Ethics in selling: why an ethical approach always made sense, even in precedented times!

In these unprecedented times, the savvy consumer/buyer is no longer willing to outsource their decision-making to marketers, salesmen or retailers.

In buying a product/service, they are choosing a mix of Product/Service, Price, Presentation and Place that represents good value for money. In making the choice, they are factoring in a combination of product performance and integrity of the seller.

Any short-changing by the seller automatically makes the price seem expensive - a bad deal - causing the consumer/buyer to refuse to buy, or even litigate in some cases…

More importantly, the praise/complain ratio kicks in, whereby a satisfied customer tells one  friend, whilst an unhappy customer tells ten…

Ethics, apart, it surely makes sense to manage expectation down to a point where the customer always receives more than expected, and willingly comes back for more….

Our contribution to a discussion led by Peter Ramsden on the Key Account Managers Group

Still think the global retailers are ignoring Amazon?

                                                                                       Pic: via Jayaram Vengayil, via Fabio Ferraro

Online delivery charges - a stumbling block or opportunity for mults?

Fully-costed home delivery by the mults costing £20 vs. a £4 delivery-charge raises some issues and opportunities for suppliers and retailers

If traditional retailers want to be online, home delivery has to be part of the package.

Whilst retailers may try to shift some of the cost-burden via promotion of click & collect, there will always be a proportion of consumers that want and can accommodate home delivery. In special cases retailers may be able to charge a commercial rate but in reality they are saddled with a £4 delivery charge.

As usual, the Amazonian elephant in the room is setting online standards.

Amazon somehow appear to be able to cover the cost of delivery – possibly a combination of scale  and geographical density resulting in drivers being able to cover costs via upwards of 100 deliveries/day – albeit apparently losing money on Prime deliveries.

This appears to suggest that high-density geographical/clustered marketing may offer a way forward for the mults, offering scope for tailored promotions by suppliers.

In other words, the mult’s potential online retail opportunity is too big to miss, so any medium term delivery-cost losses will need to be absorbed by the traditional business via route-to-consumer portfolio management in order to remain competitive.

However, in the long term this cross-financing strategy will dilute overall profitability unless it can be demonstrated that scale will eventually result in breakeven on a £4 delivery charge.

Meanwhile, supplier-partners might usefully explore joint-opportunities to introduce home-delivery promotions to help defray some of the real delivery charge…. 

Update: US Tax Inversion moves may speed up via existing law..

Further to Friday’s blog post below, it appears that Obama may not have to introduce new legislation to prevent current and future tax inversion moves by US multinationals.

In fact, according to an article in The Irish Times, Obama could invoke a 1969 tax law that would restrict foreign companies using inter-company loans and interest deductions to reduce their tax bills. This could remove the key advantages of US companies taking over foreign companies and transferring their tax addresses to a more advantageous tax environment.

In practice, this means that companies* in the acquisition-pipeline will need to radically accelerate the process in order to avoid restrictions.

In other words, the Walgreens – Boots acquisition is now in fast-forward mode… 

Ready?

* It is not clear whether  historic tax inversion companies will be impacted by the same legislation

American Tax Inversion and the NAM

NAMs need to keep in touch with the practice of US firms relocating their headquarters via acquisition of smaller players to countries such as Ireland where corporate tax rates are lower to avoid taxes in the US.

A major development took place yesterday via a speech by US president Barack Obama where he castigated American companies for “gaming the system” and signaled US determination to act against the process.

This is all part of a worldwide government and consumer backlash against tax avoidance by major companies.

These accelerating tax inversion moves affect the NAM role in three ways:

• Suppliers: If the NAM’s company - or a competitor – is in the process of making a tax inversion move, US growing resistance will become an increasing distraction to top management and thus the NAM day-job…
• Retailers: Possible acceleration of moves like Walgreens’ takeover of Alliance Boots, impacting the roles of both Boots NAMs and NAMs of competing retailers
• Consumers: The growing consumer backlash has already resulted in demonstrations against major companies such as Starbucks and may eventually affect the brands of those companies suspected of paying less than their fair share of tax…  

Action:
Best to keep in touch with developments, reassess your relative competitive appeal after each significant move and factor the result into your trade strategies, despite the distraction…

Poundshops joining the mainstream?

Given Poundland’s successful flotation in March 2014, it is perhaps time for NAMs to seriously consider Poundshops as part of UK mainstream retail.

As a start, compare the Poundland ratios vs. the Big Four latest results.

