'Farm' packaging - an opportunity to sell more British meat?

Given the ‘dawning realisation’ that non-UK i.e. Brazilian and Thai meat, is being sold in Britain without its country of origin being declared, two options are available:

 - Reactive: Government insistence that country of origin be declared on all meat products…
 - Proactive: UK branded meat products to emphasise local origin

Given that this situation has been known to the meat industry for years without appropriate government action, perhaps Option 2 has more appeal?

In other words, there appears to be a real opportunity for local producers – and pro-active retailers – to brand meat heavily and emphasise local sourcing, and by inference suggest that competitor products not thus labelled contain Brazilian and Thai-based meat…

In the current climate, this approach should resonate with at least 52% of the UK population – after all, if Brexit was not about nationalism…? 

NB. According to packaging regulations, the country of origin is the last place where a product is processed.... 

Post-Brexit opportunity: deck clearance vs. re-arrangement of deckchairs?

Governments’ pre-occupation with maintaining the ‘status quo’ provides us all with a temporary window where clarity of vision and a  modicum of decisiveness can help us to conduct a fundamental clear-out  of anything that does not contribute directly to business goal achievement.

In practice, this means getting back to basics, big time, while others still try to make sense of what is happening…

Essentially, despite the unprecedented Post-Brexit market conditions, in business we survive by driving sales or cutting costs, or a realistic combination of both. As we try to come to terms with Brexit fall-out, resulting in increasingly savvy consumers ‘making do’ and postponing purchase, thereby taking demand from the market, all growth will have to be achieved at the expense of competitors. In other words, we need to meet consumer needs better than the other guy, with tin contents always exceeding what it says on the label, whilst all costs that do not directly contribute to satisfying market need, have to be cut, to prevent others doing it for us…

1. Clarifying consumer and retailer needs

Despite our familiarity with the brand and an inclination not to try fixing what seems to be ‘working’, latest annual reports from both supplier and retailer show that companies are generating inadequate rewards for risk in the post-Brexit climate.

In fact, low or even negative interest rates – read between lines of Bank of England announcements – are causing companies to take false comfort from lower returns ‘in common with others in the same boat’…

In unprecedented times, random cut-backs can represent unacceptable risk. For this reason, consumer need has to be a starting point in establishing the real fit of our brand with the market, better than alternatives available, at both functional and emotional levels.

It is also crucial to keep in mind that consumers will increasingly buy easier, faster, closer, and more often, continuing to cause structural change in the retail market. In other words, given that the discounters are growing at the expense of brands, we all need to find ways of working profitably with Aldi and Lidl.

Similarly, our trade package comprising Product (brand performance) Prices and Terms, Presentation (how the offering is expressed) and Place (supply-demand chain and in-store logic) needs to be really tailored to individual customers, and demonstrably so. All excess will need to be trimmed back to release resources to augment inadequacies elsewhere, and not simply supplement margin.

Again, a cursory analysis of a customer’s latest annual report will indicate how our offering should be recast in order to show how it directly impacts and drives ROCE improvement. The fact that the buyer never mentions ROCE is not to say it is irrelevant, even in Post-Brexit times. In fact ROCE performance drives the entire business process. Those in doubt should reflect on the fate of companies that ignored this principle, even in the good times…!

2. Buying Mix Analysis – optimising competitive appeal

Our trade and consumer offerings are meaningless unless placed in a realistic market context of available alternatives, meaning related to other offerings to which retailers and consumers have access. Buying Mix Analysis can help

3. Driving Sales

Having identified degrees of competitive appeal above, a supplier is in a position to seek ways of driving sales. Again there are only four alternatives:

• Encouraging customers to sell more of our current lines via full availability, adequate facings, tailored promotions and optimising shopper marketing, better than the competition
• Selling our new products to current users, building on the trust established in our current products
• Attracting new shoppers of similar profile to our brand-consumers to the store and offering them our current brands
• ...and even selling our new brands to new traffic, who knows?

4. Cutting costs

While driving sales, knowing our competitive appeal and using customer/shopper need as the ultimate benchmark, we need to eliminate any redundant attributes of the offering, anything that is not actively contributing to customer and brand profitability. We thereby strip away anything that will not jeopardise the appeal of the offering, but will reduce cost…

In practice, this means reducing manufacturing, packaging and distribution costs by sourcing locally, lowering ATL expenditure to match actual consumer usage of media and redeploying where necessary. It also means communicating one-to-one with actual and potential users, and eliminating anything that is not fit for that purpose. In the same way, all trade terms and investment need to be related to expected performance via 100% compliance, with partners that adhere to the spirit rather than just the letter of the regulations, with trust as the essential ingredient…

5. Driving retailer ROCE

Using the output from 1-4 above, all moves should be incorporated into the retailer’s ROCE model, demonstrating how the brand is increasing net margin and improving capital rotation, taking overall ROCE from latest Annual Reports to where it needs to be (In spite of near zero interest rates, ROCE 15%, Net Margin 5%, Stockturn to 20 times/annum and Gearing 30% or below) without jeopardising the supplier’s own ROCE, in order to preserve their autonomy for both companies, better than the competition.

