Argos - a Local-leap by Sainsbury's?

Yesterday’s surprise announcement of an initial rebuff by HRG not only places the Argos-Homebase combination firmly in the takeover frame, but also sets a minimum starting price of £1bn.

The advantages for Sainsbury’s in terms of adding to their non-food offering, making more use of big-space via a transfer of Argos Click & Collect, and re-acquiring a DIY operation they sold some years back, combined with successful initial trials of Argos shop-in-shop make this a must-have acquisition, but not at any price.

Incidentally, gaining access to Argos Click & Collect expertise hopefully does not rank high in terms of plus-points, given that this ‘mail-order’ company transitioned into ‘hard-copy’ click & collect as an extension of their original business rather than a high-tech entry into online…

It also goes without saying that Argos vs. Amazon is a no-contest battle, on any parameter…

In terms of upping-the-ante, with a market capitalisation of £5bn, a share price showing a 57% drop since 2008, and continuing pressure from the discounters, Sainsbury’s is not in a position to raise their bid significantly in the month that remains in which to make an improved offer.

However, having put HRG in the spotlight, other mults now have until 2nd February to assess the relative appeal of acquisition in terms of similar advantages to their businesses.

In practice, Tesco and Morrisons are currently distracted by more pressing issues, but Asda’s Walmart (Mkt Cap $196bn) would have little problem in covering ‘whatever it takes’ to add scale to their UK repertoire…

On balance, the next move depends on the extent to which Sainsbury’s faith in the future of Local convenience causes them to consider converting ‘as many as it takes’ of Argos 800 High Street outlets – moving more Argos ranges into larger Sainsbury’s outlets – into additional Local branches, and persuading their largest shareholder - Qatari - to make up the difference…

Amazon Pantry could help itself to Ocado's lunch, but the combination impacts us all

                                                                                 Source: Wired via Business Insider

An article in Business Insider, acknowledges that the introduction of Amazon Pantry, already impacting Ocado shares, down 35% since June 2015, is hurting Ocado, but reports that Goldman Sachs has an interesting theory about how this might actually be good for Ocado.

Essentially, apart from putting Ocado into the takeover frame, Amazon Pantry will add to pressure on the mults, pointing them at possibly leasing Ocado's online platform and delivery infrastructure, and, as per Paul Clarke's presentation above, online grocery delivery is more complicated than general merchandise.

However, the real issue is that the combination of Amazon and Ocado expertise is raising the online bar to such an extent that other retailers may not even bother...

NB Making a difference to your online approach in 2016:  If you want a real insight into the unprecedented standards being set by Ocado in developing an online multi-product delivery-pipeline into your home, see CEO Paul Clarke's 16min +10min Q&A presentation to the Wired Retail conference above

Sir Ken Morrison's £6.6m Stake In Sainsbury’s, 'just looking'?

Sir Ken Morrison, the former Chairman and life president of Morrisons, has built up a £6.6m stake in Sainsbury’s.

According to The Times, Sir Ken owns 2.6m shares in the rival supermarket whilst his son William owns 2.1m, giving them a combined stake worth of £11.9m. Filings reveal that Sir Ken purchased his stake around April last year when as his frustrations with the management team of Morrisons was reaching its peak. He memorably criticised the then Chief Executive Dalton Philips, saying his turnaround strategy was "bulls***"....more

Coles' onshelf Price-rise buck-pass

                                                                                                             pic: The Sydney Morning Herald

In a move reported in The Sydney Morning Herald, allegedly aimed at pressuring a supplier to reverse price rises, Coles in Australia has put signs on its shelves, saying popular infant formula maker Bellamy's threatened to pull its product if the grocer didn't accept its price rises.

Fortunately, demand for Bellamy's is too big to delist - part of the unprecedented Chinese demand for infant formula - but the real risk for suppliers and retailers is that one-sided revelations of a price negotiation could result in exposure of full concession exchange - think trade investment, pricing support, and all the other product-support mechanisms that would look outrageous in the tabloid press...

A pointer for other retailers, in other places?   

Earthquake-bed, for extreme earth-movement over Christmas...

                                                                                                                                  pic: The Telegraph
Key is not to be halfway in/out when activated...

Back to the Future via Hovering Lucozade Thief

Sky News report (here) the theft of a case of Lucozade from a Mitcham Co-op by a man on a hoverboard. When you check the security video, the shock is not that it can be done, but the fact that it happened in slow-motion, proving that really original instore theatre can over-ride blatant theft, the first time…

Negative Interest Rates: Bankers vs. Mattresses - but what does it mean for NAMs?

                                                       Burglar Guide pic: The Daily Mail 

According to The Economist via CFO, in June of last year the European Central Bank reduced its benchmark interest rate, at which it lends to commercial banks, to 0.15% and its deposit rate, which it pays to banks on their reserves, to -0.1%.

As you know, in practice this negative interest rate means the ECB has been charging banks for holding their excess deposits in order to encourage more lending, in theory...

From a consumer point of view, it is likely that banks will be tempted to follow Alternative Bank Schweiz plan to charge consumers to hold their deposits via negative interest rates from January 2016.

This is where consumer savviness comes in...
Apart from putting their money under a mattress, depositors might choose to safeguard their savings by making advance payments to the taxman and then claiming them back, or withdraw their money as bankers' drafts and liquidate them when required...

The article adds that any form of pre-paid card, such as urban-transport passes, gift vouchers, or mobile phone SIMs could also double up as zero-yielding assets.

If interest rates became deeply negative, it would turn business conventions upside down. Companies would seek to make payments quickly and receive them slowly. Their inventories would grow fatter.

In other words, like deflation, negative interest rates are not an easy concept to work into the NAM's day-job, but we can be sure that the savvy consumer will be way ahead of us...

In fact, since since some savvy consumers are also well-networked burglars, you might usefully chalk the 'nothing worth stealing' option outside your house to disguise the fact that  you have personally taken the 'under-mattress' option...

Sainsbury's ahead of the flatline and redundant-space curve?

Far from being ‘doom & gloom’, Mike Coupe has made a realistic call on the market by describing current demand as flatline and remaining so for the foreseeable trading future. In the same way he pointed out the emerging ‘20%' redundancy of large space retail, way ahead of other retailers.

So, when he says that multiples retail prices need to fall to a 5% to 10% differential to halt discounter drift, it would be unwise not to listen…

In other words, time for a ‘what if’ on your brand's Multiple presence, if he is even half right?