Choose your airline carefully….

Those NAMs tempted to use a value-carrier to escape the High Street doom and gloom are advised to check the airlines maintenance records before switching suppliers…

A pilot for a Chinese carrier requested permission and landed at Frankfurt for an unscheduled refuelling stop. The reason became soon apparent to the ground crew: The Number 3 engine had been shutdown previously because of excessive vibration, and because it didn't look too good. It had apparently been no problem for the tough guys on the ground back in China: as they took some sturdy straps and wrapped them around two of the fan blades and the structures behind, thus stopping any unwanted wind-milling (engine spinning by itself due to airflow passing thru the blades during flight) and associated uncomfortable vibration caused by the sub optimal fan.

Note that the straps are seat-belts ....how resourceful!  After making the "repairs", off they went into the wild blue yonder with another revenue-making flight on only three engines!  With the increased fuel consumption, they got a bit low on fuel, and just set it down at the closest airport (Frankfurt) for a quick refill.

That's when the problems started: The Germans, who are kind of picky about this stuff, inspected the malfunctioning engine and immediately grounded the aircraft. (Besides the seat-belts, notice the appalling condition of the fan blades.)  The airline operator had to send a chunk of money to get the first engine replaced (took about 10 days).  The repair contractor decided to do some impromptu inspection work on the other engines, none of which looked all that great either.  The result: a total of 3 engines were eventually changed on this plane before it was permitted to fly again.

And to think we were all worried about toys coloured with lead paint!

Why not have a stay-at-home weekend, from the NamNews Team!

The Future of the British High Street: Voice of Russia Radio (formerly Radio Moscow)

This is a recording of a radio discussion that will be broadcast next week involving the British Retail Consortium, The New Economics Foundation and NamNews, covering key issues and predictions affecting future viability of the High Street, from the perspective of key stakeholders.

Topics include:
- Need for commercial viability
- Role of mults, charity shops, & suppliers
- Domestic-retail balance
- Legal & Rating issues
- Banks as landlords
- Predictions ref. High St, out-of-town and online shares

FYI, Voice of Russia Radio is apparently No. 3 in the world to the BBC and Voice of America.
NB. For a priority copy of the new NamNews High Street Survival Recipe, contact bmoore@namnews.com

Pop-up shops: the ultimate in suck-it-and-see research?

Pop-up retail originated with fashion designers seeking to showcase new clothing lines. However with consumer spending deteriorating and as suppliers seek to cut the costs of product launches, pop-ups have become an interesting alternative route-to-consumer.

Breakthrough research?

As you know if a supplier’s brainstorming session results in a ‘great idea’, it can take nine months to secure a space on shelf

For a retailer, a ‘great idea’ can be an early morning presentation by a NAM, and with proper co-ordination the product can be on a shelf by noon.  By 1700 on the same day, the retailer can be in a position to double the order or delist the product…!

An instant test-market opportunity for suppliers

An (obvious) exaggeration, but pop-up shops can operate within the same model and time-frame, and can represent a real market-test opportunity for pro-active suppliers.

For those NAMs that get out occasionally, the usage by well-known brands is obvious, with GAP even kicking off a 60's style tour using a school bus as a mobile pop up store in the US.

With empty shops in the high street providing instant accommodation, a recent article lists some useful pros and cons for landlords and retailers

Living with the time-frame 

For suppliers that can operate in limited time-frames, a typical pop-up store can operate for as little as two days up to a period of four to six weeks and during this period the supplier can test-market a new product or brand and thus get first-hand feedback from customers, with an added plus of lower marketing costs compared with TV.

Meanwhile we await the emergence of a pop-up NAM as real evidence of the fact that pop-up shops are becoming a permanent part of the retail landscape…

Same-price pack-size shrinkage, a con or what?

Given the status of the brands and companies involved, it is obvious that the letter of the law is being adhered to, in that weights and measures are all accurately displayed on the pack. It is not even about the spirit of the law, in that it not the job of the legislature to maintain consumer trust in a brand. It is not about economics in that most research will prove that prices of ingredients, energy and labour have consistently risen faster than improvements in NAMs' ability to negotiate trade price increases of equivalent value…

'Everyone doing it'?

