Cycle lanes for protection from cars...
Pedestrian streets for protection from cars...
and now, texting lanes for protection from cars...
Begging the obvious question: Why not ban cars?
Sunday 14 June 2015
Missing the obvious in urban evolution?
Cycle lanes for protection from cars...
Pedestrian streets for protection from cars...
and now, texting lanes for protection from cars...
Begging the obvious question: Why not ban cars?
Friday 12 June 2015
Thursday 11 June 2015
Back-margin funding of deeper price-cut by the Big 4?
The Telegraph today highlights a new report from Moody’s that says Tesco, Sainsbury's and Morrisons 'can't afford more price cuts', with sales and profits set to fall for another 12 to 18 months…
In other words, there has been some retrieval of customers, but the cost has resulted in margins being reduced by half since fiscal 2013/4....
However, this assumes that supplier trade investment has been used for the purpose intended i.e. in-store motivation of the shopper.
What if the retailer decides to switch a significant amount of back margin into price-cutting?
In practice this could work out as follows: Say suppliers contribute trade investment amounting to 20% of their turnover, to a retailer on 25% retail margin. This translates into 15% of net shelf price.
If the retailer decides to allocate say 5% for ‘back margin’ purposes, this frees up 10% of net sales that could be used for a combination of further price cuts and supplementing the bottom line….
This raises a number of issues for suppliers:
In other words, there has been some retrieval of customers, but the cost has resulted in margins being reduced by half since fiscal 2013/4....
However, this assumes that supplier trade investment has been used for the purpose intended i.e. in-store motivation of the shopper.
What if the retailer decides to switch a significant amount of back margin into price-cutting?
In practice this could work out as follows: Say suppliers contribute trade investment amounting to 20% of their turnover, to a retailer on 25% retail margin. This translates into 15% of net shelf price.
If the retailer decides to allocate say 5% for ‘back margin’ purposes, this frees up 10% of net sales that could be used for a combination of further price cuts and supplementing the bottom line….
This raises a number of issues for suppliers:
- Would you even know it had happened? i.e. Have you got updated T&Cs in place for each Back Margin bucket, along with appropriate KPIs?
- How ready are you to re-evaluate each element of your trade investment, confident in your ability to quantify the cost, and demonstrate the value to the buyer, using the retailer’s latest financials…?
Wednesday 10 June 2015
Tesco South Korea Sale - an urgent deep-cut to UK resurgence?
With six potential bidders apparently in the frame, it is possible that Tesco could raise £3.9bn from the sale of South Korea Homeplus. Whilst any retreat from a retail market makes a return difficult, recent market indicators reveal that retail sales have been slowing, possibly because South Korea now has nearly one hypermarket per 100,000 people, twice the industry ideal of one per 200,000.
The real issue is the extent to which Tesco is prepared to redefine core as UK, Grocery, Physical and Online.
This means they could cut back everything – all overseas operations, non-grocery categories and any stores that fail to deliver acceptable profit – to rebuild their Balance Sheet around a 25% market share, ROCE 15%,and 5% Net Margins.
A 25% market share would mean they could operate below the radar - farmers, special interest groups, politicians etc. – generate acceptable rewards for risk, create a stable, dominant base in the UK and gradually go global again…
Just-in-time?
As the Motley Fool says: … if a successful disrupting alternative (like discounters) in a market gains traction its growth can pyramid exponentially…
In other words, Tesco’s unhelpful little discounter issue could become unbeatable tomorrow…
Tuesday 9 June 2015
When the buyer wants the smart-shirt off your back - a variation on Back-to-Front margin?
However, rather than being a variation on Back-to-Front margin, this may simply be a reaction to the launch of the Ralph Lauren Smart Shirt;
Sensors attached to silver threads inside the shirt pick up the wearer’s movement data as well as heart and breathing rates, which can be monitored on an accompanying smart phone app and, potentially, uploaded to the cloud for analysis, via the shirt's removable slightly-larger-than-credit-card-sized Bluetooth transmitter.
