The French KISS approach to beating the discounters

According to a report in Reuters, France is the only country in Europe where discounters have seen a significant drop in market share, slipping to 11.9% in the second quarter of 2014 from a 2009 peak of 14.9%, according to Kantar Worldpanel data.

In fact, the success of French retailers in stopping the advance of discounters in the last five years shows a way out of the crisis embroiling Britain's "big four" grocers.

Their simple formula: fewer complex promotions and big price cuts across the board.
(After all, rocket-science is so pre-2007...)

The French grocers expanded their budget product lines, cut a proliferation of promotions, simplified own brand ranges and worked with suppliers to slash prices of branded goods.

In practice, this approach in the UK would require high levels of collaboration between suppliers and retailers, given the inevitable margin hits’ impact on share prices…

However, for branded goods suppliers, since any growth of the discounters comes at the expense of brands, then helping the multiples, helps the brands.

Moreover, in negotiation terms, the price for such assistance has to be a demand for fair-share dealings, between equal partners…

Truly, we are all in this together… 

Flatline demand or wot?

A report in The Observer this weekend said everything in a graph...

As the chart shows, it is very rare for real wages in the UK to fall continually over a seven-year period. They have done so only three times in the past 150 years: after a deep recession in the late 19th century; in the 1930s, following the Great Depression; and again in the past seven years, the steepest fall in 150 years....

Given that in these circumstances, governments, banks and individuals have been paying down debt, it should be no surprise that very little spending money has trickled onto the market...

And given the extent of the fall in real wages, politicians' promises of an immediate upturn need treating with caution..

In other words, best to forecast product/brand growth at the expense of the competition, if you can...

While others await a return to 'normal'....

NAM-flu isn't a myth after all !!

According to The Telegraph, men get sick because they don't have the hormones that boost women's immune system.

The study by Stanford University School of Medicine, examined the reactions of men and women to vaccination against flu. The team hopes that, in the future, this knowledge could be used to enhance resistance to common and serious lung infections and prevent flu developing into more serious pneumonia.

However, according to an earlier study, only one in five British women believe that the debilitating "NAM-flu" disease which temporarily leaves male sufferers prostrate on the sofa watching televised sports is real, meaning that NAMs can now work on the remaining 80% with this extra evidence.

The survey, which questioned 2,000 British adults about health and wellbeing, showed that misconceptions and old wives' tales, including the myth that eating carrots improves night vision, prevail among the population when it comes to beliefs about common illnesses.

More than a third of people said that sugar makes children hyper, and 37% said they believed we lose most of our body heat through our heads -- the most popular misconception of the survey, despite millions spent on consumer health and education.

However, the survey is weakened somewhat by its endeavours to show that when illness strikes, almost half of people agreed that men exaggerate their symptoms to get attention, with 38% also believing that men take longer to recover from illness than women.

NB. This additional indepth research on man-flu diagnosis and treatment can obviously now be added to a NAM's repertoire of fact-based rationale for persuading those unsympathetic stakeholders that need convincing of the obvious, in these unprecedented times

Have a gentle, comfy weekend, from the NamNews Team!

Commercial Income fall-out: the open domain perspective?

The investigation of Tesco’s £250m overstatement issue by independent auditors and Tesco’s legal advisers has obviously impacted the share price and created considerable media coverage for a topic that is technically not in the open domain. The results of the review will need to be available to all, in order to attempt to reassure shareholders that the share price fall has ‘bottomed out’, corrective measures are in place and growth will be restored, under new management.

Any holding back in the interest of ‘commercial sensitivity’ will seem like a cover-up, resulting in shareholders acting with their feet…

In other words, all output is headed for the open domain.

Meanwhile shareholders, regulators, HMRC, retail competitors, media, suppliers and shoppers, await an explanation…

The issue is, what type of explanation will satisfy this diverse audience’s need for simplicity and clarity?

Any retrospective review of accounting procedure, with a combination of legal help and the benefit of hindsight, is bound to result in a call for unambiguous clarification of each element of Commercial Income.

‘Supply and Demand’ rewards could provide a useful basis for clarification.  In other words, classifying elements of commercial income as either facilitating supply economies, or optimising consumer demand, might help, but still leaves complexity....

Supply rewards could include:
- Central assortment & listing
- Timely and committed forecasts
- EDI
- Central credit, settlement terms, and payment
- Returns/write-offs
- Deductions

Demand rewards could include:
- Listings
- 'Appropriate' range/assortment
- Category compliance: shelf space & level, fair-share facings
- Promotional compliance, price support, POS compliance, additional placements/displays
- Post-audit recovery
- Sales achievement

It can be seen that, over the years, what was once a fairly simple buying and reselling process, with a retail margin to cover the effort, and sufficient free credit to bridge the gap between receipt of goods and payment by the shopper, has evolved into the complex package we now call Commercial Income.

All stakeholders will now insist upon clarification of each element, including the precise contribution that commercial income makes to a retailer's profits.