As can be seen above, they are already ahead with ROCE 15.6%, equal on Net Margin 3.7%, underperforming on Stockturn 11.1/annum, with modest Gearing 16.1%

All they - and other poundshops - need to keep in mind are the retail standards being maintained by Walmart (ROCE 18.2%, Net Margin 5.2%, Stockturn 10.6 and Gearing 51.4%)

All a NAM needs to keep in mind is the need to help them…!

The NAM as cash manager - how Working Capital works...

Given the pressures on sales and profits, major suppliers have turned to improved management of their working capital as a source of cash in the business.

According to the latest  EY 2014 Analysis of Working Capital Management, reported in The Grocer, the world's nine biggest food and drink companies, improved their 'cash-to-cash' days by 15% in 2013.

As manager of the supplier-retailer interface, the NAM is in a position that impacts, and is impacted materially by, improvements in the use of working capital.

Essentially, as can be seen in the diagram, working capital is a combination of Current Assets - Current Liabilities, and ideally should be kept as low as possible in order to improve the ROCE.

A NAM can influence the amount of working capital by better forecasting and promo-planning, resulting in lower stockholding, and negotiating better payment terms to reduce the DSOs, all without jeopardising the business. 

Finally, the full EY Report gives a 13-point Action checklist for optimising Working Capital (more detail here) and I have highlighted those affected by the NAM.

EY 13 initiatives to drive working capital excellence:

1. Further streamlining of manufacturing and supply chains
2. Closer collaboration with customers and suppliers, enabling enhanced demand and supply visibility, improved forecasting accuracy and better supply chain reliability
3. Better coordination between supply, planning, manufacturing, procurement and logistics functions and processes
4. Improvements in billing and cash collections
5. More effective management of payment terms for customers and suppliers, including renegotiation of terms
6. Intensification of spend consolidation and standardization
7. Implementation of a larger, more unified shared-services organization
8. Increased use of VMI practices, enabling better ordering, production and delivery planning and scheduling for the supplier, and reduced inventory levels and risk of stock-outs for the customer
9. Alignment of business processes and information systems up and down the value chain to share real-time and accurate supply and demand information
10. Increase use of financing solutions as a way to provide attractive and flexible alternatives to customers and suppliers
11. Active management of the trade-offs between cash, cost, service levels and risks (choosing, for example, between customer payment terms and sales price rebates, supplier payment terms and early payment discounts, or inventory levels for consignment stock arrangements and customer service levels) that are sometimes required with various WC strategies
12. Implementation of more robust supply chain risk management policies,
13. Tracking and monitoring WC metrics

By the way, if you need pointers on optimising Working Capital, check out your major customers where, being a cash business, shoppers pay them in cash, whilst the retailer pays suppliers in 40+ days... In other words, retailers use negative working capital i.e. at any time they can have as little as £10 available to pay every £100 they owe...

Dave Lewis - a Brand New Approach to Tesco?

Today’s news of Philip Clarke’s replacement by a 28-year Unilever veteran, coupled with a need for fundamental change means that Dave Lewis will bring branding, global and supplier insight to the mix…

• With no retailer/Tesco baggage, he can be more decisive in eliminating sacred cows that have failed to deliver in terms of assets, process, initiatives and job functions
• As an FMCG marketer, he will understand that a new brand loses money on the initial purchase, makes a little on the second and begins to generate real profit when the consumer returns spontaneously having received more than was expected, and even tells a friend… The only issue for suppliers is that the brand is now Tesco, so private label and the Tesco shopping experience will now receive the state-of-art brand-marketing treatment it may have lacked in the past…
• His big-company global experience should be an asset in coordinating local, regional and global strategies
• The 28 years’ experience as a supplier has to mean a raising of the bar in terms of depth of supplier-Tesco relationships, with each side bringing more mutual insight and fact-based financial rationale to the negotiating table....

But above all, Dave Lewis will have 12 months to demonstrate sustainable improvement in Return On Capital Employed - and thereby share price - in the full knowledge that suppler-collaboration can help…

Over to you, in anticipation…  

Coffee-break: Argentina - Germany Guardian Brick-by-Brick replay...

Source: The Guardian here

Amazon ponders Netflix-like service for ebooks

According to a Reuters' report, Amazon is considering a new e-book subscription service called "Kindle Unlimited," that aims to replicate popular video-streaming models for the digital books market.

An Amazon test-page spotted by tech blog Gigaom but since taken down, touted a service that for $9.99 a month, would grant unlimited access to more than 600,000 titles

More than enough insight for pro-active NAMs to think through and anticipate another breakthrough disruption by Amazon..?

In other words, in a spare moment, think about the most needs-based and boat-rocking innovation that could possibly be made in your category and conduct a what-if on Amazon finding a way...

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…?