We all know that a wealth of data is generated in the average buying meeting – not just in what is said, but who says it and the manner and tone of voice in which they say it. The smart shirt therefore represents an obvious leap forward for a buyer wanting to compensate for possible shortfalls in body language interpretation skills, and wishing to gain a competitive advantage before GSCOP adds an appendix...
NAMtip:
NAMs wishing to remain leading-edge can anticipate and circumvent this latest buying tactic by purchasing two smart shirts, wearing one in an extremely relaxed, non-pressured social situation and covertly swapping the card transmitter during handover of the 'selling-shirt'...
HT to Tim Manasseh for pointer to article
Sunday 7 June 2015
Boots new single 2-way trip travel insurance for 115-year-olds, ideal for Ryanair travellers that need a name-change?
According to The Guardian, Boots has raised the upper age limit on its single-trip travel insurance policies to 115 years, effectively insuring anyone regardless of age, but only on a single-trip basis..
Meanwhile, the Independent reports that a passenger changed his name by deed poll because it was cheaper than Ryanair's penalty for altering a booking that got his name wrong...
I am sure both companies have factored in the possibility of a very senior citizen making an outward journey in his new name to a little-known out-of-town Ryanair airport, enjoying an unforgettable but distracting holiday before checking in under his old name for the return journey, stopping half way to the departure-gate for a mental re-boot, and then not being able to remember whether he was coming or going?
...and not forgetting the confusion at airport security....
Meanwhile, the Independent reports that a passenger changed his name by deed poll because it was cheaper than Ryanair's penalty for altering a booking that got his name wrong...
I am sure both companies have factored in the possibility of a very senior citizen making an outward journey in his new name to a little-known out-of-town Ryanair airport, enjoying an unforgettable but distracting holiday before checking in under his old name for the return journey, stopping half way to the departure-gate for a mental re-boot, and then not being able to remember whether he was coming or going?
...and not forgetting the confusion at airport security....
Friday 5 June 2015
The £1 Cafe - Austerity biting, or meeting a market need?
According to The Guardian, Fitzrovia’s new Caffix cafe is drawing in Londoners looking for an affordable lunch option by charging just £1 for all items.
From avocado and chicken baguettes to pots of curried chickpeas, quinoa salad or pesto pasta with roast beef, all cooked on site, Caffix cafe on Newman Street sells food for a fraction of the price that they would normally spend in the heart of capital.
Simple scalable idea, almost as impossible as setting up a Pound Shop in sophisticated UK retail...
Thinking of which, a possible service extension for Poundland?
Thursday 4 June 2015
For the Maturing NAM - all your daily medication in one pack!
According to Bloomberg, PillPack Inc have raised $50m to build a better online drugstore with a simple idea: dividing up customers’ pills by the time and date they should be taken.
Following its launch of the ‘daily’ service in February 2014, PillPack (see video here) has delivered over 1m packs by focusing on routine prescriptions and OTC products.
An obvious plus for an ageing population on an increasingly complex mix of medication, reaching new levels in convenience, and inevitable lock-in for satisfied users.
The issue for suppliers might be possible loss of the pack-to-patient connection
The only question is whether Walgreens-Boots and CVS can organise to replicate the service, cheaper…
Tuesday 2 June 2015
Apple Stores $4,500/sq ft/annum, strategically designed for optimum productivity
Over 15 years Apple have evolved a layout that beats all other retailers, key details at Business Insider, here
Regrettably, in case you feel inclined to pass some of these insights to your favourite buyer, let it be known that Apple are so fond of their layout, last year they succeeded in trademarking their store layout across Europe...
As a result, the ruling will apply not only in Germany, but will prevent others across Europe from replicating the interior of Apple Stores, with their distinctive symmetrical wooden benches on which electronics are laid out within a large, white space.