Post-Brexit survival will allow for nothing less…

First things first, post-Brexit?

Publicis - Walmart's New Primary Agency of Record

According to yesterday's NamNews, Walmart has entered into what is being described as a strategic partnership with Publicis Groupe that will give the retailer “unfettered access” to all of the holding company’s agencies and resources.

In practice this means Publicis becomes Walmart's Primary Agency of Record i.e. an advertising agency authorised by an advertiser to buy advertising space and/or time on its behalf.

More than that, it gives Walmart access to all agency resources, globally, in managing Walmart’s US advertising and in-store creative giving the retailer access to resources outside of marketing, including capabilities to support corporate reputation and technology that builds relationships with customers.

In other words, think state-of-art, uniform, co-ordinated, creative  management of all communication with customers..

Add whatever it takes in terms of deep-cut EDLP to regain and maintain market share, big time, and you have a new dynamic in the market..

Asda has to be part of this…

More here

Time for NAMs to conduct some what-ifs in exploring the impacts on their categories…?  .

Price-wars challenging ALL routes to consumer?

UEFA Euro Final, Paris, Sunday 10th July – urgent appeal from Wales…!

Amidst mounting anticipation re this evening’s match, a Welsh NamNews reader who had bought tickets to the UEFA Euro Final in Paris on Sunday 10th July, has contacted us.

The problem is that his bride-to-be, appreciating his passion for football, agreed to avoid possible Saturday clashes by settling for a Sunday wedding.

However, he completely forgot that Sunday 10th is his wedding day as he bought the tickets a few months before agreeing to the wedding date.

So he wants to know if anyone is interested in getting married......?

HT to AB

Smartphone shopper-tracking, a privacy-value trade-off?

Presumably, smartphone tracking in the High Street will yield more information than 'standard' security cameras, albeit some inevitable under-counting because of opt-out moves by privacy-sensitive shoppers and non-phone citizens...?

According to The Daily Mail, retailers so far signed up to take part include Pret a Manger, Aldi, Oxfam, Pizza Hut, Superdrug, Thorntons, Dixons Carphone, Patisserie Valerie, Jack Wills, Tortilla, The Entertainer, Eurochange, Itsu, and Ed’s Easy Diner, via 1,000 sensors that will be placed in 81 towns and cities.

The issue for all stakeholders will be the nature of the additional insights harvested - other than names - via wifi linkage, and the use in terms of consumer benefits...

In other words, to escape labelling as 'another 'Big Brother' move, it is important that changes are made in shopper service levels are demonstrably related to the information gathered.

The question is whether the risk of negative reaction by post-Brexit savvy consumers and their representatives, is worth the trouble...

If you thought the Savvy Consumer was demanding in 2010, wait 'til Brexit kicks in...

Brexit for NAMs - Where Now?

In what will be seen to be one of the most fundamental and far-reaching developments affecting how we conduct the NAM Job, Brexit is sending a signal that the savvy consumer has added politics and trust to what defines being a stakeholder in today’s markets, bringing with it the realisation that politics is too important to be delegated  to the politicians.

...and we are all savvy consumers under the skin...

Business is still about reward for risk, fair share dealings, and above all, a need to build and maintain a consumer's trust that the contents will always exceed the description on the tin...

In this inevitable period of uncertainty, we need to revert to basic principles that in some cases can seem like cliches:

• If the numbers don't add up, they probably don't
• If I don't understand my business idea, what can I expect from a distracted buyer?
• If I cannot make the product for less than the consumer is prepared to pay, why bother?
• Continuous Satisfaction of consumer need has to be a fundamental driver, with trust an integral part of the equation...

Brexit, albeit a monumental leap in the dark, means the following:

•  A fall in the value of the pound, meaning that exports will be cheaper, i.e. If your company is UK owned, there will be a positive impact, an advantage vs. imported competitors
• However, brands that rely on imported ingredients will incur higher costs
• Given the inevitable period of uncertainty, many major investment decisions will be put on hold, at least while the numbers are re-run...
• Companies that set up in the UK to ensure 'easy' access to the EU will probably place relocation at the top of the agenda, although it is likely that a new UK government line-up will introduce lower corporation taxes by way of being an offer that few can refuse...
• Above all, running the numbers will become a way of life i.e. The ability to calculate real cost and demonstrate value to the buyer will become increasingly important amidst the uncertainty...
• A NAM's ability to calculate and factor in the risk associated will all business decisions will become a way of life... (even the ability to label ourselves, our company and the customer as risk-averse, risk-neutral or risk-seeking, and acting accordingly, will help...)

Given a reasonably open mind, Brexit will restore our faith in our common sense, and the use of that common sense as a criterion for making decisions.

