Saturday, 24 September 2016
Thursday, 22 September 2016
What if Amazon Entered the UK Wholesale Sector?
Following an insightful day at last week's IGD Wholesaling Summit, I dared to temporarily step into Mr. Bezos’ shoes and wondered to what extent the UK Wholesaling sector might represent a potential revenue stream for Amazon.
Given the ongoing retail structural changes taking place in unprecedented times, where every route to consumer counts, suppliers are now even more reliant on wholesalers to service medium and smaller independent grocers in the UK.
The cost of personal callage at say £50k annual cost of a ‘salesman’ making 20 calls per day, 200 days per annum @5% Net Profit margin, means that a 100% strike rate at £250 ordered per call to break even, means that direct supplier coverage via a field sales force is only viable at the upper end of the retail trade.
Meanwhile, independent retailers need retailing advice, guidance and support like never before. As small, understaffed and over-worked businesses, living from hand to mouth, literally, they are under many of the pressures being experienced by the multiples in terms of red-tape, legislation, narrowing margins, fluctuating demand, unpredictable cash-flows and cost-price increases in a flat-line demand environment. And, by the way, many have an Aldi or Lidl nearby, a constant temptation for their regulars…
They choose their assortments by a combination of instinct and experience, with mistakes ending up in their freezers for later consumption by their families. As the son of a Mom&Pop grocer, I can still remember coming in from school with my siblings, each complaining about ‘salmon cutlets again for tea’, following a glut in the Dublin fish markets…
It can be seen that wholesalers provide a vital service in accessing those parts of the trade suppliers cannot afford to reach…
In the case of delivered trade, wholesalers have improved speed of response and moved towards 100% availability whilst Cash & Carry are making it easier and faster to shop, all at significant cost to the bottom line in narrow margin businesses that are faced with increasing pipeline pressures such as National Minimum Wage and Sugar Tax…
From Amazon’s point-of-view, small independent grocers could simply look like big consumers.
In practice, an added benefit would be that independent retailers are capable of aggregating the demand of consumers that are too currently too small even for Amazon…
Amazon has all the necessary machinery - infinitely scalable - already in place.
Meanwhile, in the current climate, a small retailer would benefit from being able to buy even one pack of a single SKU i.e. no minimum order, access an infinite range, avail of auto-analysis of purchasing behaviour via the Amazon machinery, all with the ease of 1-Click ordering, 1-Day delivery and no-quibble returns. In effect, a fully comprehensive delivered wholesale service, with Click & Collect serving as an equivalent to a Cash & Carry service…
And merely a step away from allowing Amazon to place some consumer Click & Collect lockers in the store as further evidence of the Amazon-retailer trade partnership…
In terms of promotional help, Amazon could make a case to suppliers that promo-kits containing materials and guidance could be packaged as ‘products’ and offered to appropriate retailers via the Amazon portfolio, with YouTube demos complementing and enriching the supplier-retailer virtual relationship. Amazon would thus have a means of offering suppliers a cost effective means of supporting smaller independent retailers, and all without a salesman having to cross the threshold…
In the process, a convenience store, given access to infinite variety, fast, could easily morph into a general store capable of meeting micro-demands from local consumers, cost-effectively, the ultimate convenience outlet.
In terms of timing and sequence, Amazon could offer this service on the back of Prime Fresh in the London area almost immediately. Thinking about it, many of the retailers/sole-proprietors are probably Amazon subscribers anyway, paying cash, so little or no vetting would be required. Most branded goods suppliers will already have existing links with Amazon, so little change would be required by either party.
In greater London Amazon would be faced with their most intense competition from wholesalers, so any success resulting from adapting their business model in this market could be rolled out to other parts of the UK, as fast as Amazon chooses to move…
In other words, a very real threat to wholesalers that are unable or unwilling to recognise the need to anticipate and react to competition from a company whose mission statement includes selling anything that can be legally sold to anyone, anywhere, anytime in whatever way they choose to buy…
All else is detail...