Fortunately no other retailer looks like this, which begs a question...
Monday 1 June 2015
Mike Ashley planning to launch chain of cut-price high street stores – a step away or ahead of Food Discounting?
According to the Mail On Sunday, the Sports Direct billionaire has launched a new discount store MEGA VALUE, in Kidderminster, Worcestershire. Similar to B&M and Wilko, it will stock products once found in Woolworths.
The issue for those acquainted with the Sports Direct model has to be the roll-out effect on the Big 4, but also the speed with which the new venture will climb aboard and accelerate the pace of Aldi & Lidl's impact on the UK grocery market.
Apart from some tough negotiations ahead, suppliers might take some consolation from Ashley’s belief in brands, as they decide whether to ignore or collaborate with the new kid on the block.
Either way, a store visit to Kidderminster might not go amiss…?
The issue for those acquainted with the Sports Direct model has to be the roll-out effect on the Big 4, but also the speed with which the new venture will climb aboard and accelerate the pace of Aldi & Lidl's impact on the UK grocery market.
Apart from some tough negotiations ahead, suppliers might take some consolation from Ashley’s belief in brands, as they decide whether to ignore or collaborate with the new kid on the block.
Either way, a store visit to Kidderminster might not go amiss…?
Sunday 31 May 2015
Friday 29 May 2015
Back Margin audits - Now it's your turn.
Accountancy watchdog to focus on suppliers after Tesco profits scandal.
According to The Guardian, the Financial Reporting Council (FRC) will make retailers’ relationships with their suppliers a priority due to ‘increasingly complex arrangements’ in their inspections in 2015/16. The FRC will “pay particular attention to the audit of revenue recognition and complex supplier arrangements” at food, drink and consumer goods manufacturers, as well as retailers. They plan to check a significant number of audits - of the 140 checks planned - in these sectors.
More details of scope and process are given in the FRC latest Annual Report published today, and for convenience we have highlighted key sections below, but best point your finance colleagues at the original document, here.
As indicated, this is about Back Margin definitions and how suppliers and retailers account for payments made to retailers.
We believe that we are headed towards further clarity, meaning that payments to retailers will eventually be measured more accurately, paid retrospectively - in arrears - and based upon results achieved vs. agreed KPIs, in order to comply with strict auditing standards and process.
Action for suppliers:
The FRS Annual Report (extracts)
Section 2-4 Page 7 refers to
...Given the focus in recent months in respect of complex supplier arrangements, food, drink and consumer goods manufacturers and retailers have been designated as a priority sector for our 2015/16 inspections and a significant number of audits we plan to inspect will be from those business sectors. These inspections will pay particular attention to the extent to which the audit team has challenged and corroborated the appropriateness of how complex supplier arrangements are accounted for. Corporate Reporting Review (CRR) as part of their programme of reviews of financial statements will also be giving priority to the reporting of these arrangements. We also plan to inspect a number of first year audits to assess the extent to which changes in auditors have an impact on audit quality.
In early 2015 we engaged external consultants to undertake an extensive review of our inspection activities and how these can promote continuous improvements in audit quality. The outcome of this review will be incorporated in the FRC’s Strategy for 2016/19.
Analysis of inspection findings: Section 3-5, page 16 Future Inspections: Section 7-2, page 32: ... planning to inspect around 140 audits.... The priority sectors for 2015/16 are insurance; food, drink and consumer goods manufacturers and retailers... Our inspections will pay particular attention to the audit of revenue recognition and complex supplier arrangements.
Appendix A, page 36 Inspection Process
Our inspections comprise a review of the firms’ policies and procedures supporting audit quality and a review of the quality of selected audits of listed and other major public interest entities that fall within the scope of independent inspection, as determined each year.