Moreover, it is not about the fact that 'everyone is doing it', in that the degree of collusion required to accurately preserve market/category equilibrium would be in clear breach of the law.

It is not even a new phenomenon, given that many of us cherish memories of our first bar of Cadbury’s Milk Flake, when it seemed so large one did not even object to sharing it with a younger brother..

Perception is the problem

No, pack size shrinkage is really about perception, the fact that a brand that has worked so hard and so long on convincing me that their combination of Product, Price, Presentation and Place is better than the competition in terms of value for money, suddenly, without consultation, destabilises that trust by allowing me to conclude that I am no longer getting what I thought it said on the tin… Moreover, if the brand’s marketing mix previously offered only a marginal advantage over the competitor’s offering, then the competitor suddenly becomes a serious contender for my attentions and even loyalty, at least until the next price rise.....

We are all savvy consumers
It is especially an insult to my intelligence as a savvy consumer, a person who has survived by learning never again to outsource product and service decision-making to marketers and retailers, and has set demonstrable value-for-money as a prerequisite for any purchasing decision.

What to do about it?

In fact, all the clues are available in the notes above:

If a brand makes a fundamental change in the Marketing Mix, it destabilises the market/category’s status quo, and needs to ‘re-sell’ me on its advantages over available alternatives, (via an up-to-date Buying Mix Analysis). 
I am not interested in boring stuff about ingredient, energy and labour cost increases, the media are full of it, in between the bits about political and financial corruption. 
I don’t want to know about those nasty retailers unfairly refusing to allow adequate and logical price increases.

I simply want assurance (and increasingly, proof) that the brand’s combination of Product, Price, Presentation and Place is so overwhelming that I would not even dream of considering alternatives…

Seemple, uh?       (Seemple = Shorthand for 'seems simple' ; Uh? = please read again )

Co-op profitability has a cost

For many years the Co-op was run as a ‘breakeven’ organisation in strict application of its shared-profits culture.

As anyone in mainstream business will appreciate, in order to result in breakeven, it is wiser to aim at say 5% net profit, and the result will probably be 0% or perhaps even 0.5% profit.

Reality of 'breaking even'

Aiming for breakeven in business can be a way of ensuring a loss-making year…

This breakeven approach and its consequential loss-making caused the failure of individual societies, resulting in them being absorbed into healthier parts of the movement. However, the Co-op still remained a confusing and inefficient trade partner for leading–edge suppliers, resulting in minimal levels of support, with most discretionary funds going to major customers that ran their businesses in a more traditional manner.

The penny drops…

Several years ago the Co-op apparently began to embrace the idea of making a profit, and even began to refer to ROCE and other KPIs in their annual reports.

All very encouraging for suppliers as the Co-op began to produce acceptable returns, encouraging increased investment of trade funding as a way of producing a viable alternative to the Big Four.

Testing the change in philosophy

The real test of this change in philosophy required the global financial crisis (a challenge to capitalism everywhere) to cause the Co-op to embrace the other side of the coin, cost-cutting and redundancies.

Latest reports indicate that the Co-op Group is preparing to further slash its food division’s workforce, as it seeks to cut costs amid tough trading at its grocery operation The job cuts in the food property team are part of its Unity Programme. This is the Co-op’s project to deliver a more co-ordinated strategy and efficiencies across over 4,800 retail trading outlets, including pharmacy, banking and funeral care.

The need for persistence

Despite the social cost, the Co-op needs to continue with this strategy, not only to maintain its profitability, but to demonstrate to its trading partners its determination to justify a level of partnership that compares with that currently given to the Big Four.

Above all, realistic suppliers need to support and cooperate with the Co-op, in this, the completion of their transition to ‘mainstream’ retailing…

Working out in the early hours….

