customers. The stores get 20m visitors a week and there are 15m people in the UK with a Clubcard loyalty card…..

However, there are cautions here for suppliers in food and non-food categories.

Tesco are now competing with traditional bankers that have never had to compete, in a category that is more profitable and exciting than traditional grocery categories. Tesco's other key focus is upon overseas development.

This means that UK suppliers now need to analyse and demonstrate the financial impact of their brands on retailer profitability, in order to grab and hold a share of Tesco's mind-space…more than ever before, and fast.

GSCOP: Something for the final Weekend of 2009?

With the real 2010 finally kicking off next Monday (snow, etc?) the effect of the most fundamental change-agent in supplier-retailer trading relationships will begin to make an impact.
To help you hit the ground running, we have analysed 3 pages of the new GSCOP and added 3 pages of calculation pointers to help show that the parts dealing with Prices & Payments, Promotions and Other Duties can have a positive outcome, given the right tools…

Make the most of your last real reflective opportunity to put the GSCOP onto the 2010 Agenda, by downloading a personal copy of our free analysis

Have a reflective Weekend, from the Namnews Team!

A question of scale, or sale?

In an article in The Guardian
- Wal-Mart, as China's seventh largest trading partner, outranks the UK, spending more than $18bn annually on Chinese goods
- The best-selling wine in the whole of Japan is an own-label Asda Bordeaux
- "It's important for us to be in one of the top three positions," says Wan Ling Martello, chief financial officer of Wal-Mart's international operation. "We have to have scale – otherwise it doesn't quite make sense."

At what stage will Asda's limited growth potential become too much of a liability, and yield more via disposal?

World’s Leading Retailers Grow Despite Recession, But Profits Take A Hit….

2010 Global Powers of Retailing, from Deloitte Touche Tohmatsu, shows that the global recession affected retailers' profitability at the largest 250 retailers in the world fell from 3.7% in fiscal 2007 to 2.4% in 2008.
Threat 1: Anyone managing these major customers knows that they don't do 'reduced profitability'.

The Report said, "2008 has been a tumultuous year for the global retail industry. Sales growth slowed and profitability fell, sharply for some. Many retailers 'bought' sales with heavy promotions which hit the bottom line hard. However, we are already seeing evidence that as economic recovery takes hold around the world retailers should be able to return to a path of improving profitability."
Threat 2: Retailers don't always 'buy' sales via their own pockets
Threat 3: Retailers don't always await economic recovery to improve profitability

The composition of the Top 10 retailers in the world remained the same this year. This group now accounts for over 30% of the total retail sales of the Top 250 retailers. Wal-Mart Stores remained the world's largest retailer, ahead of Carrefour. Despite Tesco’s better sales growth rate, relative currency strength against the US dollar enabled Metro to climb above Tesco, back into third place.
Threat 4: Tesco did not get where they are today, to meekly surrender global third place to Metro

Add to these four threats the implementation of the Groceries Supply Code Of Practice due on 4th February 2010 where UK retailers will need to recoup losses on payments no longer allowed…
Threat 5: This means that concessions on margins, credit periods, settlement discounts, rebates, promotional support, trade funding will be probably be re-negotiated to replace any retailer losses on payments no longer allowed (such as shrinkage allowances, space-costs, retros, etc.)

Now ask yourself if it is likely that it will be 'negotiation as normal' over the coming months?

Action:

1. Revisit the Cost & Value of every aspect of your trading relationship with major customers
2. Re-assess your team's ability to calculate and demonstrate the financial impact of your brand offering on the customer's profitability
3. Prepare for your toughest negotiations ever…
4. If in any doubt, please re-read Threats 1-5 above…
5. Find some short-cuts via NamCalc