In these unprecedented times, we the suppliers, retailers and consumers need to work together, using trust as our most valuable resource, keeping to the spirit rather than just the letter of the law or regulation, always aiming to deliver more than it says on the tin, recognising that opportunity lies available now for those that attempt to move forward using basic principles of acceptable reward for risk in business, while others await a return to normal…

Above all, using a slogan that worked well in other times, NAMs need to keep calm and carry on….

Maslow reality check....?

HT to Morten Overbye

When Big Sister knows better.....

What the future of the petrol station looks like

Given the fact that, according to The Economist, although combined petrol and diesel consumption has grown by over 75% since 1970, the number of petrol stations has fallen by nearly 80%, with oil companies first replacing independent operators, in turn oil firms were undercut by supermarkets, which sold petrol at near cost to attract shoppers to their out-of-town sites.

Now that consumers are shopping faster, smaller, closer and more often, another threat looms, in that shoppers are less willing to shop out of town...  These changes probably account for the fact that the petrol stations that remain are selling twice as much fuel.

However, the problem remains for forecourt owners of how to maximise revenue streams from forecourts.

And therein lies the opportunity for NAMs...

Selling more to existing users:  
Apart from the obvious fuel, including super-charging of electric cars, and motor requisites and services, 'feeding' the driver comes second, with goods and services for passengers next.

Then comes food-to-go and top-up shopping for drivers and foot-traffic, as required. And not forgetting Amazonian facilities like click & collect, where appropriate.

In fact, according to The Telegraph, Shell are part of a joint venture with Daimler and others to commercialise hydrogen gas for powering hydrogen fuel cell vehicles, and have spent “quite a bit of money” since 2012 revamping 400 of its UK petrol stations – making them larger, adding parking spaces, installing DHL pick-up points – with plans to upgrade 50 more this year.

The company has two sites in Bangkok that sell only V-Power, Shell’s highest quality fuel, alongside a luxury cafe. Each customer gets two attendants – one to serve them and one to service their car. In Luxembourg, Shell operates the world’s largest petrol station, servicing up to 25,000 customers per day (Details and pics on The Telegraph site).

In other words, all possible ways of meeting all possible needs, to optimise the space...

However, one key limitation has been the flat-site heritage where the original (lateral?) thinking - in an era of plenty of low-rent space - decreed that petrol stations had to be single storey, drive-in/out locations.

What is now required is the application of some vertical thinking, in terms of a re-modelling of the site in terms of underground car-parks, and multi-storey buildings, thus allowing the unit to become a multi-service pod that really serves the local market...

So some short term, medium and long term opportunities for creative NAMs...that can combine the best bits of lateral and vertical thinking, without missing a beat...

Head Of Walmart China Taking Over at Asda

This morning's surprise news that Sean Clarke has been appointed CEO from 11 July, indicates a probable change in stance for Asda in its dealings with suppliers:

*   Sean started his retail career in 2001 with Asda where he served as Commercial Finance Director. He then served as Chief Financial Officer in Japan and Germany before moving to Walmart Canada, where he also worked in a CFO role
*   …any doubts about the importance of financed-based argument to the new CEO?
*   …and the rest of the team…?

Sales per Sq Ft as a Primary Retail Indicator?

Given that rental levels and Business Rates are based on sales area, and with retail rents in prime spots in London’s Oxford Street reaching £1,000/sq ft/annum – equal to best-in-class grocery sales/sq ft/annum – it could be said that selling intensity i.e. sales/sq ft/annum is a pretty good indicator of retail effectiveness…

In other words, in the case of Oxford Street, a store achieving sales of £1,000/sq ft/annum is using all of its sales revenue to pay the rent, leaving costs of business rates of say £300+/sq ft/annum, cost of goods say 75% of net sales, overheads and store maintenance etc to be met from other parts of the business..

Incidentally, on a macro level, sales/sq ft/annum, can also steer a balance between investment in Bricks&Mortar and online – where space is infinite, and ‘free’ – helping to temper corporate  online enthusiasm as one begins to realise that fulfilment costs make online less profitable than well-run B&M…

Given that online space is infinite and ‘free’, a retailer contemplating switching resource to online development needs to have one foot firmly anchored to its Bricks & Mortar base, with its costs, in order to constantly re-evaluate the opportunity costs of developing its online channel vs traditional retail.

By the same token, Amazon’s decision to take the ‘retro-step’ of opening B&M bookshops can be seen to be state-of-art in that, using online sales results as a basis for B&M assortment, allows them to stock the most–demanded 4,000 titles – in 10% of the space a traditional bookshop needs in order to carry a minimum assortment of 40,000+ titles…

In terms of personalising the shopping experience here on earth, as shopper perception of shop-floor assistance can be based on staff numbers/sq ft,, minimum wage legislation can make adding people to the aisle an increasing burden. However, if a retailer hopes to go even further in terms of being different to online – using real people – by employing demonstrators and sales assistants, it is imperative not only that a non-pressured balance be arrived at in terms of salary and commission, but also that the combined costs of these expensive resources be calibrated against square footage…see GMROS and GMROL in KamTips.

