Sainsbury's to convert part of supermarket into Netto - a national template?

According to Graham Ruddick at The Telegraph, the company will convert 10,000 sq. ft. into a Netto at its Heaton Park 100,000 sq. ft. store, complete with a separate entrance..

Thus, in one move, Mike Coupe tackles two top-of-agenda issues: large space redundancy and discounter growth.

This in-store move radically changes how others should view the Sainsbury's-Netto initiative...

Whilst Sainsbury's may open several standalone Netto branches for comparison purposes, the real agenda has to be the possibility of a Netto branch in every medium to large outlet.

Thus JS will be able to assess the real synergies at close range, without diluting the Sainsbury's brand, a process of integration that can be slowed down/refocused to optimise market response... all on the back of a brand already known for discounting.

Furthermore, the close proximity of a fast-paced 'rival' under its own roof has to have a positive impact on the rest of the team....if not the customers?

In turn, this begs the question of what it will take for rival mults to find similar ways of accommodating Aldi/Lidl/?/? 

Tesco Pharmacies Benefit As Armchair Sports Fans Injure Themselves After Watching World Cup

The law of unintended consequences came into play via our most-downloaded NamNews item yesterday.  Sales in the last four weeks of pain relief gels, rubs and ointments at Tesco pharmacies across the UK have apparently soared by 20% compared to the three weeks before the World Cup started. Moreover, demand for insect bite-relief sprays jumped by 50% since the tournament started while after sun sales are up 20%, as armchair fans 'replayed' key moves in parks throughout the country.

The Tesco-effect can be seen as a positive, unexpected benefit, and might have been anticipated by marketers of global brands in pain relief via pitch-side advertising in the case of gels, rubs and ointments and possible new launch endorsement in the case of Suarez bite-prevention...

However, proactive NAMs could extend this pain-relief opportunity idea to target audiences for spectator sports everywhere....

For instance, when I was working in Budapest 25 years ago, it happened that Chuck Berry, Jerry Lee Lewis and Little Richard were giving a concert at the local football stadium, a great novelty for newly liberated but mature fans at the time, so the stadium was packed to capacity. As I looked around, I concluded that the fans ages would cause them to sit quietly and result in the music being audible to all.

However, at the opening riff of Johnny Be Good, most of the audience ran down, jumped over the 1 meter perimeter fence and invaded the pitch, as they might have done in their youth... However, this unplanned stretching caused most of them to pull a ligament, or worse, with their pain very evident as they limped towards the stage.

Another heaven-sent opportunity for those pain-relief vendors that managed to anticipate this unexpected demand and charge what they liked, in the post-communist scarcity of newly liberated Hungary...

Former Apple retail chief: Only 1 in 100 Apple store visitors actually buys...

According to a new interview reported in Cnet.com, "The Apple store's a place to be," Ron Johnson said. Not a place to shop, a place to be, in a redefinition of shopping experience....

(Ron Johnson was brought in from Target to set up the Apple store, 'giving reasons to visit and figuring out how to create more intimacy, relationship and experience in stores, but it does not mean you have to buy...')

Yet 'rule-breaker' Apple  is usually the busiest shop in the shopping centre, and generates annual sales per sq. ft. of £2,654 compared with £1,100 for UK mults...

(See the full 50 minute interview at Stanford Graduate School of Business on YouTube)

Simply food-for-thought in classic grocery retailing?

Or a fundamental challenge to our assumptions re collaboration with retailers in connecting with a brand via the in-store experience?

M&S 'online' results vs. the real KPIs in online retailing

Shareholders will obviously indicate their feelings re overall year-end results via the M&S share price, but M&S online performance deserves some consideration by NAMs.

Essentially, at yesterday's AGM, the biggest problem this time around was M&S’s online channel, through which sales tumbled by  8.1 per cent despite a much-heralded relaunch and claims that customers think it’s really, really great, according to The Independent.