P.S. If you would like a copy of our companion paper: How UK Grocery Wholesalers could pre-empt Amazon… Please email me on bmoore@namnews.com
Given the ongoing retail structural changes taking place in unprecedented times, where every route to consumer counts, suppliers are now even more reliant on wholesalers to service medium and smaller independent grocers in the UK.
The cost of personal callage at say £50k annual cost of a ‘salesman’ making 20 calls per day, 200 days per annum @5% Net Profit margin, means that a 100% strike rate at £250 ordered per call to break even, means that direct supplier coverage via a field sales force is only viable at the upper end of the retail trade.
Meanwhile, independent retailers need retailing advice, guidance and support like never before. As small, understaffed and over-worked businesses, living from hand to mouth, literally, they are under many of the pressures being experienced by the multiples in terms of red-tape, legislation, narrowing margins, fluctuating demand, unpredictable cash-flows and cost-price increases in a flat-line demand environment. And, by the way, many have an Aldi or Lidl nearby, a constant temptation for their regulars…
They choose their assortments by a combination of instinct and experience, with mistakes ending up in their freezers for later consumption by their families. As the son of a Mom&Pop grocer, I can still remember coming in from school with my siblings, each complaining about ‘salmon cutlets again for tea’, following a glut in the Dublin fish markets…
It can be seen that wholesalers provide a vital service in accessing those parts of the trade suppliers cannot afford to reach…
In the case of delivered trade, wholesalers have improved speed of response and moved towards 100% availability whilst Cash & Carry are making it easier and faster to shop, all at significant cost to the bottom line in narrow margin businesses that are faced with increasing pipeline pressures such as National Minimum Wage and Sugar Tax…
From Amazon’s point-of-view, small independent grocers could simply look like big consumers.
In practice, an added benefit would be that independent retailers are capable of aggregating the demand of consumers that are too currently too small even for Amazon…
Amazon has all the necessary machinery - infinitely scalable - already in place.
Meanwhile, in the current climate, a small retailer would benefit from being able to buy even one pack of a single SKU i.e. no minimum order, access an infinite range, avail of auto-analysis of purchasing behaviour via the Amazon machinery, all with the ease of 1-Click ordering, 1-Day delivery and no-quibble returns. In effect, a fully comprehensive delivered wholesale service, with Click & Collect serving as an equivalent to a Cash & Carry service…
And merely a step away from allowing Amazon to place some consumer Click & Collect lockers in the store as further evidence of the Amazon-retailer trade partnership…
In terms of promotional help, Amazon could make a case to suppliers that promo-kits containing materials and guidance could be packaged as ‘products’ and offered to appropriate retailers via the Amazon portfolio, with YouTube demos complementing and enriching the supplier-retailer virtual relationship. Amazon would thus have a means of offering suppliers a cost effective means of supporting smaller independent retailers, and all without a salesman having to cross the threshold…
In the process, a convenience store, given access to infinite variety, fast, could easily morph into a general store capable of meeting micro-demands from local consumers, cost-effectively, the ultimate convenience outlet.
In terms of timing and sequence, Amazon could offer this service on the back of Prime Fresh in the London area almost immediately. Thinking about it, many of the retailers/sole-proprietors are probably Amazon subscribers anyway, paying cash, so little or no vetting would be required. Most branded goods suppliers will already have existing links with Amazon, so little change would be required by either party.
In greater London Amazon would be faced with their most intense competition from wholesalers, so any success resulting from adapting their business model in this market could be rolled out to other parts of the UK, as fast as Amazon chooses to move…
In other words, a very real threat to wholesalers that are unable or unwilling to recognise the need to anticipate and react to competition from a company whose mission statement includes selling anything that can be legally sold to anyone, anywhere, anytime in whatever way they choose to buy…
All else is detail...
