Mexico's leading retailer Walmex has made early payments totalling US$326 million to its suppliers to make sure they deliver products on time for Thanksgiving and for the Christmas season. This has to be an indicator that when the circumstances are right, even the world’s biggest retailer will pay for goods in advance.
When you take into account that retailers in Mexico pay in 60-90 days, it can be seen that Walmart are in fact paying up to 6 months earlier than suppliers would normally have been paid…
Why a retailer can pay upfront
In practice, being cash-rich in that the consumer pays on receipt of goods, a retailer is capable of, and willing to pay in advance, on delivery or up to 90 days later, with or without settlement discount. In the case of private label, a retailer can even contribute to the investment in special plant, buy the raw material and ingredients and even contract to purchase at a given price for up to five years in order to help the supplier to amortise investment.
It all depends on the deal….
For this reason, it is vital that suppliers always have a clear idea of the financial dimensions of their relationship with individual retailers. This means being realistic about the pulling-power of their brand vs. available alternatives in the eyes of both consumer and retailer.
Running the numbers, both ways...
Based on this potential leverage, it is essential to calculate each element of the deal in terms of actual/estimated cost and also the incremental sales to the retailer in order to break even. It is then necessary to calculate what the retailer ‘gets’ from the brand in terms of margin, free credit, settlement discount, trade funding and above-the-line support in addition to service level, rotation, availability, exclusivity and priority when stocks are scarce, all set against their sales equivalent required to generate this total investment.
In other words, by listing the brand, a retailer on 5% net profit needs sales of £20k for every £1k received from a supplier…this needs bringing out in negotiation!
Going to ‘see’ the buyer without having run the numbers in this manner is worse than going in blind, especially if your competitor, without your brand benefits, knows and can use the financials, has eyes wide open…
Incidentally, before emailing the Asda buyer, it might be prudent to keep in mind that with planned purchases of $6.4bn in Mexico for Q4, Walmex are in fact paying for $326m in advance, i.e. 5% of purchases…
Wednesday, 14 November 2012
Monday, 12 November 2012
Making more of existing traffic in supermarket convenience….
With more than 1-in-20 shoppers are leaving supermarket convenience stores having failed to spend all they intend, according to him! research & consulting, it follows that improved availability will optimise existing traffic, without adding another shopper...
At a time when every little helps, it seems a no-brainer to respond to the 5,000 shoppers surveyed at supermarket convenience stores, including Tesco Express, Sainsbury’s Local, M-Local and Little Waitrose, that report the main reason for these failed purchases is poor availability. Moreover, failure to buy one product in smaller format stores, when shoppers only need two or three, means a significant proportion of a shopper’s needs are left unfulfilled.
Losing business in the aisle
As you know, a brand’s consumers exhibit different need-sets as they shop different store formats, and retailers need to tailor both the offering and layout to suit, or suffer business drift…
In the current climate, suppliers and retailers invest heavily in presenting the offering to the consumer. It seems a pity to discard that consumer as shopper when they respond via a more convenient store of their choice…
Moreover, any additional traffic arising from more satisfied shoppers ‘telling a friend’ will be truly incremental..
At a time when every little helps, it seems a no-brainer to respond to the 5,000 shoppers surveyed at supermarket convenience stores, including Tesco Express, Sainsbury’s Local, M-Local and Little Waitrose, that report the main reason for these failed purchases is poor availability. Moreover, failure to buy one product in smaller format stores, when shoppers only need two or three, means a significant proportion of a shopper’s needs are left unfulfilled.
Losing business in the aisle
As you know, a brand’s consumers exhibit different need-sets as they shop different store formats, and retailers need to tailor both the offering and layout to suit, or suffer business drift…
In the current climate, suppliers and retailers invest heavily in presenting the offering to the consumer. It seems a pity to discard that consumer as shopper when they respond via a more convenient store of their choice…
Moreover, any additional traffic arising from more satisfied shoppers ‘telling a friend’ will be truly incremental..
Friday, 9 November 2012
'Boots the Grocer' - How Walgreens and Musgrave are helping them become a force in UK convenience…
Given that Walgreens, Boots 45% partner’s experience of food in pharmacy, give c15% of their store space to food, coupled with the Musgrave trial of food-to-go in Boots’ branches means that ‘Boots the Chemist’ could become a big competitor in the UK convenience landscape.