Having calculated the sales and sales costs per sq ft for the whole organisation, it is then possible to examine different components of the business in terms of their relative contribution to overall performance.

For instance, a store by store comparison of sales/sq ft/annum will indicate which outlets are merely ‘showing off’, while others do the real work…

Seriously, it is obviously important to have show-room outlets in key parts of the country as  physical anchors for the online business, but if these outlets generate lower than average sales/sq ft, they become a drain on the business, besides starving other outlets of necessary upkeep and maintenance.

Think about it, the greater the difference between a flagship outlet and a ‘worker-store’ the more confusing for the shopper, besides raising the problem of which version to feature in the advertising, with a local real-life store visit possibly contradicting shopper expectations generated via national media…

Moving from store by store to in-store department by department comparison, adds more insight, making category comparisons a no-brainer in terms of determining a balance of resource and investment.

In fact, using this approach of developing a basis for measuring the sales/sq ft of the entire organisation, and then tracking the contribution beyond category to every SKU, on & offline to that overall performance becomes possible, even essential…

Having done so, tracking supplier Trade investment by sq ft performance allows a retailer to rank individual brands/categories and suppliers, whilst Gross Margin by the same measure shows relative contribution by SKU, eventually justifying the calculation of net profit/sq ft.

In fact, with GMROII barely out of the closet following 15 years of ‘digestation’, it is perhaps time to explore the possibility of the next phase of the process, Net Margin Return On Inventory Investment, providing even deeper insight into the retail value of brands.

Finally, if suppliers se major customers moving towards everyday use of these measures, it follows that incorporating a similar approach to assessing brand contribution per sq ft/annum, has to provide a joint-basis for possible synergies…

All else is detail… 

Muhammad Ali R.I.P. - A Personal Memory

Saturday morning's sad news of the death of Muhammad Ali, calls to mind my personal encounter with this great man, on his first product-endorsement tour of the UK.

Back in 1971, Ali agreed to work for a week promoting Ovaltine (his first product endorsement) 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, an exhibition dedicated to the great man opened in March 2016 at the O2, and because of illness, Muhammed Ali was not able to attend the opening session, but he sent a mock-epilogue to commemorate the event, which can now serve as a memorial I believe he would have wanted:

'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!'

Muhammad Ali R.I.P. - Saturday 4th June 2016

Mercs & Perks, a basis for customer segmentation?

Shortly after The Wall came down in Berlin, we worked with a client in Russia, helping to raise the bar in retailing by investing in development of wholesale and retail standards as a basis for optimising emerging routes to consumer.

Given limited resources, we needed a way of selecting customers that would be most receptive to - at that time - state of art retailing techniques. In other words, we needed to distinguish between those retailers/wholesalers that had the right attitude in terms of growing their business but lacked the knowledge and skills, and those that were simply in it for the Mercs & Perks.

This meant we could focus on helping KAMs to develop customers’ skills in key aspects of retailing aiming at improving ROI, basket-size, sales/sq. ft., net margin, stockturn and shrinkage.

This made the customer more demanding of the right things, but even tougher for the competition...

Time for a really fundamental approach to customer evaluation?

Early morning avoidance of the Sainsbury's fridge-camera?

                                                                                                                                     pic: Brian Moore
More: 

Deep hair-conditioner - a lesson in brand dedication...?

Back in my marketing days in haircare, Peter, our hands-on sales director, always insisted on trying new product formulations personally, before signing off a brand for launch.

For those not yet into deep conditioning of the hair, the best treatment is a viscous waxy-like substance that needs to be liberally applied after a shampoo, and left in place for a couple of hours, ideally in warm steamy conditions.

Late one evening, having forgotten that he was due to report on the new formulation the next day, he hurriedly showered, shampooed and applied liberal quantities of deep conditioner before climbing into his pyjamas. Given that steam rooms were not a typical feature of even sales directors' homes at the time, Peter improvised by taking a Tesco plastic bag, wrapping it around his head and securing it firmly in place to accelerate the conditioning process.

By eleven he was settled by the fireside when his wife announced that having rained heavily all evening, the build-up of leaves on the flat roof of the garage had blocked the drain, causing floodwater to penetrate the upper floor. Peter hurriedly put on a raincoat over his pyjamas, donned his green wellies, grabbed a torch and climbed out onto the roof with a yard-brush, and began to rod the drain.

Not long after, a police car, silent and with blue light in off-mode, arrived in response to a report of an intruder by a concerned neighbour....

Peter's wife tried to explain, but the police decided that a personal account from Peter was necessary.

Eventually, having cleared the drain, Peter climbed back in the window onto the upper landing to be confronted by two bemused members of the local constabulary...

The next day, new product formulation sign-offs at Wella were henceforth delegated to the marketing department...

Time to take it for granted that not everyone can be taken for granted?

