A new route to market - The no-middlemen group in Greece

According to the New York Times, the feisty owner of a small family business that makes detergents in Northern Greece, struggling to keep his business afloat under the weight of unpaid invoices and constant demands for bribes, started selling his products directly to consumers for cash at fixed prices through a non-profit collective – the no-middlemen group – instead of through shops and traders as he had always done.

In their search for solutions to the economic crisis, the Greeks are tinkering with a new type of economy with little precedent in Europe. The movement seeks to cut out wholesalers, shop managers, state officials and anyone else between producers and consumers, and who once took a share of profits and added to the costs of goods.

The group runs a website that takes orders for goods that are then distributed at car-park markets for a fixed price paid in cash. Staffed by volunteers, the group takes a small cut to cover expenses.

Trade investment:

• The owner of the detergent company says that traditionally the purchasing managers of supermarkets, whether local or foreign owned, demanded bribes for agreeing to a meeting where he presented his products!
• They also asked for money to ensure an attractive display for his products!
• The price varied according to shelf height!
• On average he paid $1,300 a transaction plus gifts at Christmas and other holidays…!

The key issue is not the fact that in the face of increasing demands, the worm finally turned, but that the elimination of all intermediaries and incentives has been so comprehensive, and it appears to be working……

Tax collection via the consumer-shopper...

Whilst it could never happen here (?), in the State of Sao Paulo in Brazil, customers who ask for a receipt can give their social security number to the cashier. Businesses have to submit their copy of those receipts - with or without social security numbers - to the tax authority. The authority creates an account for every social security number entered into the system and reports to customers which receipts have been entered with their social security number and how much they are for. Customers receive a rebate worth about 30% of their share of sales taxes paid through the business each month, and for every $50 of receipts they are entered into a lottery with a maximum pay-out of $500,000. They can complain online if they think receipts are missing or have the wrong price.

Details of the experiment are available here, but the key point is that by ‘crowd-enlisting’ in a creative manner, it is possible to approach old problems in a new way, to everyone’s benefit...

Founders Of Morrisons Considering Buyout: what this means for suppliers

Essentially, Morrisons appear to want to step back from short-term accountability to the stockmarket, and run the business with a longer-term perspective without having to explain and justify each move to outsiders.

However, unless the family – a 10% shareholding - can raise between the £5bn to £7bn it would take to buy-back the company, using a combination of own resources and personal contacts/bank borrowing, it will be necessary for them to make the move via a private equity partner.

Given that Morrisons own 80% of their estate currently valued at £9bn vs. £5.5bn market capitalisation, a private equity partner would want them to spin off much of the estate to release the ‘hidden value’ therein, going against the family’s wish to be independent of landlords etc.

For this to go Morrisons way, they would need to acknowledge the redundancy of large space retail. This means finding other business-uses for ‘spare’ space to justify their retention, or sell off the property portfolio.

Either way, it seems obvious that Morrisons will need to focus on financial measurement and ROI justification on every aspect of the business, going forward.

An obvious consequence is that any supplier wanting to accommodate Morrisons new approach will need to speak the same financial language, fast….

Dumb Starbucks' shop opened In Los Angeles by local comedian…

 pic: Jonathan Alcorn/Reuters

According to The Guardian, the comedian Nathan Fielder has outed himself as the man behind a parody coffee shop called Dumb Starbucks that appeared to throw down a gauntlet to the real Starbucks, a TV stunt rather than an art installation or business start-up…

Long lines formed as word spread on the street and social media, prompting debate over whether it was Banksy-style pop-up art or an entrepreneur’s audacious attempt to simultaneously mock and purloin the Starbucks brand.

A fact sheet posted inside the shop claimed that by adding the word “dumb” it was technically making fun of Starbucks and so could use their trademarks under a law known as fair use.

It remains to be seen whether Starbucks get the joke and hopefully the coffee tastes as good as the real thing, but meanwhile some food for thought for others hoping to grow at the expense of the competition, in these flat-line times?

Thx Richard

Asda playing instore...?

Given increased supply-chain efficiencies, coupled with shopper reluctance to drive out-of-town, resulting in increasing redundancy of large-space retailing, Asda appears to be following Tesco’s lead in seeking to buy businesses that might complement their retail offering whilst absorbing overheads.

The Daily Express reports that Asda is rumoured to want to buy out the Early Learning Centre, given Mothercare’s struggles…

Apart from a good purchase price, the ELC would be a natural fit in terms of family offering, but could also add to instore theatre and enrich the shopping experience whilst keeping the kids amused.

