Trade credit-pulled TJ Hughes appoint administrators

Just three months after its suppliers reportedly had its trade credit insurance pulled, the discount department store collapsed into administration.

Given that retailers can enjoy 45+days free credit, often combined with daily delivery, it still surprises suppliers that their customers can run out of (their ) cash…

For instance, a supplier having a net profit before tax of 5% needs incremental sales of £3m for every customer that goes bust owing them £150k.

If a supplier’s wholesaler’s (say 1% Net Profit BT) customer goes bust owing £150k, the wholesaler needs incremental sales of £15m, in this market!

For this reason it is always worth running the numbers on customer exposure, especially in the current climate.

It can be unfortunate to go bankrupt, but crazy to go bust because someone owes you money….

Six months austerity in the High Street

• So far this year, 15 UK High Street chains* have gone bust
• Some blame the consumer, others the multiples
• Real issue is supply and demand mismatch
• Consumers are cutting back predictably in response to unprecedented economic pressures,
• Savvy shoppers demand convincing of value
• All Multiples started as 1-shop operators
• Grew by matching demand with efficiency
• Efficiency driven by shopper-focused management of state-of-art retailing
• Doing simple things very, very well..
• …and minding the money, driving down prices to match need
• Others can survive, perhaps even thrive, by doing the same
• Rocket-science comes later…

In case you had not noticed, the year so far…

January

British Bookshops & Stationers Bust, 40 jobs lost

March

Henleys Clothing In administration, closed all 18 stores and lost 200 jobs.

Officers Club Clothing shop into administration; lost hundreds of jobs.

April

Oddbins Administration, 300 jobs lost.

May

Focus DIY Administration, 55 stores sold, 3,000 jobs being lost.

HMV Closing 60 stores.

Mothercare Up to 120 stores to close.

JJB Sports In difficulty, with 95 stores.

June

Homeform Announced some stores to close, 1,300 staff jobs under threat, plus jobs of 1,500 fitters used by firm.

Haldanes Supermarket Administration; 26 stores and 600 jobs threatened.

Habitat Administration, 30 shops closed, 750 jobs at risk.

Thorntons (below) Plans to close up to 180 stores, putting 1,125 jobs at risk.

Jane Norman Administration, sold 30 stores but 1,000 jobs at risk.

TJ Hughes Administration, 57 stores, 4,000 jobs at risk.

Carpetright Profit warnings, closure of up to 50 stores

Tesco Virtual Commuter-shop, a killer-app?

Tesco Korea have used mobile phones to create what might be the most clever use of mobile barcodes. By combining QR Codes, smartphones and Tesco’s existing home delivery service, it has transformed a South Korean subway station into a convenience store.

In Korea, Tesco Home Plus faced tough competition from market leader E-Mart,who have a far greater number of retail locations than Tesco. So Tesco decided to apply technology to the problem, and came up with a really smart solution: virtual shops.

Tesco has placed large billboard-style ads in a metro-station in South Korea. The ads are designed to look like shelves in a grocery store – as you pass by, you see the goods lined up as if you were in a store:

Every item has a QR Code beneath it. To add the item to your shopping basket, you simply scan the QR Code with your phone. When you’ve finished shopping, you send your list to Tesco’s on-line delivery service, and they will bring it straight to your home.

Deliveries are arranged to arrive in minutes or hours, rather than days, so the groceries will be in the shopper’s kitchen that night and there is no need to wait in to collect them.

Just like everybody else, South Koreans are busy at home and tired after a long day at work so offering the opportunity to shop while doing something else has a lot of value. Tesco settled on commuters waiting for their train: they have time on their hands and the most have jobs, so they’re likely to have money but little time.

A killer-app for any commuter-hub, anywhere…

Add-on ideas:

- Escalator-ads: a good use for the unused space beside the hand-belt and wall?

- Platform-ads: how about making them mobile, with a slow-scroll down every aisle?

NB. To work in the UK, two vital pieces of infrastructure would be required: mobile connectivity on all forms of public transport, including the tube networks in London, Glasgow and other cities, and a fleet of delivery vans set up for fast reactions.

Alan Haberman, father of the barcode, died 12th June 2011, aged 81

He was largely responsible for standardising the barcode’s design and introducing it into the world’s supermarkets, a development that has revolutionised retailing and countless other activities.