The key issue here is the hurdle-rate represented by Amazon for any retailer hoping to compete online:

First, one has to experience the ease of 1-Click ordering to appreciate how clunky other sites are by comparison. In fact it has become so easy, I have personally had to remove the Amazon link from my desktop, in the vain hope that having to ‘re-search’ the site via Google will cause me to reconsider the extent of my real need each time…

Secondly, given my background in the family Mom ‘n’ Pop store, I had become concerned at family members’ apparent lack of conscience in deliberately over-ordering three dresses from Amazon, trying them on, keeping one and returning two, ‘no problem’…

To test the process I deliberately ordered a book I did not need, and found that the returns facility was easier than 1-Click…  

However, the real clincher for me was Amazon’s distribution process:
In April, I took delivery of a package from Amazon. It was due between 1230 and 1330 on Wednesday, so at 1130 I did a parcel-check to find that my Amazon driver ‘Leo’ was currently four streets away on delivery 30, and still had 33 deliveries to make before reaching me at 1245…

In other words, this is what M&S - and any other retailer - is up against, in attempting to compete with Amazon, especially in clothing…

Anything less will simply become another apology at next year’s AGM…

‘Share your meal’ – for NAM foodies everywhere

Given the 24/7 nature of the ‘day-job’, busy NAMs may not feel like cooking an evening meal, or even eating out?

Shareyourmeal has identified 75,000 home cooks across the world that are prepared to share meals with people that don’t have time to cook for themselves. The cooks prepare meals in their homes, and share them at cost with customers, living in the neighbourhood.

In other words, NAMs can now find out what meals their neighbours are sharing, reduce food waste and meet new people!

Launched in the Netherlands in 2012, the idea has caught on to the extent that Ahold have kicked off trials at an Albert Heijn outlet in Amsterdam, in conjunction with Shareyourmeal.

More details as part of a larger agenda within the sharing-economy via a Ted-talk by the founders here.

When you register on the website, you will automatically receive e-mails listing all the meals in your neighbourhood. Or you can check out the website to see which meals are on offer near you.

Incidentally, for UK NAMs that feel this might be a ‘foreign’ idea for use abroad, www.shareyourmeal.net already lists local consumer-cooks and their customers availing of the service in the UK...

Seriously, albeit little acorns thus far, the idea obviously taps into a felt-need reflecting these unprecedented times - like discounters/pound shops? - and is unlikely to simply fade away should the good times roll…

Time for food service suppliers - and innovative retailers, including Amazon (!) -  to find a way in, before this new marketplace discovers that it can survive, and even  thrive, independently…?

Connecting the credit insurance dots around your Co-op business

News in this weekend's Grocer that some suppliers are taking out trade credit insurance against the Co-op Group should have come as no surprise, given recent issues re debt, etc....

However, as retail trade credit insurance may represent uncharted territory for some suppliers, and bearing in mind that the Co-op is unlikely - or would not be allowed - to fail, understanding the potential financial impact on trade dealings may benefit from a little dot connecting as follows:

As you know, credit insurance premiums tend to cost between 0.3% - 0.7% of a supplier's annual turnover (or turnover of their top customers if say they insure only their mults' business*). However, given that the top 5 can represent 80+% of the business, the cost of credit insurance remains a major issue.

Moreover, as the actual exposure at any time for a supplier on 45 days credit is 12.5% of their turnover, the actual rate of the premium is 5.6% of average amount outstanding i.e.

Say sales = £100,000,000
Premium = 0.7% per annum = £700,000
45 days = 8 times / annum
Actual premium is 5.6% of average amount outstanding.... i.e. ( £700,000/£12,500,000 ) x 100

However, given the current economic climate - and your risk-profile - you may decide that insuring Co-op credit is not necessary...

Again, some numbers may help in assessing your resulting level of exposure, and why some suppliers have run for cover:

Say your Co-op annual turnover is £5m, and your net profit before tax is 9%, with an average 45 days sales outstanding:

Average amount outstanding = £625k  i.e. £5m/8

Therefore,  incremental sales required to cover £625k = £6.9m  i.e. (£625k/9) x 100

It is unlikely that the Co-op will fail, but pro-active NAMs tend to feel better operating within known levels of exposure...