The Entertainer triples email revenues

One of the UK’s most innovative toy retailers, The Entertainer is using The Message Cloud to power smarter emails tailored for specific personas in their existing database, according to Direct Commerce Magazine.  The results, showing a 3x increase in email revenue and 120% lift in mobile sales are worth further analysis, via a tool that can be especially useful in categories where a parent buys on behalf of a child.

The real benefit is in moving from blanket e-mailing - alienation - then refining and converting your existing consumer email data to a 1:1, non-intrusive, more productive dialogue via your existing contact details. Then, having refined the method, a move to a pro-active gathering of additional email details has to provide a basis for further growth…

Time to check out the possibilities re what you already know...?

wow = WOW! when you realise just 25% of Amazon sales are in Books & Media...

                                                                                                Pic: Pacific Crest via Business Insider

Latest US figures show that e-commerce is still only a tiny part of the overall retail industry, representing a mere 7.2% penetration rate.

However, when you begin to overlay Amazon performance, the threat to other retailers is obvious, as they play catch-up in category after category in the biggest trading opportunity ever...

Are you sure you are doing enough to anticipate the obvious?

Geographical density: You realise they are No.1 when Amazon-man delivers your parcel along with one for next-door...

BHS Attracts ‘Multiple Offers’ As Deadline Closes

News of five potential bids raises a number of issues for BHS suppliers:

• Having parked the pension deficit, a new owner will need to assess the profitability of every outlet, and sell off those that are a drain on the business, before exploring the viability and potential of the current business model
• (There may be buyers among the secondary bidders seeking sites that are complementary to their current locations)
• Previous suppliers to BHS need to check out possible prices & terms disparities re their relationships with the new owners...
• …but deep down, the real issue will be the extent to which the brand has been damaged – terminally? - by the surrounding controversy…

More brands on Aldi’s shelves?

How about Nestlé, P&G and Unilever for starters?

Given the rate of growth of the discounters, primarily at the expense of brands, it was inevitable that major suppliers would begin to find ways of working with Aldi and Lidl in order to compensate for the sluggish growth of traditional retailers...

In fact, a new report by Miloš Ryba at the IGD, gives details of branded manufacturers such as Nestlé, P&G and Unilevers' increasing willingness to list their products on discounters’ shelves in Aldi Germany over the past 12 months.

Nestlé currently offers Nesquik, Smarties and Wagner-Pizza, while P&G lists Blend-a-med, Lenor, Pampers, Ariel, Always and most recently Head & Shoulders in Aldi...

Just last week, Unilever, joined them with listings of Knorr, Langnese-Magnum and Duschdas...

More details in Miloš' article, but the key message for all branded suppliers has to be the need to reassess trade and channel strategies in order to define a non-compromising role for their brands in outlets that will otherwise continue to grow at the expense of brands...

And if the big guys are managing the transition, it must be possible for others...

Morrisons second quarter of sales growth, a baseline for NAMs?

Today’s news of steady progression establishes a minimum standard for Morrisons’ NAMs in making their financial case for a fair share deal for both parties.

In other words, unless your brand has grown by at least 0.7%, you won’t justify an interview.

However, the more your growth exceeds Morrisons average, the greater your appeal…

The key build on this position is to measure and compare Morrisons main financial ratios with your conservative estimate of your brand’s performance to show point-for-point how you are adding to the retailer’s comeback performance…

In other words, until Morrisons reveal more detail, work with the latest annual report and calculate their Net Margin, rotation, credit period, sales/sq ft and rate of growth, and then compare with your best estimate of your brand’s performance within the retailer.

For instance, you are already growing faster, like-or-like, so you have the buyer’s attention...

Next assess bottom line impact, your real contributor...

Typically, most mults, operate on an average 25% gross margin, will receive up to 20% of purchases in Trade Investment, average 43 days credit, turn their stock 25.6 times/annum and sell approx £900/sq. ft./annum.

Net Margin
Say Morrisons Gross Margin on your brand is 30%, with typical shrinkage (2%) and Store costs & Handling (15%), Overheads of 5%, you are contributing 8% to their bottom line…minimum.

If their GM on your brand is less than 25%, tip in your trade investment…

Trade credit
If you are giving more than 43 days credit, you are adding the additional cost savings to their bottom line.

Stockturn
If you are delivering your main SKU on a weekly basis, this looks like a stockturn of 50 times a year.

Sales/sq. ft./annum
Calculate your brands foot-print performance in Morrisons (number of facings x back-of-facings stock x SKU footprint x number of stores stocked) to give your selling area, and divide it into your annual sales to Morrisons to provide your sales/sq. ft., vs Morrisons average…

The above calculations will give you a conservative estimate of your positive impact on Morrisons performance…and hopefully a basis for indepth discussion on leveraging your brand's performance and optimising your trade investment in the aisle...

Where are Aldi & Lidl headed, profitwise?

Thinking back to the relative simplicity of the 800 SKU model, based primarily on surrogate label with a handful of anchor brands, coupled with low staffing levels and small outlets, it was relatively easy to beat the multiples on price and yet make adequate profits.

