Tesco: What now?

This morning’s announcement more or less met expectations and will be a continual topic for commentators in the coming months…

Meanwhile, NAMs have to pull together a plan of action, get in the car and drive to Cheshunt...

Essentially, from a NAM’s point of view, there are now effectively three Tescos in play:

• A small business-development task force focused on growing the business, profitably
• A fire-fighting Tesco tasked with ensuring that the ‘here & now’ is optimised, keeping to the regulatory guidelines, ensuring that nothing compromises business growth
• A ‘historical-records’ Tesco whose sole aim is to satisfy all demands for details of past transactions, tidy up record-keeping systems, clarify Commercial Income elements & KPIs, and demand appropriate records from suppliers…

Suppliers might be well advised to replicate this structure in their dealings with ‘The Three Tescos’ in order to make the best of what will otherwise be an ultra-conservative and risk-averse approach to managing what is still the UK’s biggest and most profitable grocer…

The French KISS approach to beating the discounters

According to a report in Reuters, France is the only country in Europe where discounters have seen a significant drop in market share, slipping to 11.9% in the second quarter of 2014 from a 2009 peak of 14.9%, according to Kantar Worldpanel data.

In fact, the success of French retailers in stopping the advance of discounters in the last five years shows a way out of the crisis embroiling Britain's "big four" grocers.

Their simple formula: fewer complex promotions and big price cuts across the board.
(After all, rocket-science is so pre-2007...)

The French grocers expanded their budget product lines, cut a proliferation of promotions, simplified own brand ranges and worked with suppliers to slash prices of branded goods.

In practice, this approach in the UK would require high levels of collaboration between suppliers and retailers, given the inevitable margin hits’ impact on share prices…

However, for branded goods suppliers, since any growth of the discounters comes at the expense of brands, then helping the multiples, helps the brands.

Moreover, in negotiation terms, the price for such assistance has to be a demand for fair-share dealings, between equal partners…

Truly, we are all in this together… 

Flatline demand or wot?

A report in The Observer this weekend said everything in a graph...

As the chart shows, it is very rare for real wages in the UK to fall continually over a seven-year period. They have done so only three times in the past 150 years: after a deep recession in the late 19th century; in the 1930s, following the Great Depression; and again in the past seven years, the steepest fall in 150 years....

Given that in these circumstances, governments, banks and individuals have been paying down debt, it should be no surprise that very little spending money has trickled onto the market...

And given the extent of the fall in real wages, politicians' promises of an immediate upturn need treating with caution..

In other words, best to forecast product/brand growth at the expense of the competition, if you can...

While others await a return to 'normal'....

NAM-flu isn't a myth after all !!

According to The Telegraph, men get sick because they don't have the hormones that boost women's immune system.

The study by Stanford University School of Medicine, examined the reactions of men and women to vaccination against flu. The team hopes that, in the future, this knowledge could be used to enhance resistance to common and serious lung infections and prevent flu developing into more serious pneumonia.

However, according to an earlier study, only one in five British women believe that the debilitating "NAM-flu" disease which temporarily leaves male sufferers prostrate on the sofa watching televised sports is real, meaning that NAMs can now work on the remaining 80% with this extra evidence.

The survey, which questioned 2,000 British adults about health and wellbeing, showed that misconceptions and old wives' tales, including the myth that eating carrots improves night vision, prevail among the population when it comes to beliefs about common illnesses.

More than a third of people said that sugar makes children hyper, and 37% said they believed we lose most of our body heat through our heads -- the most popular misconception of the survey, despite millions spent on consumer health and education.

However, the survey is weakened somewhat by its endeavours to show that when illness strikes, almost half of people agreed that men exaggerate their symptoms to get attention, with 38% also believing that men take longer to recover from illness than women.

NB. This additional indepth research on man-flu diagnosis and treatment can obviously now be added to a NAM's repertoire of fact-based rationale for persuading those unsympathetic stakeholders that need convincing of the obvious, in these unprecedented times

Have a gentle, comfy weekend, from the NamNews Team!

Commercial Income fall-out: the open domain perspective?

The investigation of Tesco’s £250m overstatement issue by independent auditors and Tesco’s legal advisers has obviously impacted the share price and created considerable media coverage for a topic that is technically not in the open domain. The results of the review will need to be available to all, in order to attempt to reassure shareholders that the share price fall has ‘bottomed out’, corrective measures are in place and growth will be restored, under new management.