Why not run the numbers for your business, and see how it feels...? 

When choice rather than need drives discounter growth...

Demand for value retail began as novelty and morphed into need, in the aftermath of the global financial crisis.

However, as savvy consumerism spread, shoppers began to seek out discounted products, first the brands and then private label. Because of the high level of surrogate labels in hard discount offerings, branded goods suppliers have found it necessary to actively support the pound shops, thereby helping them become permanent - and growing - features of the landscape...

The evidence is all around us, especially in the latest results from Poundland.

However, whilst need-driven demand will last beyond flatline, shopping at value stores has become a matter of choice, thus ensuring their long term growth.

For this reason, it is important that suppliers evolve cost-based strategies to ensure that their brands that sell for a pound are self-financing, in order to avoid the risk of subsidising via larger SKUs.

In other words, suppliers have to find a way of launching a £1 brand into the value market at a sustainable cost-price, especially if the 'pound size' finds its way into mainstream channels in response to choice-based demand... 

Upward only rent reviews - a case for exceptions in retail and food service?

Given the narrow margins and sensitivity to consumer - i.e. market - demand, and their links with employment and economic growth, surely there is a case for abolition of the uniquely UK and Irish lease legislation ref. Upward Only Rent Reviews?

Flexibility and choice in the commercial property market is essential for retailers who need to be able adapt quickly to the changing needs of consumers, especially given the structural change - discounters, convenience and online - currently taking place in the two markets (See British Retail Consortium survey here).

A recent case in point took place on Tuesday in Dublin where the landlord has won its Supreme Court appeal against a ruling that the €1.46m annual rent for Bewley's Cafe in Grafton Street must be allowed fall to reflect market rates, thus reversing a 2013 judgment in the Circuit Court that fixed a new rent on a Grafton street property at just 53% of the previous rent - See more here.

Commercial property owners obviously want the security of predictable rental income-streams, but insisting on retail rents that are increasingly out of touch with consumer market realities - like Dublin retail rentals currently at 50% of Tiger levels - has to eventually result in an acceleration of shop and food service closures, and even more uncertainty in a flat-line market...

A more realistic approach might be a method that allows landlords and tenants to share business risk - and rewards - via a combination of base rental and percentage of sales, thus encouraging developers and landlords to focus on real demand-drivers and actual usage of their properties in the 21st Century...

Flying to avoid Monday morning traffic?

Screen-pull, Flight radar app 0700, Monday 30th June 2014

Hit the 'airlines' tag below for other reasons to fly...

Everyone wants a bite of the Apple pie...

Ireland has announced a consultation process with business and other interested parties, as it prepares to tweak its tax regime for a post-global-reform corporation tax world.

Apple, no doubt, is among a wide number of multinationals with operations in the Republic that are also considering their options for the most likely post-reform, and post-inquiry, scenarios.

However, to quote David McWilliams, the global ground has shifted and countries such as the US will not tolerate the wholesale looting of its corporate tax base and the countries that facilitate this behaviour.
Watch this space for bigger tweaks...

Meanwhile, time for competing suppliers to re-assess the post-bite changes to the competitive landscape?

Shopping for exercise – how to burn up to 800 calories per trip…

A new article in Femail First and Promotionalcodes.org.uk describes 10 instore exercises with appropriate calorie counts, that will either revolutionise assumptions about shopping behaviour, or get you certified…

These include:
- Squats instead of bending to access the bottom shelf
- Trolley-lunging to express aisle-rage at giggling onlookers
- Arm-curls with tins to escalate the potential engagement
- Leg raises to demonstrate ‘if only’ world cup moves, or more aisle-rage
- Side-lunges into the chiller-cabinet to cool down and avoid retaliatory moves

In fact, the entire repertoire of gym-moves within the price of an enhanced weekly shop…

Alternatively, why not let your fingers do the walking, online…? 