This will inevitably result in new auditing procedures aimed at transparency, defensibility and like-with-like 'comparability' in dealing with Commercial Income in retail accounts.

Moreover, as it is unlikely that all retailers will have evolved a uniform definition and treatment of commercial income, so any output from the Tesco exercise will soon result in the need for parallel reviews of other retailers’ accounts, in order to satisfy all stakeholders…

Meanwhile, suppliers could usefully prepare for the inevitable by reassessing each element of their offering in terms of purpose, cost, value and result, before the open domain demands an explanation…

Normal? Moi?

                                                                                             Hat-tip to Adam Mehegan via Colin Doree

‘One to show & one to go’ - minimalist stock control in retail

Mark Taylor built on Mike Anthony's link to the high cost of parked inventory by illustrating how retailers can re-allocate the cost of financing display-stock.

If we accept that the purpose of a facing-pack is to advertise the pack behind it, then it becomes logical to a retailer that the cost of the facing display-pack should be carried by the supplier. Moreover, since a consumer in general buys one pack at a time, it also follows that any back-of-facing stock, other than one-for-purchase, should also be carried by the supplier…

In other words, the only stock that should be financed by the retailer is one sales-pack per facing…!
It follows that all other stock, including pipeline from store-receipt to back-of-facing (minus one sales-pack) is the financing responsibility of the supplier.

This obviously challenges the fundamental purpose of Bricks & Mortar shops – are they really the ultimate ‘showrooms’ where consumers are reminded of the existence of the brand/pack, and then outsource the actual purchase and fulfilment to Amazon…? This leaves a sales pack available on shelf for those shoppers who insist on completing the purchase in the store.

In these fast-moving-consumer-goods times, it seems to me that strong retailers are in a position to insist upon the fair-share re-allocation of stocking-costs outlined above.

Time for suppliers to evolve a convincing counter-argument, or take another hit to their customer P&Ls?

Hat-tip to Mike and Mark

Optimising retail assets via after hours niche promotions

                                                                                                                                         pic: The Argus

According to The Argus, 8,500 students yesterday flooded Brighton’s Churchill Square shopping centre to take advantage of 20% discounts.

The Student Lock-in event, one of 40 events in 20 cities, is organised by the marketing company Total Students, takes place after normal hours starting at 6.30pm and ending at 10.30pm.

Students are granted exclusive access to one-night-only discounts, giveaways and competitions across on-site stores and promotional stands. A range of entertainment is provided, including meet and greets with famous faces; activities include climbing walls and surf simulators; on-site club features like bars, live music and DJ performances

Worth locking in some students for something really incremental in your category?

Commercial Income - the driver for large space retailing?

                                                                                      Shopper-density map Herb Sorensen

The current controversy ref retailers’ advance booking of commercial income and its impact on profit forecasts will be the subject of increasing press coverage in the coming months, especially as other major retailers feel the need to reassess and explain how their procedures differ…

In the meantime, Shopper-scientist Herb Sorensen, in his work The Problem: "Parked" Capital, and his use of shopper-density maps of retail stores, questions retailers’ use of large space.

The above extract is an accurate map of the time shoppers spend in the store. All those blue, and especially the dark blue areas, represent what he calls ‘parked capital’, defined as money tied up in real estate and inventory.

The data and map above are relevant to both inefficient use of floor space capital, but are also directly related to the massive unmoving inventory on most stores' shelves.

Sorensen goes on to suggest that the building of larger and larger stores has been driven more by the desire to offer more inventory - requiring more space - on behalf of the brand suppliers, who are paying for the space and other marketing services, than consumer need.

In other words, large space is NOT needed to accommodate the demands of the crowds of shoppers.

If this is the case, then following the UK's ‘re-audit’ of Commercial Income, redundant space may not be the only casualty…

Hat-tip to Mike Anthony for the pointer

3D printing - coming to a category near you?

                                                                                                  Hershey chocolate pic Technabob

TechRepublic have identified 10 companies using 3D printing in ground-breaking ways. Whilst six of the companies deal in engineering and allied fields, four innovators could present challenges in FMCG categories…

• Nike: The Nike Vapor Laser Talon, was designed for players running the 40 yard dash on football turf in the 2014 Super Bowl.
• Hasbro: In February, Hasbro announced a partnership with 3D Systems to “co-develop, co-venture and deliver new immersive, creative play experiences powered by 3D printing of toys for children and their families later this year.”
• Hershey's has partnered with 3D Systems to make a special 3D printer for making chocolate
• MakieLab: London-based MakieLab offers the ability to design your own Makie doll with MakieLab, which 3D prints 10 inch flexible fashion dolls from thermoplastic, allowing a choice of all of the features of the doll: face, eyes, jaw, smile, hair, and more

Still in doubt?
McKinsey analysts project that total 3D printed economic worth will be around USD$230-550bn per year by 2025, of which USD$100-300bn will be direct consumer products, such as toys.

