The Happiness Formula

                                                                                                                       Source:: Andrew Sullivan

Happiness “doesn’t depend on how things are going,” says lead study author Robb Rutledge of University College London. “It depends on whether things are going better or worse than you had expected they would.”

In other words, everything depends upon setting the correct expectation level, then the numbers count...

Tesco share-price plunge - a new opportunity for NAMs?

News of yesterday’s plunge in Tesco’s share-price to a 10-year low of 243.8p represents an opportunity for those suppliers prepared to re-interpret their Tesco strategies in terms of having a direct impact on share-price improvement, surely a top-of-agenda item for both the share-optioned Tesco team and the incoming Dave Lewis.

If share price is driven by ROCE, in turn driven by net margin and rate of capital turnover, then a supplier-template for helping an increasingly receptive Tesco emerges…

Essentially, Tesco’s ROCE has dropped over the years to 8.2% and its Net Margin to 3.6%, whilst Walmart’s performance has remained at a steady ROCE 18.2% and Net Margin 5.2%, despite the global financial crisis and its aftermath.

Therefore, to restore its historic share-price, Tesco needs to raise its financial performance to Walmart levels

Suppliers can help in two areas: improving Tesco’s Net Margin and improving its capital rotation as follows:

Net Margin improvement:
Reducing Operational Costs
- Better delivery arrangements
- Easier, more economic process
- Less damaged or defective stock
- Easier handling
- More economic use of labour
- More economic use of space

Reducing Administration Costs
- EDI
- Less time spent on administration
- Fewer administration tasks
- Better payment terms
- Simpler stock and order systems

Capital rotation improvement: 
Sales Volume or Value Increase
- Driving traffic and basket size
- Increasing Tesco yield i.e. sales/sq ft
- Improving quality of yield i.e. trading up

Asset Reduction
- Less capital tied up in stocks
- Less space required to stock
- Faster throughput
- Better use of spare cash
- Better use of fitments and space
- Fewer staff required

In fact, everything you are already doing, but expressed as a direct contribution to Tesco's ROCE and thereby share-price enhancement...

This direct focus on issues for a  customer currently pre-occupied with share-price performance has to represent a new opportunity to demonstrate the value of your trade initiatives and support in a way that connects directly with the buyer’s needs and wants, like never before…

...and why not throw in the fact that every £10k you invest in Tesco is worth £277k in incremental sales, based on their 3.6% margin!

Walgreens to complete purchase of Alliance Boots in £5bn deal

Last evenings announcement by Walgreens that they have decided remain in the US and are expected to announce shortly their decision to complete their acquisition of Alliance Boots will impact your WBAD dealings.

Their decision not to move their headquarters to the EU (tax inversion) means the time-pressure is off re acquisition, meaning that they can avail of the 6 months acquisition-window beginning in February 2015.

Remaining in the US means that Walgreens-Boots will pay corporation tax on US earnings @ US rates of 36%, probably making them subject to pressure from some major shareholders.

It also means that WBAD will have the buying muscle of 3xAB turnover….

In other words, some new dots to connect in your dealings with WBAD…

Watch this space

Walmart playing catchup with Amazon? Seriously?

News that Walmart are introducing personalised web pages based upon shopping behaviour for personal shoppers, represents a major leap for the Global No 1, but in reality is a mere step for online....

In other words, Amazon have set some fundamental KPIs for any player hoping to be taken seriously in the online game:

• 1-Click: this smooth ordering process becomes addictive, especially compared with aspiring rivals. Walmart allegedly say they are reducing online ordering to 1 page.....
• Returns: regular users know that returning unwanted goods to Amazon is easier than ordering
• Delivery: try tracking your next Amazon order, and be astonished at the high numbers of deliveries by your driver and intense geographical density of their distribution, en route to your address...

Without matching these basic KPIs, other 'online' retailers are simply playing catchup, and I mean playing...

PS: For online rivals that match the KPIs, why not try Amazon's anticipatory shipping...?

Ethics in selling: why an ethical approach always made sense, even in precedented times!

In these unprecedented times, the savvy consumer/buyer is no longer willing to outsource their decision-making to marketers, salesmen or retailers.

In buying a product/service, they are choosing a mix of Product/Service, Price, Presentation and Place that represents good value for money. In making the choice, they are factoring in a combination of product performance and integrity of the seller.

Any short-changing by the seller automatically makes the price seem expensive - a bad deal - causing the consumer/buyer to refuse to buy, or even litigate in some cases…

More importantly, the praise/complain ratio kicks in, whereby a satisfied customer tells one  friend, whilst an unhappy customer tells ten…

Ethics, apart, it surely makes sense to manage expectation down to a point where the customer always receives more than expected, and willingly comes back for more….

Our contribution to a discussion led by Peter Ramsden on the Key Account Managers Group

Still think the global retailers are ignoring Amazon?

                                                                                       Pic: via Jayaram Vengayil, via Fabio Ferraro

Online delivery charges - a stumbling block or opportunity for mults?

Fully-costed home delivery by the mults costing £20 vs. a £4 delivery-charge raises some issues and opportunities for suppliers and retailers

If traditional retailers want to be online, home delivery has to be part of the package.

Whilst retailers may try to shift some of the cost-burden via promotion of click & collect, there will always be a proportion of consumers that want and can accommodate home delivery. In special cases retailers may be able to charge a commercial rate but in reality they are saddled with a £4 delivery charge.

As usual, the Amazonian elephant in the room is setting online standards.

Amazon somehow appear to be able to cover the cost of delivery – possibly a combination of scale  and geographical density resulting in drivers being able to cover costs via upwards of 100 deliveries/day – albeit apparently losing money on Prime deliveries.

This appears to suggest that high-density geographical/clustered marketing may offer a way forward for the mults, offering scope for tailored promotions by suppliers.

In other words, the mult’s potential online retail opportunity is too big to miss, so any medium term delivery-cost losses will need to be absorbed by the traditional business via route-to-consumer portfolio management in order to remain competitive.

However, in the long term this cross-financing strategy will dilute overall profitability unless it can be demonstrated that scale will eventually result in breakeven on a £4 delivery charge.

Meanwhile, supplier-partners might usefully explore joint-opportunities to introduce home-delivery promotions to help defray some of the real delivery charge…. 

Update: US Tax Inversion moves may speed up via existing law..

Further to Friday’s blog post below, it appears that Obama may not have to introduce new legislation to prevent current and future tax inversion moves by US multinationals.

In fact, according to an article in The Irish Times, Obama could invoke a 1969 tax law that would restrict foreign companies using inter-company loans and interest deductions to reduce their tax bills. This could remove the key advantages of US companies taking over foreign companies and transferring their tax addresses to a more advantageous tax environment.

In practice, this means that companies* in the acquisition-pipeline will need to radically accelerate the process in order to avoid restrictions.

In other words, the Walgreens – Boots acquisition is now in fast-forward mode… 

Ready?

* It is not clear whether  historic tax inversion companies will be impacted by the same legislation