Given Sainsbury’s predictions that this will be an own brand Christmas as hard-up Britons “splash out” to enjoy a family Christmas, making their money go farther via own-brands perhaps the Ansoff Matrix can spell out the moves and help suppliers to anticipate the impact…?
As you know, Ansoff identifies four ways of growing a business by selling:
- More current products to current customers
- New products to current customers
- Current products to new customers
- New products to new customers
How Sainsbury’s could increase own-brand sales
More current products to current customers:
Essentially, as most produce sales are own-brand, coupons and keen prices and store-level assortment could encourage purchase of larger portions of Christmas meats turkey, fruit & veg, with pricing delicately balanced to avoid over-purchase/waste….making current customers happier
New products to current customers:
Here the emphasis could be on encouraging purchase of complementary Christmas items both food and non-food, brands & own-brands, with in-store promotion/theatre and linked couponing to tease custom away from branded alternatives and other mults/channels via current JS customers in the aisle – making current customers even happier....
Current products to new customers:
By studying the profile of their current customer, JS could seek out new shoppers of similar profile, and try to attract them to the store via the own-brand products that appear to appeal to current JS customers, given that they probably have similar appetites. These new customers will need to be attracted and retained by a combination of virtually one-to-one communication and coupon-swaps to encourage a first-time switch from their traditional Christmas destination. To achieve an acceptable ROI, this has to result in an unprecedented and compelling experience, well suited to the JS approach.
This will probably be the most competitive segment as Tesco tries to recover lost share/customers and retain its current customers via its £1bn investment programme…
New products to new customers:
This high risk alternative means trying to attract new shoppers and sell them new products, targeting consumers that are unaccustomed to the JS experience, with products that are new to JS, a double-whammy that may attract the risk-seekers, but will probably play a small part in own-brand Christmas..
So, from a supplier’s point-of-view, this is all about own-brand, wrong!
This is about how a skilled and systematic retailer is going to make this an unforgettable own-brand Christmas, using differentiation to build and hold an enlarged customer-base, at the expense of brands…unless suppliers make Ansoff work even better for their brands…
PS For insight on the subtle moves see our free paper : 4 generations of private label
Thursday, 15 November 2012
Wednesday, 14 November 2012
Delivery leverage for on-time supply - Walmart pays upfront
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…
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…
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…
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