Great news for toy suppliers, but a possible threat for NAMs in less exciting categories…? However, surely this presents an opportunity for extra creativity that might also be rolled out elsewhere?

Friday What-if: Why CVS Is Quitting Tobacco and the UK/EU implications

CVS Caremark Corp is a $123bn American retailer and health care company that has announced it will stop selling tobacco in October 2014, and focus on healthcare provision.

Respondents to Andrew Sullivan's blog add some interesting insights:

• CVS own Caremark RX, a huge pharmacy benefits manager (PBM), managing the prescription drug components of Medicare and other public and private insurance programs
• Pharmacy chains have been providing the care that more traditional medical practices cannot, with CVS clinics rising from 800 to 1,500 by 2015...
• CVS has between 30 and 40 partnerships with healthcare systems across the US
• CVS shares the retail-clinic space with Walgreens, Target and Walmart, and the CVS tobacco move could cause these three players to make similar moves re. tobacco, alcohol and even shotguns..
• Junk food and drinks have to come under the same spotlight as the healthcare market expands...
• The $2bn lost in tobacco sales will need replacing...

So, apart from some fundamental changes in US retailing, the key issue for UK/EU NAMs has to be the impact of McKesson and Walgreens expansion into Europe on CVS.

What-if CVS decide to copy the McKesson move and acquire some healthcare wholesalers, say Phoenix for starters?

To give you some idea of the scale of the issue and the money involved, some 2012 sales figures:

CVS Caremark                    €90.5bn
McKesson-Celesio              €115.3bn
Alliance Boots-Walgreens    €80.7bn
A.S. Watson                       €14.2bn

Apart from pushing Alliance Boots-Walgreens down into third place, with the right acquisitions, CVS could even take the No.1 slot...

Watch this space... 

London's first pay-per-minute café facing closure?

Ziferblat is a social network in real life! At 388 Old Street, Shoreditch, London, EC1V 9LT, the café opens from 1000 to midnight, and charges 3p per minute.

For NAMs willing to try, you pick up an alarm clock on arrival, note the time, and check out on completion. Complementary snacks and coffee are available 'on tap' and even bespoke coffee if required.

However, rather than being inundated with 'smash & grab' free-loaders making it uneconomical, Ziferblat, the country’s first pay-per-minute café, is facing closure less than three months after opening because of a lease dispute. According to The Standard, Ziferblat’s role as a café where customers make their own coffee and food, but pay by the minute, means it falls into a legal grey area between being classed as a “shared workspace” and a venue “selling food and drink”.

Hopefully, ways can be found to live with the bureaucracy, avoid biting the dust, and allow the emergence of a new approach to food service...

Rebuilding consumer confidence - the brand role

Nielsen's latest Global Survey of Consumer Confidence reveals that in Q4 2013, 60% of Britons are seeking to reduce their electricity bills, 58% have cut back on expanding their wardrobes, 57% have cut out takeaways and 55% are switching to cheaper brands in the supermarket.

As reported in The Guardian, the poll of 30,000 people has uncovered the first dip in consumers' confidence since 2011. Chris Morley, managing director of Nielsen UK and Ireland, said: "British consumers are increasingly recognising improvements in the economy, but they are still cautious and likely to continue to modify their buying and consumption habits to save money"

It is obviously impossible and inappropriate for brands to attempt to shift the mood of the entire population, that being a job for the politicians (!). Better for brand owners to focus on that pool of loyal users, the ones that have remained loyal despite the pressures and blows to credibility (horsemeat etc), the consumers that continue to believe in your brand, albeit at reduced consumption levels.

Working from what you know works, it can be easier to encourage existing users to consume more, rather than trying to attract new users to the brand.

• A key first step is to reassess latest consumer needs vs. brand attributes
• ...and checking that the brand delivers more than it says on the tin, every time....
• Check post-consumption delight -who needs satisfaction...?
• Optimise consumption levels by ensuring 100% onshelf and multichannel availability 24/7 - why take a chance on preventing any potential consumer from accessing your greatest asset?
• Share with consumers other uses of the brand revealed by regular users
• Then begin to encourage existing users of your current brand to try another brand in your portfolio, capitalising on your mutual knowledge and emerging confidence in the relationship

When loyal consumers have experienced and have confidence in your offering on these two levels - existing and new products - it is time to build on the ability of satisfied, savvy consumers to tell their friends....

A slow approach?
Then how about taking a chance on delivery vs. promise, and allowing the other half of the 'tell a friend' mechanism to kick-in, whereby a delighted consumer tells one friend, whereas a complaining consumer tells ten eager listeners, via every medium available...much, much faster!