If you find that managing the increasing pressures of the 9-5 NAM Agenda leaves little workout time to increase/decrease adrenaline levels, why not sacrifice sleep-time (+ four hours max means one is constantly wired, with less effort required to wind down/up….) join the NamNews Team and find a 24/7 gym?

NAMs, KAMs, Night owls, insomniacs, shift workers and other denizens of the dark are finding less need to fit their workout time into the nine-to-five world of ‘normal’ folk..

Increased availability

More gyms are remaining open round the clock, experts say, spurred by advances in surveillance and security technology, clients' ever more fluid work habits and a generation of multi-tasking consumers.

"At 6:00 a.m. you get the professionals going to work. Late morning you see a lot of stay-at-home moms. 

Extend your network

Overnight I tend to see more creative types," she said. "More piercings, more tattoos. I have met interesting people at three or four in the morning."

Go on, have a proper 24/7 weekend, from the NamNews Team!

The Battle Against Obsolescence in the High Street

The high street is successfully fighting for its life on many fronts, but in some categories it is a lost cause, and scarce resources should be focused on realistic revival prospects.

For instance, given the inevitable drift of business to new delivery systems like downloading, in categories such as DVD sale and rental, along with retailing of CDs, books and even games, it is important to distinguish denial from planned demise in a product or category lifecycle.  Anyone in doubt need only think of the declining fortunes/demise of Blockbuster, HMV, Borders and GameStop for some high-profile examples of the trend.

The inevitability of the life-cycle 

Essentially, it is important to accept that all brands go through a natural lifecycle from innovation to growth, maturity and decline in response to market demand.  Whilst the latter stages can be delayed, the process of prolonging active life usually becomes increasingly expensive and produces diminishing returns.  However, in some circumstances, the life of a brand can be prolonged profitably by constant innovation and ‘reinvention’ in the absence of serious threat from substitution.

Retail format life-cycle...

However, if we accept that a home entertainment retail format offering video-rental and sale, like a brand, has a life cycle, we need to acknowledge that the format passes through stages such as innovation, growth, maturity and decline, as night follows day…  Here the download alternative provides convenience, choice and ‘instant’ gratification in a way that is impossible for traditional outlets.  As the download providers take increasing shares of these categories, in time their low cost-base will allow them to complete the process via price-cutting the traditional outlets out of existence.  In these circumstances it is important for traditional home entertainment retailers not to deny the inevitable, but rather to proactively manage the maturity and decline of their format.

Meanwhile, at the receiving end... 

For store-owners, the ultimate question of how long the mature and decline phases will last has to be replaced by one reflecting the owner’s lifestyle expectation in terms of return on investment, coupled with their risk-profile (risk-averse, risk-neutral or risk-seeking).  This will help the owner to determine a satisfactory risk-reward relationship that will help them to decide whether to persevere for five or ten years, or seek a radical reinvention of the home entertainment format.   As entrepreneurs at heart, store-owners will be accustomed to making business decisions that offer a realistic balance of risk and reward in a market undergoing constant change.

Obsolescence is but another variable in the game….in which suppliers have a strategic role

Private Label - The Fifth Generation?

                                                                                                        pic: BBC
No longer content with even the Finest Fourth Generation, Senbikiya sells only perfect fruit - with a price tag to match!

As you know (!), giving fruit as a gift is a common custom in Japan. But this fruit is not your normal greengrocers' produce, complete with bumps, bruises and blemishes. The pick of the crop is grown with exquisite care and attention to detail - and commands an eye-watering price when it comes to market.

Instore refinement

Classical music plays softly over the speakers in the Senbikiya shop in central Tokyo. The uniformed members of staff are politely attentive, ushering the customers to chairs and crouching down beside them to take their orders.

The ceilings are high, the fittings elegant, the lighting tasteful and the displays are beautiful. But this is not some designer handbag emporium or high-end jewellery store.  Senbikiya is a greengrocers!

