A space race, but not as we know it....online retailers could be hit by warehouse space shortage

According to a new report by property consultancy LSH in International Business Times, Amazon, Tesco, Argos and other online retailers could be hit by shrinking warehouse space. In fact, logistics space fell from a peak of 360 million sq. ft. in 2012 to 200 million sq. ft. in 2015 (Reuters).

Lambert Smith Hampton (LSH) predict that demand will exceed supply by 25 million sq. ft. by the end of the decade.

Given these retailers use a network of warehouses to ensure faster delivery of goods to customers, the shortage of storage space will affect their delivery capabilities.

Knowing that the retailers involved - and their online shoppers - don’t do waiting, it is unlikely that they will await the 1-year construction time of new-builds, and will instead race to buy available space.

Ironically, given the planning legislation, and different prices/rentals for retail vs. industrial usage, those B&M retailers with redundant large-space cannot simply switch some of their outlets over to online warehousing, although some may compromise, and ‘make do’ in the short term...

More likely we are probably going to see more consolidation/takeovers of any source of suitable warehousing, and even inter-retailer collaboration as stakeholders demonstrate their determination not to compromise the potential of the only growth-channel in town…

For suppliers, this means more complicated and rapid response logistics arrangements in a fast changing logistics landscape.

It is hopefully obvious that they will not be allowed to compromise online retailers’ ability to meet online-shopper need, as speed and availability become the only real differentiators in the online race… 

When you don't need the brand name...

HT to Phill Barnett for pointer

Supermarkets Fastest Growth In Five Months - Source & Impact?

Taking the latest results from Nielsen and Kantar, it is encouraging that some of the mults appear to be coming back (possibly at the expense of other multiples?)…no-one ever wanted these guys to fail, and besides so much of the supplier business model is built upon growth and the mults having a major slice of the action.

However, brand-owners might usefully think about the split between brand and private label of the market data. Add to this the high rate of discounter market share growth, again at the relative expense of brands’ demand and a different picture of recovery emerges..

All pointing to the fact that brand premia are being eroded, hopefully triggering a return to basics, real basics, by the realists… 

Tesco Ireland Fails To Convince Court That It Can’t Afford To Pay Staff Bonuses

News that The Labour Court in Ireland has recommended that Tesco’s Irish business pay staff their 2015 bonuses despite the retailer saying that it is not in a position to do so given its weak trading performance in the country, could have unintended consequences:

• If Tesco decide to fight this recommendation, in open court, they may be forced to divulge local profit margins…
• …with the inevitable knock-on impact in terms of putting other retailers' profitability in the spotlight
• …all in a local environment that is being increasingly subjected to corporate tax scrutiny by the US and EU…

On the bottom line, every little helps...

Muhammad Ali - an inspiration to Ovaltine and the team

News that an exhibition dedicated to the great man is opening today at the O2, calls to mind his first product-endorsement tour of the UK.

Back in 1971, Ali agreed to work for a week promoting Ovaltine via an extended train trip around the UK, stopping at every station that was near a supermarket, inviting the local managers on board to meet the champ and disembark at the next station, inspired for life, in many cases.

We even managed to secure an interview on the new Michael Parkinson TV chat show, an episode that has been repeated many times since.

To our surprise, we found Ali to be a modest, even shy man, with immense presence, whose can-do attitude proved to be an inspiration personally and to other members of the team.

As fans will know, because of illness, Muhammed Ali will not be able to attend the opening session, but he has sent a mock-epilogue to commemorate the event:

'I would like to be remembered as a man who won the heavyweight title three times.

Who was humorous and who treated everyone right.

As a man who never looked down on those who looked up to him.

And who helped as many people as he could.

As a man who stood up for his beliefs no matter what.

As a man who tried to unite all humankind through faith and love.

And if all that's too much then I guess I'd settle for being remembered only as a great boxer who became a leader and a champion of his people.

And I wouldn't even mind if folks forgot how pretty I was.

Be cool and look out for the ladies!'

Guest Blog: Are your customers taking the….funding??

By Ian Yates, Director at Barcanet

Ever had one of those days? Just as you finalise the sales and growth forecast, your key customer (or someone on their behalf) sends you that email….

‘Some years ago, your predecessors, predecessor agreed a promotion on the product you no-longer manufacture.  We have been going through our records and found that we sold a lot, but didn’t ask you for all the funding, therefore you owe us lots of money (we haven’t added loss of interest as I think we can settle this quickly ;-).  Please find attached 200 pages of documentation that substantiates what we are saying.  We will knock the value off the next payment to you.  I don’t anticipate this will impact the funding you are offering on future promotions.  Have a nice day.’