P.S. If you would like a copy of our companion paper: How UK Grocery Wholesalers could pre-empt Amazon… Please email me on bmoore@namnews.com
Sainsbury’s Ramps Up Online Operations With Opening Of First Purpose-Built Fulfilment Centre
Upping the online ante gives Sainsbury's an edge in London
- Where at: Given that Amazon have made time and 100% availability the key online differentiators, Sainsbury’s are in a position to comply 100%, in what is the most concentrated online market in the UK
- Where headed: Fulfilment (speed & availability) in the London area will become a key online driver
- How it affects you: This zero-defect criterion will challenge any systems that are less than perfect
- Action: Set this standard for your business in the London area, and apply as much as possible elsewhere
Wednesday, 21 September 2016
Promotions Failing To Ignite Sales For Retailers - IRI
Given that IRI's research re effectiveness of promotions shows that reality does not match expectation when it comes to sales, this study of over 85,000 promotions in UK supermarkets, convenience stores and health and beauty outlets raises the following issues for NAMs:
- Where at: Essentially, vital to examine your specific categories/brand performance, but it looks like any gain for retailers is via trade investment rather than margin on incremental sales
- Where headed: Eventually, more enlightened retailers will realise that specific brands appear to be growing at expense of competitors, thus in breach of basic principles of category optimisation, rather than incrementally growing the category. Short term retailers will simply grab the money
- How it affects you: Not good for building brand equity
- Action: Best to revert to fundamentals, assessing each part of the marketing mix and emphase any real advantage vs. alternatives available
Tuesday, 13 September 2016
Arcadia to give online shoppers three months to pay
According to the Retail Gazette, Arcadia will offer online shoppers three months interest-free credit on online purchases.
Topshop, Dorothy Perkins, Miss Selfridge and Burton will now offer a “Buy Now, Pay Later” scheme.
Given the stresses on consumer budgets, this move will undoubtedly give the retailer access to incremental business.
The question has to be how long Arcadia will retain a competitive edge if other retailers follow suit.
Even more concerning will be the extent to which issues of loan non-performance, and retrieval of payment-default goods will lead to a degree of negative media coverage that is beyond even the levels currently enjoyed by the company…
Topshop, Dorothy Perkins, Miss Selfridge and Burton will now offer a “Buy Now, Pay Later” scheme.
Given the stresses on consumer budgets, this move will undoubtedly give the retailer access to incremental business.
The question has to be how long Arcadia will retain a competitive edge if other retailers follow suit.
Even more concerning will be the extent to which issues of loan non-performance, and retrieval of payment-default goods will lead to a degree of negative media coverage that is beyond even the levels currently enjoyed by the company…
Monday, 5 September 2016
Tuesday, 30 August 2016
Inflation, the next planning factor?
Given the post-Brexit fall in the pound, it follows that imported ingredients will cost more…
Add the recent BOE reduction in interest rates (0.5% to 0.25%!!), means the pound is even less attractive vs. other currencies.
Stir in the fact that UK food manufacturing costs are rising by around 10%, and you have a recipe for increased inflation, causing prices to rise in line with demand…
Except for UK retail
Already on reduced margins, major multiples cannot afford to absorb any cost increases. Equally suppliers, having stripped out any ‘excess' costs, are unable to take any more pain... Meanwhile, the price war/s make it unlikely that shelf prices will bear any significant upward movement without loss of share.
All of this means increasing pressure on the mults, loss of market share and the growing importance of alternative routes to consumer.
For suppliers it means re-balancing their customer portfolios to reflect the new realities, secure in the knowledge that at least some of the competition will await a return to normal before being forced to change…
Add the recent BOE reduction in interest rates (0.5% to 0.25%!!), means the pound is even less attractive vs. other currencies.
Stir in the fact that UK food manufacturing costs are rising by around 10%, and you have a recipe for increased inflation, causing prices to rise in line with demand…
Except for UK retail
Already on reduced margins, major multiples cannot afford to absorb any cost increases. Equally suppliers, having stripped out any ‘excess' costs, are unable to take any more pain... Meanwhile, the price war/s make it unlikely that shelf prices will bear any significant upward movement without loss of share.
All of this means increasing pressure on the mults, loss of market share and the growing importance of alternative routes to consumer.
For suppliers it means re-balancing their customer portfolios to reflect the new realities, secure in the knowledge that at least some of the competition will await a return to normal before being forced to change…
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