At that time, it was cost-effective to approach the multiples’ suppliers of private label, and piggy-back on key lines, without picking up origination and compliance costs.

However, now that the discounters are extending their ranges via more creative product introductions, it follows that they will need more expertise in terms of more support staff in R&D, Tech, QC, apart from picking up the burden of the usual ‘9 out of 10’ failure rate…

Furthermore, as they continue to grow share, consumer media will highlight any product defects, thus triggering the ‘tell a friend’ mechanism – 'if I like it, I tell one friend, disappoint me and I tell 10 friends…'

All adding further to the compliance overhead.

Given the fact that the mults continue to keep pressure on shelf prices, it follows that the discounters’ additional costs will dilute bottom line performance. Perhaps this will become an opportunity for an entrepreneur to re-discover the original 'hard discount' formula, and launch a competitor to Aldi & Lidl?

Leaving us all to ponder on where the legal responsibility for damage to consumers can be laid: retailer or O/L manufacturer?

Welcome to the high-cost world of ‘normal’ retail…

A wonky-chicken solution to excess drumstick demand?

Online clothing service for those that hate 'going shopping'...

Business Insider details a new online service that appears to eliminate one of the bugbears of a busy single-tasking (i.e. male) NAM's life - going shopping...

The Chapar, founded in 2012, is an online clothing-concierge service that offers its members "trunks" of curated items - including shirts, shoes, and knitwear - tailored to their taste and delivered next-day direct to their door.

Based on a combination of a short questionnaire, and phone consultation, a personal stylist sends a trunk of 12 items, of which 8 are usually returned...

For those who cannot wait, more details available on the Business Insider site...

A new way of shopping, but the issue for branded suppliers/retailers is how to factor a 66% return rate into an online business model...

Digital private label - your new competitor from Amazon

How its best-selling brands are driving AmazonBasics...

Bloomberg reports that the e-tailer is gleaning insights from it’s Amazonian product portfolio to produce own label equivalents of its best-sellers at up to 50% off.

It's AmazonBasics private label offering now includes more than 3,000 products based on their best-selling branded lines - from women’s blouses and men’s khakis to fire pits and camera tripods, all perfectly tailored to consumer demand.

Shoppers increasingly start on Amazon.com to search for products, bypassing Google and traditional chains’ websites.

So not only can Amazon track what shoppers are buying; it can also tell what merchandise they’re searching for but can’t find, allowing them to spec ideal products for their AmazonBasics offering.

The important issues for FMCG NAMs have to be how soon their turn will come, and what to do about it.

• Amazon are obviously working down a ‘best-selling’ league table, cherry-picking based on a combination of their sales and consumer searches
• They also have the luxury of trying single products, and discontinuing where necessary
• Suppliers would be unwise to miss any selling opportunities by refusing to supply Amazon
• Key for brand owners is to make their entire offering, access and fulfilment so attractive that they optimise direct purchase, without losing any potential via the Amazon route
• The difficult part has to be optimising your own data to bond with your consumer-shopper base, using Amazon as a standard…   

BHS - A Pound Shop Fails when the numbers don't add up...

Following its sale last year by Philip Green for £1, BHS – with debts of more than £1.3bn, including a pension fund deficit of £571m – had limited options… Rents on top 77 stores unchanged, rents reduced to 'market levels' on next 47 stores and 10 months trial for the 40 least profitable outlets, all to no avail....
A detailed timeline is available on the BBC site 

The key issue for NAMs is the extent of knock-on impact on other retailers that are battling under similar pressures...

In other words, time to check out the latest financials of your customer, and anticipate the inevitable, while your competitors dismiss the BHS issue as ‘another trade sector, nothing to do with us…’

Taking NOTHING for granted, when every sale counts...

The supermarket war heats up the multiples' approach to media, too

Whilst the multiples’ reductions in media spend could mean everything is going into price, in practice significant monies are still being invested in driving us to our favourite store…

Essentially, Media Week reports that during the recession of 2008-2009, traditional grocers were among the best advertisers as consumers continued to buy food while cutting back elsewhere. But that has changed in that Asda, Tesco and Morrisons have collectively cut spend on press, TV, outdoor, radio and cinema by nearly £100m, or about a third, since 2011, according to Nielsen – although some of that has gone into online.

Meanwhile, Sainsbury’s doing better financially, increased its spend by 2% to £59m (More details in the Media Week article)

All of this highlights the fact that the mults are competing with one another on price for a diminishing share of the action, and need to do so via differentiation - own label - and increasingly instore via the shopping experience.

This has to represent opportunities for suppliers that are capable of, and prepared to service regional and even store-based assortments, tailored to local need, and optimised via tailored shopper-marketing initiatives…

Finally, the main causes of it all, those ‘downmarket, common, limited-choice upstarts’ Aldi boosted ad expenditure by 160% to £69m from £26m and Lidl by 275% to £83m from £22m.