A new report from him! focuses on the Boots / Musgrave food range trial, and new exclusive shopper feedback shows that shoppers are excited about the extended range of food products being trialled in 11 Boots stores. Looking to Boots to provide healthier alternatives, 58% said that they are likely to buy from this new food range at Boots in the future.
Why this initiative matters to everyone...
Given their track record, traditional suppliers to Boots will not underestimate the ability of this global player to expand synergistically via the right partners. Moreover, this logical brand-stretch via healthy food from a quality convenience retailer, combined with Boots retail footprint and regular traffic, has to represent a major breakthrough in the convenience sector, for both retailers.
Implications in a zero-sum market
The obvious implications in terms of relative space, ease-of-access and increased buying muscle means that it is important therefore that all suppliers tap into the Walgreens food background and link this with Musgrave’s quality convenience-experience in order to adequately factor this innovative food range trial into your trade strategies…
Full details of the Walgreens-Boots merger, the Boots-Musgrave trial and shopper reactions in the him! report
A new report from him! focuses on the Boots / Musgrave food range trial, and new exclusive shopper feedback shows that shoppers are excited about the extended range of food products being trialled in 11 Boots stores. Looking to Boots to provide healthier alternatives, 58% said that they are likely to buy from this new food range at Boots in the future.
Why this initiative matters to everyone...
Given their track record, traditional suppliers to Boots will not underestimate the ability of this global player to expand synergistically via the right partners. Moreover, this logical brand-stretch via healthy food from a quality convenience retailer, combined with Boots retail footprint and regular traffic, has to represent a major breakthrough in the convenience sector, for both retailers.
Implications in a zero-sum market
The obvious implications in terms of relative space, ease-of-access and increased buying muscle means that it is important therefore that all suppliers tap into the Walgreens food background and link this with Musgrave’s quality convenience-experience in order to adequately factor this innovative food range trial into your trade strategies…
Full details of the Walgreens-Boots merger, the Boots-Musgrave trial and shopper reactions in the him! report
Thursday, 8 November 2012
Morrisons losing share - what would you do?
According to latest results with a 2.1% fall in like-for-like sales, Morrisons are losing share vs. the other mults, apparently due to insufficient presence in convenience and online….
Essentially, they are doing the right things, promoting no-nonsense value for money to a hard core of loyal users, who are perhaps hurting more than most in the current climate. However, the company needs to drive its share price in order to remain autonomous, and independent…
How to help
Every salesman, myself included, ‘knows’ how to run a hotel, a pub, and even a shop.
So what would you do if you were in Dalton Phillips’ shoes? All ideas and suggestions welcome, at least in Kamblog…
For starters:
The one-to-one approach with existing customers, the most valuable asset
Essentially, they are doing the right things, promoting no-nonsense value for money to a hard core of loyal users, who are perhaps hurting more than most in the current climate. However, the company needs to drive its share price in order to remain autonomous, and independent…
How to help
Every salesman, myself included, ‘knows’ how to run a hotel, a pub, and even a shop.
So what would you do if you were in Dalton Phillips’ shoes? All ideas and suggestions welcome, at least in Kamblog…
For starters:
The one-to-one approach with existing customers, the most valuable asset
- Work on the core users: a basic business-building principle, they are already sufficiently satisfied to visit your store regularly, presumably in preference to other retailers
- Find out who they are, where they live and look after them (social marketing/media, networking, online)
- Treat them well as individuals and they may even tell their friends. In other words, find out why they came in and make sure their needs are satisfied (store-level assortment, availability, instore theatre, shopper-marketing )
- In effect, sell more of their current requirements, where feasible
- Attempt to help them buy appropriate new products, rather than selling to them
- ‘Follow them home’: after-sales checking for satisfaction via e-networking
- Ideally via recommendations from current customers (back to rewarding satisfied current customers)
- Attracting ‘spontaneous’ new custom is too costly and takes longer than you have…
- Shop staff look after 450 categories, a supplier NAM manages three, maximum
- NAMs can generate 20 ideas per category, all they need is access..
- NAMs represent pan-market breadth, in that they know how their categories are sold in most types of outlet, a wealth of insight, available on tap..