See 10 pic Slideshow

The ultimate assortment 

There are apples, the size of a child's head, with evenly red, blemish-free skin on sale for 2,100 yen, or $25. That's each, not for a bag. Senbikiya Queen Strawberries come in boxes of twelve perfectly matched fruits at 6,825 yen, $83. Even on a slow day they sell 50 boxes.

Then there are the melons, each perfect, of course, and topped with identical T-shaped green stalks. They're 34,650 yen, or $419, for three.

Given Japan’s gradual emergence from 20 years of austerity, could the launch of a Tesco Fifth Generation in Private label be a more credible sign of the UK’s faltering steps out of recession via new levels of quality…?

Co-branded promotion featuring Coca Cola and a Metro Private Brand in Romania

                                                                                                 pic: Brandprivat
Brandprivat, a consultancy in Romania, have reported a promotion that broke this weekend.

This featured a simple mechanic: Buy one box (4 bottles Coca Cola 2Ltr) and get 2 packs of pasta (Spaghetti 200g under Fine Food brand). Fine Food is a mainstream private brand from Metro Cash & Carry (part of the Metro Group, Germany).

The package for Fine Food spaghetti was a ‘limited edition’ as it featured Coca Cola’s logo with a strapline: “meals with Coca Cola are more tasty”…  

Could this be a breakthrough example of collaborative innovation between suppliers and retailers of this scale?

In these unprecedented times, suppliers are seeking to optimise innovation resources on the best possible revenue sources, whilst retailers are seeking both product and instore innovation. Retailers also need to not only innovate in terms of the products they carry, but also on the shopper’s experience.

Suppliers and retailers therefore have a primary goal in common: to please the consumer and grow market share. Collaborative innovation seems to be a ‘no-brainer’..

All that remains is the need to reach some accommodation on the relative importance of store equity and brand equity…

Pawnshops move upmarket in unprecedented times...

Fine wines are among the items they will accept as collateral for loans, along with family jewels and fine art, a practice spreading from Britain to the US.

Prime Asset Loans, based in Durham, UK, has a specific list of wines it will loan against. In addition to the First Growth Bordeaux, it will also make loans on Burgundy's famed Domaine de la Romanee-Conti and, depending on the vintage, Australia's renowned Penfolds Grange.

"We lend up to 70 percent of the value of the wines and the term is usually seven months," said Richard Mews, a partner at Prime Asset Loans. "Investors are using this type of loan more as it is quick, easy and there are no fees. ... If used properly, it can be a very cheap way of raising short-term funds."

Exporting the concept, the real government agenda?

A British-based pawnbroker, borro.com, with an office in New York recently lent $120,000 in exchange for 128 bottles of Chateau d'Yquem. The golden Sauternes were actually worth an estimated at $250,000. They then listed several other loans that were secured with various vintages of the five First Growths Bordeaux: Chateau Haut-Brion, Chateau Lafite-Rothschild, Chateau Haut-Brion, Chateau Margaux and Chateau Mouton Rothschild. These top wines are regularly sold at auctions where cases fetch tens of thousands of dollars. 

(Worth sending a suitably qualified politician on a states-visit to compound and optimise the special relationship?)

Target users

Borro.com 's clientele, whose net worth ranges from $1 million to $10 million, use the loan "for liquidity - no pun intended. They're mostly small business owners who basically are just waiting on payments and managing cash flows."

Time for NAMs and KAMs to replace the bank by raiding the cellar and sacrificing a bottle or two?

Then why not finish the case via an unprecedented St. Patrick’s Day weekend, from the Namnews team?

Where now for Tesco succession?

Too early to check the hats in the ring, we believe the City will give Clarke a year, following the Brasher development.

Decision time
-  A fast, high-level internal switch would allow Clarke to maintain global momentum. 
-  Going outside for what would need to be a strong, experienced and ‘natural-for-the job’ player would take too long, might simply re-ignite possible internal career-pressures, and could suggest a possible Clarke-replacement option for the City….. 

Marketplace reaction
Meanwhile, competition in the marketplace will be a combination of Tesco defence, with other multiples attempting various degrees of land-grabbing, all now led by very experienced teams focused on optimising this new window at Tesco’s expense.