Let me explain the chain of events that got you here:

1. Three years ago, the buying team at the customer did some analysis on what was sold during the agreed promotion, calculated what funding you owed and you paid the invoice.
2. Around 6-months later, the customers internal finance team found that a whole bunch of sales hadn’t been included in the original calculation.  Did a new calculation and raised another invoice – you paid that as well.
3. Another 6-12 months later, an external ‘recovery-audit’ company (specialising in retail funding/promotions) trawled through the transactions and found yet more discrepancy.  The customer had forgotten to include in the calculation all stock that was bought for the promotion (i.e. before the promotion actually started), not just what was sold.  They sent a claim to your predecessor, he hadn’t time to review it so agreed a settlement.
4. Two years later (now), a different ‘recovery-audit’ company is doing another review.  They think they have found more errors, they aren’t altogether sure, but it kind-of looks like there are some mistakes, so they have raised a series of claims with a lot of back-up documents and sent them to you for review.

And here we are, the onus on you to fix a mess from before you even joined the company.  What do you do now?

My guess, is negotiate another settlement?  Finance and IT haven’t the time (or inclination) to get you the data, and lets be honest you don’t have the time or inclination to analyse it – so its easier to negotiate with the customer.

And that is exactly what these audit companies want.  They are remunerated by taking a share of whatever they are able to recover from you for the customer - so the more claims they raise, the more likely a negotiated settlement, the more they get paid.

Not only does this cost your business money (and cold cash at that), but it impacts on this year’s marketing budget, which means less promotions and reduces your chances of achieving target – lets start again on the sales plan!

OK, yes we can help you analyse and, where appropriate, rebut those claims (and that is a worthwhile exercise freeing your time and money).  More importantly, how do you manage this whole promotional funding process better?

Of course, utopia is for your ERP system to connect with the various promotional, ordering and AR systems to effectively manage this – but that will cost – both in time and £’s.

Quicker and cheaper – introduce a process where the relevant data is taken from these disparate systems and centrally stored and analysed on an ongoing basis, so you know your exposure at any given time (if you like, the reverse of what the recovery-audit companies do).

As a very quick starting point, here are 4 tips you should consider implementing to reduce the promotional funding administration processes:

1. Consider inserting additional clauses into funding arrangements;
   a. ‘claims for funding’ must be made within 6-months of the promotion finishing.
   b. in the event any ‘claims for funding’ submitted are found to be illegitimate, we will charge you (the customer) at a rate of £150 per hour for the time taken to investigate and reject the claim.
   c. informing suppliers that any disclosure of ‘pricing’ or agreements to any 3rd parties will contravene the agreement or deal, this should include ‘Audit Recovery’ firms.
2. Agree that calculations and submissions made by the customer will be treated as full and final - request a declaration from the customer before settling any funding or any cessation of supply of any product or service, confirming they have received the correct payment for goods or services to date.
3. Build a centralised ‘log’ of claims received by customer and the settled value – showing a high % of ‘false’ claims makes negotiating the next one a little easier.
4. Identify (internally or with the help of a 3rd party) underpayments, payments not within ‘agreed terms’ and over deductions made and submit as ‘Counter Claims’. These will at least reduce the value of any claim and may result in the customer not pursuing their claims further.

For further information or a confidential discussion, contact Ian Yates, Director at Barcanet 
Email: ian.yates@barcanet.com or Tel. +44 7868-745705

Queueless, Cashierless Convenience, 24/7 - a Swedish Smartshop

According to Associated Press reports in Gizmodo, a 480 sq. ft. store that operates via smartphone has opened in Viken, Sweden.

A door-opening app-scan registers and allows access to creditworthy customers 24/7, goods are purchased by scanning the barcode, and the bill is paid monthly.

Behold the convenient convenience outlet of the future… 

BTW, six security cameras and a ‘crow-bar wielding’ human owner ensure the shrink-proofing of a business model that aims to bring small shops back to many communities in Sweden that have been swallowed up by supermarkets and big chain stores.

As the son of Mom ‘n Pop grocers, I would caution against the 1-month credit facility, but otherwise this Smartshop looks scaleable, exportable, and is possibly a way of diluting the minimum living wage issue for major retailers?

More here