- Many suppliers are willing to shopper-market, and want to influence the shopper in the aisle
Wednesday, 7 November 2012
Effective projects – the vital ingredients…
Effective projects start with an exit strategy, in turn becoming the basis for the project objective, a description of the end result…
Criteria for Practical Objectives:
Definition of basic purpose, Timed, Measurable, Worthwhile, Achievable, Compatible, Agreed, Communicated clearly, Reviewed regularly...
Example Objective:
As a result of implementing the plan, the following will have happened:
- Achieved successful launch of new variant
- Sales grown by 12%
- Profits grown by 11%,
- Increased distribution to 78% by month two of new brand
- Incremental business of £450,000
- By month 7 have achieved 70% of full year target
Anything less is simply hope masquerading as achievement….
Amazon's nine steps to success - Bezos' formula
A great article in Londonlovesbusiness.com spells out Jeff Bezos’ secrets in driving a $48bn company growing at 26% CAGR.
Amazon's formula
Ranging from taking a long term view of 7 rather than 3 years, reducing customer service by getting it right first time, use of lower margins to build loyalty, managing detail, starting with consumer need and working backwards, innovating rather than copying, working hard to charge less, and rocking-the-boat to make a difference, the Amazon checklist provides a practical basis for optimising your relationship with the world’s largest online operator.
More importantly, by applying the same principles in-house, realistic NAMs will not only achieve a better match with Amazon, but could also evolve a simple, but effective customer-focused strategy going forward…
Amazon's formula
Ranging from taking a long term view of 7 rather than 3 years, reducing customer service by getting it right first time, use of lower margins to build loyalty, managing detail, starting with consumer need and working backwards, innovating rather than copying, working hard to charge less, and rocking-the-boat to make a difference, the Amazon checklist provides a practical basis for optimising your relationship with the world’s largest online operator.
More importantly, by applying the same principles in-house, realistic NAMs will not only achieve a better match with Amazon, but could also evolve a simple, but effective customer-focused strategy going forward…
More on Amazing Amazon
Tuesday, 6 November 2012
'Making do' taking demand out of the market...?
With hopes for a continuing pre-Christmas sales revival dashed today amid signs that consumers are still limiting spending to essential items, it is perhaps useful to consider the impact of people ‘making do’ with existing products and postponing purchases of replacements in these uncertain times.
Housing demand
Essentially, taking big purchases first, how many householders are trading refurbishment and ‘extending’ for the purchase of a ‘new house’ that is a better match for growing family needs. Think of even a third of homeowners, with unprecedented access price–comparison facilities on sales costs, legal fees, removal charges and especially property values, deciding to postpone a house purchase for even a year, taking 33% out of the market
Cars & home entertainment
Similarly making do with the family car for a third year may add a little to upkeep costs, but takes another slice from new car demand. And what if large companies decide to apply the same logic to fleet replacement…?
The same with (age permitting), mobile phones, laptops, home entertainment, etc, etc, etc.
Austere eating...
When it comes to food, the impact of ‘making do’ on out-of-home eating is already obvious as people increasingly retire indoors, hopefully via a ready-meal+wine upgrade... Meanwhile, if consumers are stretching sell-by limits and not binning meal left-overs but are in fact re-heating for even one meal in three, we again have at least a third of demand removed from our sales forecasts…
The way forward...
Realistically, in an environment where only politicians and vested interests are optimistic, we need to factor these ‘making do’ drivers into business budgeting, accepting that our business models are based on ever increasing demand, and realise that in a zero-sum game, any growth is coming at the expense of the other guy.
In other words, assume that a third is knocked off your next year's sales, and seek ways of replacing those sales at the competition's expense, via a better match with consumer need...
Accordingly we need to find a way of identifying what the consumer thinks is important in our category, and communicating (and delivering ) the real difference our brand represents, better than, and at the expense of, our competitor, in a way that makes a savvy consumer come back for more…
Housing demand
Essentially, taking big purchases first, how many householders are trading refurbishment and ‘extending’ for the purchase of a ‘new house’ that is a better match for growing family needs. Think of even a third of homeowners, with unprecedented access price–comparison facilities on sales costs, legal fees, removal charges and especially property values, deciding to postpone a house purchase for even a year, taking 33% out of the market
Cars & home entertainment
Similarly making do with the family car for a third year may add a little to upkeep costs, but takes another slice from new car demand. And what if large companies decide to apply the same logic to fleet replacement…?