Scope in Appendix B
According to The Guardian, the Financial Reporting Council (FRC) will make retailers’ relationships with their suppliers a priority due to ‘increasingly complex arrangements’ in their inspections in 2015/16. The FRC will “pay particular attention to the audit of revenue recognition and complex supplier arrangements” at food, drink and consumer goods manufacturers, as well as retailers. They plan to check a significant number of audits - of the 140 checks planned - in these sectors.
More details of scope and process are given in the FRC latest Annual Report published today, and for convenience we have highlighted key sections below, but best point your finance colleagues at the original document, here.
As indicated, this is about Back Margin definitions and how suppliers and retailers account for payments made to retailers.
We believe that we are headed towards further clarity, meaning that payments to retailers will eventually be measured more accurately, paid retrospectively - in arrears - and based upon results achieved vs. agreed KPIs, in order to comply with strict auditing standards and process.
Action for suppliers:
- Identify and clarify all of the ways in which you remunerate the customer
- Reassess the 'buckets', clarify the definitions, measurement process and ensure the customer agrees...
- Focus on Tesco's three permitted buckets (scale discounts, rewards for display and payments re product re-calls) that will probably become 'standards' eventually, as SFO, FRC and GCA investigations begin to report findings
- Think through internal processes re proposal, objectives, agreement (you and the customer), timing and payment (if in any doubt about the eventual accounting rigour involved, check with your production colleagues re their capital requisition process...)
- Whilst your company will hopefully escape an FRC inspection in 2015/16, auditors will obviously be increasingly conscious of the risks involved and will be more than likely operating to the above standards anyway...
The FRS Annual Report (extracts)
Section 2-4 Page 7 refers to
...Given the focus in recent months in respect of complex supplier arrangements, food, drink and consumer goods manufacturers and retailers have been designated as a priority sector for our 2015/16 inspections and a significant number of audits we plan to inspect will be from those business sectors. These inspections will pay particular attention to the extent to which the audit team has challenged and corroborated the appropriateness of how complex supplier arrangements are accounted for. Corporate Reporting Review (CRR) as part of their programme of reviews of financial statements will also be giving priority to the reporting of these arrangements. We also plan to inspect a number of first year audits to assess the extent to which changes in auditors have an impact on audit quality.
In early 2015 we engaged external consultants to undertake an extensive review of our inspection activities and how these can promote continuous improvements in audit quality. The outcome of this review will be incorporated in the FRC’s Strategy for 2016/19.
Analysis of inspection findings: Section 3-5, page 16 Future Inspections: Section 7-2, page 32: ... planning to inspect around 140 audits.... The priority sectors for 2015/16 are insurance; food, drink and consumer goods manufacturers and retailers... Our inspections will pay particular attention to the audit of revenue recognition and complex supplier arrangements.
Appendix A, page 36 Inspection Process
Our inspections comprise a review of the firms’ policies and procedures supporting audit quality and a review of the quality of selected audits of listed and other major public interest entities that fall within the scope of independent inspection, as determined each year.
Scope in Appendix B
Thursday 28 May 2015
Fifa emerges from under the covers - a sponsorship crisis for anyone that cares about branding...?
Deep down, global football may be too big to fail, in that this could be just another crisis...
However, given that a sponsor's nightmare has to be the possibility of the star succumbing to drugs, booze or worse, Fifa, by exception, can be no exception.
In sponsorship, nothing beats the speed with which a sponsor slides from under a problem package. The obligatory public responses of some of the biggest brands in terms of expressing concern, disappointment, have to be code for 'lets work out the best way of getting out of here, fast...' And as demand usually determines prices of advertising in sports sponsorship, those that decide to weather it out, will find some consolation in reduced rate-cards...
Players, themselves conscious of personal shelf-life limitations, will also focus on how they can distance themselves from the fall-out...
Leaving the consumer, that docile recipient of unprecedented brand-based revelations over the past few years, to vote in the only way possible, with their feet...
Meanwhile, as the US authorities have already said, this is only the beginning...and no amount of blethering will make a difference...
Monday 25 May 2015
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