Supplier action
Suppliers now need to revisit their trade strategies to reflect new competitive appeals in an unprecedented market, and factor in probable moves of the mults. Retailers will not waste time being subtle, so the moves should be pretty obvious.

Then working from 'their' consumer back to the essence of the brand, suppliers should simplify and make the offering very transparent, and echo this in simplified trade strategies, with built-in fair share and compliance conditions, all the way through the supply-chain...

Or sit on the sidelines, have a better view of the race and wait for things to settle down...

Either way, it is going to be tough, very tough for all stakeholders…

Calculating Personal Inflation by ignoring the government basket-case…

Those of you munching pineapples while awaiting tomorrow’s delivery of your iPad3, and freeing up the necessary 50% of waking hours by sacrificing high-level DIY projects via the postponement of the purchase of a new ladder, may find that government measures of inflation will in future provide a more accurate reflection of your version of the rising cost of living.

However, if you are like the remaining 99% of the population, an alternative approach may be necessary…

The monthly inflation figure is essential in gauging how the nation is doing but it’s largely irrelevant and different to individuals.

That’s because the basket of goods the Office of National Statistics measures to monitor prices is a general one.

Simon Read in the Independent offers a simple way to calculate how inflation is hitting your finances:

-       Take a bank statement from a year ago and compare it to today.

-       Look at the things you have to spend on every month – travel costs, energy bills, phone, broadband, food, etc 

-       Add up how much you spent then and how much now

-       Work out the difference as a percentage of last year’s figure

This will give you a rough idea of how much inflation really is ravaging your finances.

Your bank manager will supply the decimal points…

If a customer delays payment... Time for the six honest serving men?

In the current climate, it is probably more a question of ‘when’, rather than ‘if’, but for the moment let us stick with the main question.

Either way, payment delays cost you money and increase your risk-exposure.

Although credit control is someone else’s job, you are the one with total responsibility without authority.

And besides, would you really want a finance colleague trying to get incremental sales from a customer, in order to recover lost profit?

The key issue is ‘why’ the delay?

Essentially, the customer is either in trouble, short of working capital or someone else is shouting louder (a rival supplier offering more Settlement Discount?).

‘Who’ is driving them?

If the ‘who’ happens to be the bank, a quick check of their recent annual report (remember ‘what’ you downloaded from Companies House within minutes of publication four months ago but is still on your ‘must-read' list?) in the Balance Sheet ‘where’ in the outside borrowing section you will find creditors i.e those excluding the guys ‘who’ give them credit free of charge, trade creditors, like you…

This will help you calculate their gearing, and if significantly greater than 30% of Shareholders Funds, it is time to reach for the button…

While checking the Annual Report, the P&L will also reveal the Net Margin for two years, and if less than 2% and heading South, any upward correction is going to be at your expense…

‘How’ it happens?

This will come via ‘deductions’, possibly a delay in payment because of faults/shortages in delivery, with each invoice presenting a new opportunity…

‘How’ you deal with rolling invoice queries can be an opportunity for you to shine in in-house financial circles.

‘What’ to do about it?

How about dividing your annual sales to the customer by twelve, and negotiate with their buyer/finance department that they pay a fixed ‘twelft’ each month by standing-order for eleven months, leaving the final month’s invoice for all the queries?

The end-game..

If the customer is simply reflecting a supplier’s bad invoicing discipline, then the above approach combined with more accuracy on your part, will probably work.

However, if the buyer is simply using excuses, any excuses, to delay payment, this will tell you ‘when’ it is time to give the six honest serving men a rest and ring the lawyers…


P.S. According to Kipling, the 'men' rest from nine-to-five, and never skip meals...  Perhaps 24/7 NAMs/ KAMs need other tools for office-hours?

Retailers hampered by lack of innovation?

If the test of innovation is a consumer’s willingness to pay, then it could be said that retailers have it all their own way. 