The same with (age permitting), mobile phones, laptops, home entertainment, etc, etc, etc.
Austere eating...
When it comes to food, the impact of ‘making do’ on out-of-home eating is already obvious as people increasingly retire indoors, hopefully via a ready-meal+wine upgrade... Meanwhile, if consumers are stretching sell-by limits and not binning meal left-overs but are in fact re-heating for even one meal in three, we again have at least a third of demand removed from our sales forecasts…
The way forward...
Realistically, in an environment where only politicians and vested interests are optimistic, we need to factor these ‘making do’ drivers into business budgeting, accepting that our business models are based on ever increasing demand, and realise that in a zero-sum game, any growth is coming at the expense of the other guy.
In other words, assume that a third is knocked off your next year's sales, and seek ways of replacing those sales at the competition's expense, via a better match with consumer need...
Accordingly we need to find a way of identifying what the consumer thinks is important in our category, and communicating (and delivering ) the real difference our brand represents, better than, and at the expense of, our competitor, in a way that makes a savvy consumer come back for more…
Monday, 5 November 2012
The 'average' citizen vs. the bleeding differences that make for individualism
The move from broadcast to narrow-cast, even one-to-one media marketing and social networking is a reflection of the fact that increasingly savvy consumers demand to be treated as individuals by suppliers and retailers. Combined with the increasing availability of one-to-one consumer feedback, marketers risk dilution and dissipation of the brand message in refusing to acknowledge that the traditional use of ‘average’, apart from being increasingly out-of-step with reality, is verging on becoming an insult, compared with the relative awkwardness of ‘individualism’,
In other words, ‘average’ is easy, but ‘individual’ can be a nuisance…
However, even in Japan where being the same is considered a good thing, much of the population are said to enjoy finding little differences that distinguish people, blood type being the latest example.
What blood groups show
According to popular belief in Japan, type As are sensitive perfectionists and good team players, but over-anxious. Type Os are curious and generous but stubborn. ABs are arty but mysterious and unpredictable, and type Bs are cheerful but eccentric, individualistic and selfish.
In fact a whole industry of customised products has also sprung up, with soft drinks, chewing gum, bath salts and even condoms catering for different blood groups on sale.
By the same token, NAMs that are individual, whatever the blood group, tend to make a difference, despite being something of a nuisance...
Historical signals...
Incidentally, those of you with Type AB blood of a poetic bent might have picked up this need for individualism as far back as 1939, via W.H Auden in The New Yorker.
It is the epitaph of a man, identified only by a combination of letters and numbers, described from the point of view of government organizations i.e. the "Bureau of Statistics."
The poem satirises bureaucracy and standardisation of people (the average citizen) at the expense of individualism, and perhaps explains much of what has gone wrong in the last few years....
To optimise the individualism of your next coffee break we attach Auden’s poem below - vive la difference!
The Unknown Citizen
He was found by the Bureau of Statistics to be
One against whom there was no official complaint,
And all the reports on his conduct agree
That, in the modern sense of an old-fashioned word, he was a
saint,
For in everything he did he served the Greater Community.
Except for the War till the day he retired
He worked in a factory and never got fired,
But satisfied his employers, Fudge Motors Inc.
Yet he wasn’t a scab or odd in his views,
For his Union reports that he paid his dues,
(Our report on his Union shows it was sound)
And our Social Psychology workers found
That he was popular with his mates and liked a drink.
The Press are convinced that he bought a paper every day
And that his reactions to advertisements were normal in every way.
Policies taken out in his name prove that he was fully insured,
And his Health-card shows he was once in a hospital but left it cured.
Both Producers Research and High-Grade Living declare
He was fully sensible to the advantages of the Instalment Plan
And had everything necessary to the Modern Man,
A phonograph, a radio, a car and a frigidaire.
Our researchers into Public Opinion are content
That he held the proper opinions for the time of year;
When there was peace, he was for peace: when there was war, he went.
He was married and added five children to the population,
Which our Eugenist says was the right number for a parent of his
generation.
And our teachers report that he never interfered with their
education.
Was he free? Was he happy? The question is absurd:
Had anything been wrong, we should certainly have heard
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