I forgot about Price-comparison apps.....!

                                                                                                        pic: TheTelegraph

Andy Murray's Scottish restaurant has been criticised for selling alcohol at up to six times its retail value. 

Walgreens-Boots, where next, when?

Walgreen Co, the largest U.S. drugstore operator, withdrew its profit and revenue forecasts for 2016 on Tuesday, saying it had yet to work out several aspects of its planned acquisition of European drug retailer Alliance Boots Holdings Ltd.

Walgreens, which bought 45% of Alliance Boots in 2012, and has an option to buy all of the Switzerland-based company in 2015, said it would update investors about the proposed purchase of the rest of the Europe's largest pharmacy chain owner and issue a new forecast by late July or early August. Combined synergies continue to generate savings albeit slightly lower than forecast, hence the withdrawal of the 2016 forecasts.

The real issue is the probability that Walgreens will respond to pressure from some shareholders to do a so-called "tax inversion" deal with Alliance Boots that would shift Illinois-based Walgreen's tax domicile overseas and reduce its tax bill. Their US tax rate is 36% and this would reduce to 21% if they transferred to Switzerland.

A possibility has to be consideration of availing of Ireland's tax rate of 12.5%.

However, to quote David McWilliams, the global ground has shifted and countries such as the US will not tolerate the wholesale looting of its corporate tax base and the countries that facilitate this behaviour.

This could mean that globally harmonized tax rates are on the way, but may take several years to implement.

Meanwhile, companies in Walgreens' position may choose to make a change sooner, rather than later.

For this reason, suppliers might usefully anticipate the possibility of Walgreens completing their acquisition of Boots earlier than the 2015 deadline... 

Time for NAMs to complete some what-ifs on a 2014 move, and act accordingly?

Deductions - the last retail frontier?

                                                                                                                pic: GCA Survey by YouGov

Given that margins, cost & selling prices, credit periods and trade investment have hopefully been pushed to their limits, Deductions remain as the final route to retail profitability enhancement.

With over 70% of deductions representing pricing and promotion issues and resulting deductions caused by misunderstanding, misinterpretation and time lags in communicating trade deals, it is vital that suppliers avoid the inevitability of settlements in favour of the customer by reducing process "disconnects," which cause preventable deductions i.e. supplier doing things one way, and customer another…

Deductions have to remain a supplier-driven issue.

Whilst future legislation may focus on unauthorised deductions, suppliers that take collaborative steps with the retailer to reduce preventable deductions can have a significant impact on their bottom line:

• Suppose a supplier has £3m in preventable deductions and a 5% net margin
• Preventing £1m in deductions because of internal changes and improved processing of retail requirements will cause any saving to flow to the bottom line
• A 5% margin means £1m saving is equivalent to £20m in incremental sales

Therefore, a supplier can achieve same financial effect of £20m in new sales without producing or shipping a single unit...

In other words, by identifying and agreeing to compatible policies and processes, supplier and customer can avoid all this non-productive paperwork, and produce increased profits for both.

Alternatively, why not wait until deductions reach US levels of 7% of your sales before elevating deductions-management to the No.1 agenda position it deserves...?

NB. Well worth checking through the full GCA survey for additional GSCOP insight

A hard lesson in CV precision at Myer Au: a tweak too far?

Apparently the retailer has sacked its newly appointed general manager of strategy and business development on his first day because of alleged discrepancies on his CV.

The claims appear to have included spells as managing director and vice-president of Asia Pacific for Zara, and key roles at Tesco China, Walmart and Homeworld...more on NamNews

In a world of total transparency, where even a little ‘month-slippage’ on a Linkedin profile can be validated, it is preferable for both parties to get CV details right at the point of job-application, and thereby avoid the job-holder nightmare where a performance-fault triggers the wisdom of corporate hindsight…