Finally, see No 10 on the list:
Matter.io is a company that is making it easier to make, download, and share designs by embedding the files into websites so users can download and customise the designs…..

The growth of mobile - a zero-sum game?

                                                          pic: Brian Moore Brighton Pier 5-10-2014

This phone booth, at the entrance to Brighton Pier, the UK's most popular seaside destination, to my mind says it all for the future of landline utility...

Great ideas inevitably float to the top...

pic: Fabian Kirner

Hat tip to Andy Parker via Orlaith Whelan

Shopper-engagement at the checkout?

According to Reuters, the Venezuelan government has started to fingerprint shoppers at some state-run supermarkets, in a plan to combat food scarcity by weeding out smugglers and hoarders. Around 785,000 people have been registered in six state-run food store chains across the country, allowing them access to price-fixed products on the shelves.

So, adding fingerprints to name, address, occupation, age, sex, family structure, income-level, state-of-health, recreations and travel, dietary habits, insurance, debt-profile and bank-balance, completes the retailer’s knowledge of the consumer…

In other words, if ‘ownership’ of a consumer is defined by extent of knowledge, then retailers combining loyalty card and scanning data to produce a 100% shopper-profile have to have a greater claim to ownership of the consumer than a marketer knowing that the consumer is probably grey-haired and living alone in the country, two children having left home…

However, a NAM working in collaboration with a major customer represents potential access to that retailer insight....

So perhaps taking a fingerprint is merely an inevitable move towards ultimate consumer satisfaction, all under the watchful eye of our benevolent big sister….?

The NozamA approach to shipping from home?

Forget packaging and waiting in lines. Shyp picks up your items, packs, and sends them anywhere in the world using the lowest cost, most reliable option.

Although currently limited to San Francisco and New York, the idea fulfils a real need and is scalable…

The only issue is that with a slight tweak, Amazon could reverse its model, and take the business.
Given its geographical density of distribution, the addition of collecting has to represent further economies for amazing Amazon…

Hat tip to Andrew Sullivan

Where now for Tesco NAMs?

Tesco NAMs have two choices:

• Await a return to ‘normal’ (and join all those other NAMs that are still awaiting a return to ‘ normal’ trade management following the 2007 global financial crisis..?)
• Or, accept that business is about making the best of the ‘here and now’….

Alternative actions?

• Ignore Tesco’s troubles? i.e. business as usual: illogical, given that nothing in Tesco is or will be the same, ever again..
• Do nothing? i.e. stop all initiatives: unwise given their 25%+ of the grocery market and equivalent access to ‘your’ consumer..
• Tailored initiatives? i.e. based on based on current circumstances, as we know them…

On the face of it, Tesco, a new customer, is now in a mode that is

• Ultra conservative
• Risk-averse
• Retro-focused and defensive
• Under new management, but distracted by re-audit, legal, City/share-price, Government, loss of market share…to be followed by good people jumping ship?
• Receptive to convincing ideas for growth, on a fair-share basis…
• Driven by a new team that has to succeed…

The way forward for NAMs has to be via initiatives that are

• Simple and direct
• Defensible
• Tailored to Tesco traffic-profiles (holding and optimising their current-customer types)

These initiatives must have

• Conservative/achievable forecasts
• Clear KPIs
• A results-based reward structure
• Error-free execution
• 100% availability
• Exclusivity in exchange for 100% compliance

In other words, the best opportunity you have had to work properly with Tesco in years…

A one-off approach to Aldi and Lidl?

Traditional NAMs and their marketing colleagues have been reared in a culture of continuity. In other words, we spent years building up relationships with consumers and customers, on the premise that a strategic approach to brand optimisation produced a predictable and acceptable return on investment, growing a level of brand equity that would carry us over the troughs in demand.

This all changed with the 2007 global financial crisis and the emergence of the savvy consumer, gradually morphing into the savvy buyer, each unwilling to outsource their purchase decision-making to marketers and retailers, in a continuous search for demonstrable value-for-money, for each purchase…

The results are evident in the successes of Aldi and Lidl at the expense of Tesco and the other mults…

We are now as good as yesterday’s sales results, everywhere…

Any supplier attempting to build up a continuous relationship with the discounters, soon realises that life in this channel consists of a series of one-off initiatives, each bearing little or no relationship with previous moves made with the retailer.

In fact, thinking about it, the same now holds true for dealings with the major multiples (the over-rider agreement is now seen as ineffectual and is fast becoming increasingly dis-credited as the row about commercial income escalates…).

And perhaps this is how it should be in business..

If this is the case, perhaps all branded manufacturers should target Aldi & Lidl with one-off experiments to help their colleagues become accustomed to discontinuity, developing skills that can then be applied, hopefully with even more effect, via their traditional customers, making each initiative ‘the best ever’, as if our livelihood depended upon it…as it probably does…