A message for your marketing colleagues?
Given that any growth is being driven by Multiples own label and Discounters’ surrogate brands, it is vital that your marketing colleagues increase brand alignment with retail offer-communication, while you find non-compromising ways into Aldi and Lidl…

KAMClinic Q22: Buyer wants to put us ‘on consignment’

Q22: Brian, a quickie: Buyer wants to put us ‘on consignment’ i.e. we invoice on sales out (Ian, St Albans 4th Feb 2016)

A:  Thanks Ian,
‘On consignment’ always seems like increased collaboration, but strictly speaking, unless you build in some conditions, it can end up diluting your account P&L.

As you know, most retailers have shrink levels of approx. 2%, meaning that for every 100 cases you deliver, 98 actually goes through the checkout. This means that by agreeing to invoice based on sales out, you are absorbing the shrinkage issue (and cost!).

If the buyer is acting in good faith, your condition that checkout sales be restored to 100% (volume sales out/98 x 100) for invoicing, should be accepted. If not, then not…

Hope this helps.
Brian

P.S. Despite your having to refuse ‘on consignment’ your buyer may be simply wanting more money.
Best to continue with ‘obviously we cannot agree to unconditional on consignment invoicing, but we may have other ways of increasing our trade investment, depending on getting equivalent value in return... Now what type of money are we talking about?’

Disclaimer: 

Your Query?

For a KAMClinic reply, simply email me ( bmoore@namnews.com ) giving as much detail you are comfortable with... 

Auto-storecheck: Supermarket robot creates product maps as it takes stock

Pic: 4D Retail Technology Corp via Gismag        

A great article in Gizmag tells of the development of the stock-taking, store-mapping 4D Space Genius robot by Toronto's 4D Retail Technology Corp.

In less than an hour, the self-guiding Segway-based Space Genius can reportedly move along every aisle of a 40,000 sq. ft. supermarket or other large store, scanning all of the products and barcodes on display in HD and 3D. In the process, it produces a 3D map of the store, showing SKUs, OOS, pricing & placement anomalies.

(The Gizmag article gives more detail, including links to a Tally Robot).

Apart from the obvious advantages for mults and consumer-shoppers, NAMs - via an app - can conduct indepth storechecks 'from the comfort of their own homes'..., but we all know that nothing beats mingling with the aisle-travellers, live...

Meanwhile, spare a thought for what the Space Genius could do for instore compliance...

Buy Now, Pay Less Later

An article in this week’s Sunday Times details an unusual price promotion in a German Furniture chain: Who’s Perfect, which could provide UK NAMs with a way of understanding some of the consequences of Negative Interest Rates.

Essentially, its Frankfurt store offers a white Halma corner sofa – the company’s bestseller – for €2,700, buying and paying now at full price, or have a 1% discount if paid after two years… 

This is because the store gets charged negative interest rates on its bank deposits, so it is preferable to leave the cash with customers for two years at a cost of 0.5% per annum…!

Logical to a point, but the promotion ignores the risk-factor involved with credit extension.

For example, can you imagine if, after all these years of begging, or even paying for earlier payment, you were to offer your buyer a discount for taking even longer to pay, at increasing risk to you, in these Imperfect times…?

Tailoring your brand portfolio to new retail realities...

As the multiples struggle to adjust to the consumer's shift to smaller, cheaper, faster, closer, more convenient and online shopping by selling surplus outlets and trying to manage lower productivity caused by redundant space in their estates by culling SKUs, the consequences for brands are hopefully obvious.

In other words, with less shelf space available, only strong brands can maintain their facings, unless you can prove otherwise....

Moreover, brands are further threatened by the fact that much of the multiples' growth is via private label (if in any doubt, why not dig into your in-house Kantar data?), and discounters' via surrogate labels.., all adding to the need for new retail strategies..

In the face of these 'permanent' market changes, it follows that branded suppliers need to re-set what may be a pre-2008 approach by re-evaluating the relative appeal of their brand portfolios to suit current retail realities.

Essentially, this means fundamentally re-assessing consumer appeal, by brand, by retailer, vs. available competition to ensure each SKU of each brand has a defensible rationale to justify its on-shelf presence in each of the multiples.

In practice, this will mean you will have a different brand portfolio for each of the multiples, with possible regional variations to match local need.

Finally, any of your brands that do not meet these criteria should be diverted to other channels, before the multiples do it on your behalf...  

Making every trip count...

Demonstrating your impact on Tesco averages

How your brand drives Tesco performance in latest figures

Latest results indicate that:

1. Tesco Group sales £54.4bn vs. Inventories of £2.4bn suggest a stockturn of 22.6 times/annum

Given your twice weekly delivery, and assuming smooth sell-through, has to suggest your SKUs are turning 100 times /annum, thereby driving Tesco stockturn...!