Any holding back in the interest of ‘commercial sensitivity’ will seem like a cover-up, resulting in shareholders acting with their feet…

In other words, all output is headed for the open domain.

Meanwhile shareholders, regulators, HMRC, retail competitors, media, suppliers and shoppers, await an explanation…

The issue is, what type of explanation will satisfy this diverse audience’s need for simplicity and clarity?

Any retrospective review of accounting procedure, with a combination of legal help and the benefit of hindsight, is bound to result in a call for unambiguous clarification of each element of Commercial Income.

‘Supply and Demand’ rewards could provide a useful basis for clarification.  In other words, classifying elements of commercial income as either facilitating supply economies, or optimising consumer demand, might help, but still leaves complexity....

Supply rewards could include:
- Central assortment & listing
- Timely and committed forecasts
- EDI
- Central credit, settlement terms, and payment
- Returns/write-offs
- Deductions

Demand rewards could include:
- Listings
- 'Appropriate' range/assortment
- Category compliance: shelf space & level, fair-share facings
- Promotional compliance, price support, POS compliance, additional placements/displays
- Post-audit recovery
- Sales achievement

It can be seen that, over the years, what was once a fairly simple buying and reselling process, with a retail margin to cover the effort, and sufficient free credit to bridge the gap between receipt of goods and payment by the shopper, has evolved into the complex package we now call Commercial Income.

All stakeholders will now insist upon clarification of each element, including the precise contribution that commercial income makes to a retailer's profits.

This will inevitably result in new auditing procedures aimed at transparency, defensibility and like-with-like 'comparability' in dealing with Commercial Income in retail accounts.

Moreover, as it is unlikely that all retailers will have evolved a uniform definition and treatment of commercial income, so any output from the Tesco exercise will soon result in the need for parallel reviews of other retailers’ accounts, in order to satisfy all stakeholders…

Meanwhile, suppliers could usefully prepare for the inevitable by reassessing each element of their offering in terms of purpose, cost, value and result, before the open domain demands an explanation…

Normal? Moi?

                                                                                             Hat-tip to Adam Mehegan via Colin Doree

‘One to show & one to go’ - minimalist stock control in retail

Mark Taylor built on Mike Anthony's link to the high cost of parked inventory by illustrating how retailers can re-allocate the cost of financing display-stock.

If we accept that the purpose of a facing-pack is to advertise the pack behind it, then it becomes logical to a retailer that the cost of the facing display-pack should be carried by the supplier. Moreover, since a consumer in general buys one pack at a time, it also follows that any back-of-facing stock, other than one-for-purchase, should also be carried by the supplier…

In other words, the only stock that should be financed by the retailer is one sales-pack per facing…!
It follows that all other stock, including pipeline from store-receipt to back-of-facing (minus one sales-pack) is the financing responsibility of the supplier.

This obviously challenges the fundamental purpose of Bricks & Mortar shops – are they really the ultimate ‘showrooms’ where consumers are reminded of the existence of the brand/pack, and then outsource the actual purchase and fulfilment to Amazon…? This leaves a sales pack available on shelf for those shoppers who insist on completing the purchase in the store.

In these fast-moving-consumer-goods times, it seems to me that strong retailers are in a position to insist upon the fair-share re-allocation of stocking-costs outlined above.

Time for suppliers to evolve a convincing counter-argument, or take another hit to their customer P&Ls?

Hat-tip to Mike and Mark

Optimising retail assets via after hours niche promotions

                                                                                                                                         pic: The Argus

According to The Argus, 8,500 students yesterday flooded Brighton’s Churchill Square shopping centre to take advantage of 20% discounts.

The Student Lock-in event, one of 40 events in 20 cities, is organised by the marketing company Total Students, takes place after normal hours starting at 6.30pm and ending at 10.30pm.

Students are granted exclusive access to one-night-only discounts, giveaways and competitions across on-site stores and promotional stands. A range of entertainment is provided, including meet and greets with famous faces; activities include climbing walls and surf simulators; on-site club features like bars, live music and DJ performances

Worth locking in some students for something really incremental in your category?