Despite resistance from conspiracy theorists, who considered barcodes to be intrusive (!) surveillance technology, and from some Christian groups who thought the codes hid the number 666, more than five billion of the codes are now scanned in shops worldwide every day; the technology has yielded savings running into the trillions of dollars

Slow to start, the breakthrough came when the “pile-em-high-sell-em-cheap” retailers got in on the act. In 1984 Wal-Mart, Kmart and Bullocks decided to introduce the barcode and other chains soon followed suit. As the system developed it enabled retailers to keep track of inventory with unparalleled accuracy, making possible the introduction of “just-in-time” ordering, minimising the need for storage and waste, and providing a huge range of sales data which allowed greater responsiveness to customer demands.

If you have any doubts as to the fundamental change caused by Haberman’s drive, think how unexciting the KAM role would be without barcodes…

Snake-farming opportunities and threats..

Courageous KAMs with a farming/gardening bent and seeking a little excitement may like to consider rearing snakes for food and traditional medicine. Cobras, vipers and pythons are everywhere in Zisiqiao, aptly known as the snake village in China’s eastern Zhejiang province, where the reptiles are deliberately raised to bring in millions of dollars to a village that otherwise would rely solely on farming.

The original breeding method was simply putting males and females together, but now meticulous research is done on how the snakes breed, how to select good females, investigation into their diet, and how to incubate eggs so survival rates rise.On the downside, the snake farmers said they had been bitten, some by deadly snakes, and were saved only by injection of anti-venom medicine.

Today, however, more than three million snakes are bred in the village every year by the 160 surviving farming families

Meanwhile, why not prepare by having a venom-free weekend, from the Namnews Team!

Home DePot - Medical marijuana superstore opens in Arizona

Seeking to capitalise on the state’s newly enacted medical marijuana law the 21,000-square-foot store offers some 2,000 products, including soil, grow lights and irrigation trays, specially designed for effective marijuana growing,

NB before booking flights please note that the only item missing from the category is marijuana itself.

Have a totally forgettable weekend from the Namnews Team!

Tesco is 'not too big'

Philip Clarke’s denial that the chain is too big raises several issues:

• Presence in the High Street: ‘Appearing to be everywhere’ can be a negative in terms of implied limitations of choice. This can be avoided via clear and differentiated positioning, but especially by delivering quality and value far in excess of alternatives available.
  
  
• Share of business: whilst Tesco average is 31% of food sold in the UK any incremental growth will be a continual problem in terms of having to manage negative PR. By emphasising that their expansion via non-food and ad the need to regard them as a mass merchandise retailer, their current 12.5% of ACV means there is lots of headroom as they grow this to 25%, after which it they are back to the current PR problem.
  
  
• Real issue for suppliers is how big a share of your business they represent. Your risk profile (risk averse, risk neutral, risk seeking) will determine your level of comfort with anything in excess of 25% meaning that you model your business around Tesco, and make it fit other retailers…. If too big for comfort, the answer can be to grow your Tesco business as much as their potential allows, and at the same time try to improve the performance of other major customers using Tesco best practice and standards...
  
  
• Then you really will be able to anticipate and even join them in their reaching for the moon…

When Greece defaults....

Given the inevitability of a default, KAMs may be interested in a Daily Telegraph article on what happens next:

• Every bank in Greece will instantly go insolvent.
  
  
• The Greek government will nationalise every bank in Greece, forbidding withdrawals from Greek banks.
  
  
• To prevent Greek depositors from rioting on the streets, the Greek government will declare a curfew, perhaps even general martial law.
  
  
• Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)
  
  
• The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.
  
  
• The Irish will, within a few days, walk away from the debts of its banking system.
  
  
• The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.
  
  
• A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.
  
  
• The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.
  
  
• The French and German governments will meet to decide whether (a) to recapitalise the ECB, or (b) to allow the ECB to print money to restore its solvency.
  
  
• They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.
  
  
• There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps
  
  
• Attention will turn to the British banks. Then we shall see…

When?

Financial markets anticipate anything from a month to 2 years.

Your Action: Worth a 'what if' by KAMs for key markets/customers?

i.e.

• Supplies to Greek customers invoiced in Euros (at up to 150 days credit)
• Impact on Parallel trade

etc, etc,

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