2. Tesco UK sales of £37.2bn vs. UK sales area of 41.5m sq. ft. showing selling intensity of £900/sq. ft./annum 

Calculating your SKU footprint (Average number of facings x number of units of facings backup on shelf x numbers of stores stocking) and then dividing the result into Tesco sales of your SKU per annum, has to show that your SKU is generating sales per sq ft of at least 2x Tesco average...

Just two ways of demonstrating your value in negotiation...

Tesco's latest result: the stand-out numbers for NAMs

Tesco’s return to profitability means that proactive NAMs can now incorporate latest operating profit into their discussions with buyers.

With UK sales of £37.2bn and operating profit of £505m, this means that Tesco is generating 1.4% operating profit on sales.

This can help in demonstrating the value of your trade investment, in that every £10k you give Tesco is equivalent to £714k in sales i.e. £37.2/1.4 x 100

This has to help for starters, while we await the full detail of the latest annual report...

A 3-in-1 Solution? (Redundant-space, Deterrence, Theatre)

Is delivery the new black? Three trends are changing the distribution landscape

A great article in realbusiness by Tim Robinson describes the changing image of logistics and fulfilment becoming the sexy end of retail.

The seemingly unstoppable growth of online shopping has put the spotlight on fulfilment and delivery in particular. Delivery options are now promoted in prime media space, a situation which would have been unheard of 10 years ago.

The article goes on to detail new ways of meeting consumer need fulfilment in terms of matching ease of purchase with ease of access to products. Read here for Tim’s update on technology, environment and the sharing economy.

The key point for NAMs is to see this raising of the fulfilment game in the same way that savvy consumerism spread back up the pipeline, making the buyer more savvy, demanding demonstrable value for money, or else…

In other words, as retailers struggle to meet the rising standards of home delivery, so these standards will spread up the supply chain and become the norm in supplier-retailer delivery..

If in any doubt, why not nip down to the despatch department and find out what your logistics colleagues think?

Lidl - the real threat?

This week, why not visit your nearest Lidl and think about the threat to the major mults? Even better, follow it with a call on a nearby Tesco to heighten the contrast…

See how long it takes for you to appreciate that the hard discounters becoming more like supermarkets is not the issue... Of course they will add to their offering, especially to cater for upmarket clients…

But suppose their real impact is in making the consumer-shopper value a simpler, more limited choice, and in the process convincing us that we cannot perceive – and don’t always need – the ‘extras’ provided by equivalent brands at 30% more…

Causing us to ponder whether we are changing the discounters, or they are changing us?

Now that’s the type of competition the mults – and their branded suppliers - don’t need…

Waitrose raises the Private Label bar - a threat for all brands?

News that Waitrose is rolling out 'Waitrose 1' premium label across 500 food products, replacing some premium ranges but adding ‘new and improved lines’ raises some issues for suppliers:

• Given that Waitrose tops the league table for best place to buy private label (Which? report 2015, 47% of products tested achieved best-buy status) this represents an extra emphasis on premium own label
• Bearing in mind that Aldi came 2nd, Sainsbury’s 3rd and Lidl fourth in the same survey, it is likely that other mults may take the Waitrose move as an incentive to upgrade their private label offerings
• With all mults in the same large-space, out-of-town boat, their growth will be at the expense of other mults...
• Price-cutting on brands has not worked and has impacted bottom lines...
• ...and private label remains the only real differentiator for the mults
• This could mean we are entering a new type of food-based private label quality-war, which if it works, could spread to other categories

Dyson preparing to hoover up the re-chargeable battery market?

News that Dyson will spend £1bn – plus a UK grant of £16m in last week’s budget - on battery development over the next five years has to serve as a warning that this innovative disruptor is on the move again…

Following a 2015 acquisition of Satki3, a U.S. maker of solid-state lithium-ion batteries for $90m, having previously invested $15m in the Michigan firm, Dyson is ready to invest in the firm’s discovery that it has found a way to produce batteries with twice the energy storage potential of standard lithium-ion models, at a half to a third of the cost.

A step too far?
I still blush when I recall a very early competitive brainstorming session conducted for a defunct supplier where we concluded that whilst a see-through vacuum cleaner model might appeal ‘in the shop’, the first-use viewing of gathered dust would soon alienate most consumers…Dyson obviously knew better...

• While the immediate application for new batteries would probably be in Dyson’s existing cordless products, they have potential uses in everything from electric cars to tablet computers
• In other words, imagine the disruptive appeal of twice the energy storage potential of standard lithium-ion models, at a half to a third of the cost...

Tesco Takes On Discounters With Seven New Value Own Label Ranges, So?

                                                                                                                                pic: Marketing Week

News that Tesco stepped up its fight against the discounters yesterday by launching a host of new value-orientated own label ranges in the fresh produce and meat categories raises some questions:

• What are the chances of Tesco value-labels possibly being perceived as 'cheap' versions of the Tesco brand, a downward stretch, whilst discounter surrogate labels look equivalent to brands in quality, an upward stretch?
• Same quality, same price, different perception...?
• ...and the ultimate question being: Which customer is more likely to say “Wow”?