Whilst a brand owner can take nine months from initial idea until appropriate shelf-space is secured in a major multiple, for a retailer the source of a new idea can be a presentation by a supplier that morning, a hyper-efficient supply chain can have it on a shelf by noon, and by close of play that same day, the retailer is in a position to delist the brand or double the order…

Exaggerated, but you get the picture…  

Recent press reports suggest that retailers need to be more innovative.

In fact, the two types of innovation, products and channels, present different challenges for retailers in these unprecedented times.

The innovation challenge for retailers: products vs. channels

Product /service Innovation can be so easy for retailers

-       ‘Suppliers taking all upfront risk’

-       ‘Put it on shelf and let the market decide’

How private label can make a difference

In fact, with the right supplier-partners private label can be a means of making exceptional products available exclusively in a retailer’s outlets, with consumers having to return for any repeat purchases, willingly…

Traditionally, suppliers kept the best ideas for the brand and offered second-tier ideas to the retailer. However, one exception was a client I worked with many years ago, a leading yogurt brand. They took a more innovative approach to brand development: when the ‘Lab’ had produced six new flavours, the company would first offer all six to their own-label customer. Then, following  a month’s sales in Tesco/JS, the relative popularity of each flavour allowed the company to select the best three flavours for inclusion in the brand extension programme….(Tesco/JS were ok with this, given their innovator’s advantage and their different agendas)   

Different when innovating channels or changing channel emphasis

Retailing can be a zero-sum game, in that in general a retailer’s routes-to-consumer can be sub-sets of a fixed demand. In other words, the success of a ‘new’ channel can be at a cost to their main channel in terms of sales, for instance where online siphons off sales of many non-food categories from a superstore…    

Large outlet 'redundancy'

Although pop-up shops can make some outlet diversification easy, re-engineering a 100,000 sq. ft. outlet can take a little more effort…

Large outlet ‘redundancy’ was a natural consequence of increased shopper insight combined with improvement in supply-chain efficiencies, in that two facings and minimal stock levels can now do the work of ten facings and a week’s back-up stock.

Rescuing a superstore 

In fact, for the major multiples, the next moves are crucial, in that £50m investments in superstores cannot easily be reversed, without massive dilution of ROCE, and sell-off is not an alternative, in that a superstore’s traditional retail hyper-efficiency means that any alternative use of the building cannot match a superstore’s  financials…i.e. no one can afford to pay what the retailer needs...

Restoring its viability 

A more practical solution might be a combination of store-level assortment, extending the range of goods/services to include anything that can be legally sold to the public, and sub-letting some space to shop-within-a-shop specialist retailers.

How to attract, select and retain the right specialists?

Charge a minimal rent, and a percentage of sales, collaborate on purchasing, share insights on retail productivity, and earn some good press in the process…

This has to be an opportunity for suppliers willing to help a retailer to really innovate…

Seemple, right?    (i.e. seems simple....)

Innovation in retail multichannel management, an opportunity via the new Post Office?

In retail, increasingly innovation will be linked to the development of multichannel retailing, particularly as sales migrate to new channels, the role of multichannel director is emerging as the most likely route to becoming chief executive of a major retailer. 
Suppliers need to mirror the role-moves.

Need for innovation focus
Korn/Ferry Whitehead Mann have found that, despite profound change in the retailing sector, many were prioritising existing goods and services, rather than reinventing themselves with breakthrough ideas. 

This week’s guest-Kamblogger, Gary Coyle, a thought leader in the Postal sector, updates NAMs on upcoming consumer-access opportunities via the Post Office network.

Post Office rebirth
The UK Post Office network is in decline – 5,000 Post Offices have closed over the last 6 years with 8 million fewer weekly customer visits.  The Government have promised funding of £1.34bn over the next four years to help modernise and re-energise the retail network.

In fact, as the largest retail network in the UK, the Post Office now needs to innovate, take some calculated risks and be radical in its approach to adopting a new business model in order to optimise ever challenging consumer demands.

See Gary’s free white paper: Post Offices – Time for a Digital Reinvention as a Unique Route to Consumer?