A Unique Day-out Treat For Your Buyer?

M25 Orbital Coach Tour

Think of it, a 4 hour (minimum) captive audience, you and your buyer, with little or no outside distractions as you explain category dynamics and share a packed lunch in recognition of current austerities.

The day is designed for lovers of modern coach travel by Brighton & Hove Coaches in an attempt to provide a “flight of fancy” around the London Orbital.  The coach direction will be decided on the day by the drivers and will stop to take refreshment at the services, perhaps even at Cobham to coincide with the opening of the new Cobham Services.  An entertaining commentary by the co-driver will accompany the journey covering interesting facts about the motorway’s evolution.  Passengers are invited to crowdsource by guestimating to the nearest mile the distance the coach will travel around the route, with a bottle of Champagne as a prize for the closest.

The planned date was 11 October 2012, but because of demand, another date, 22nd March, has now been added.

Book up now to avoid disappointment

New CEO Carrefour, hypermarket fix instead of breakup?

Carrefour has picked a retail veteran  with a solid track record in company restructuring, Georges Plassat as its next boss.

Plassat spent 14 years at French retailer Casino and two years at Carrefour Spain before joining Vivarte, a retail fashion chain in 2000. He also holds a stake of about 10 percent in Vivarte.

Global No2 Carrefour has been struggling for years, partly due to its reliance on hypermarkets, which have been losing out as time-pressed shoppers buy more goods locally and online, and prefer to purchase general merchandise from specialist stores.

Squashing speculation of possible breakup and sell-off of global businesses, Plassat may pursue an alternative strategy for the hypermarkets, like downsizing them, slashing prices to lure back cash-strapped shoppers who think that Carrefour products are too expensive and investing more in e-commerce

However, some think Plassat faces an uphill struggle and giant stores are out of touch in a world where you need to give shoppers a good reason to make that out of town trip.

The new move will be watched carefully by suppliers and competitors alike, not least of which Tesco, as it reconsiders the long term value of its superstores....

Crowdsourcing: tapping the collective want…

Following the impact of our NamNews item: Nestle checking views on Kit Kat flavours (1,265 hits in two days), we felt it might be useful to point you at some useful sources of potential applications

Definitions: Essentially, crowdsourcing is a technique whereby the long tail plays an important part i.e. each member of the crowd submits an insignificant contribution to the total outcome, but the total of these contributions amounts to a considerable difference. (More on definitions)

How it started: The Social Path tells the story of a 1906 country fair at which attendees were invited to guess the weight of a large ox. Hoping for a cash prize, about 800 people made guesses, though no one got it right.

Afterwards, a statistician analysed the written guesses and discovered something shocking: the average of all the guesses was a mere one pound away from the exact weight of the ox. The site also gives some great examples with spooky implications…

Examples: For a comprehensive coverage of examples see Anjali Ramachandran on the following

1. Individual businesses or sites that channel the power of online crowds

2. Brand-sponsored initiatives or forums that depend on crowdsourcing. I've included those that are no longer active as well, for reference.

3. Brand initiatives that allow users to customise their products

4. Brand-sponsored competitions/challenges focussed on crowdsourcing

Curiously, much of the good source material is two years old…an indicator that given its success, perhaps companies are paradoxically now keeping crowdsourcing to themselves?

Have a crowded weekend, from the NamNews Team!

High Street survival and leases

For many years, UK and Irish retail property markets have been compromised by the existence of 25 year upward-only leases with no break clauses. This has ensured that institutional landlords like banks have been able to put the leases on their balance sheets as assets with a guaranteed income stream. In fact commercial property is valued not on its sale price, but rather as a multiple of annual rental*.

This explains why bank-landlords cannot renegotiate rentals, in that to acknowledge a lower yield means lowering the value of the asset in the balance sheet, leading to a need for re-capitalisation…God forbid,,,

Because of the global financial crisis, a two-tiermarket has emerged for high street leases depending on whether they have an upwards-only reviews or not.

For retailers the new leases mean there is a stronger focus on the unit, the pitch, the covenant and the lease terms. In other words, a more realistic, commercial approach to risk-sharing by the landlord.

There is a commercial logic to aligning the interests of the landlord and the tenant to ensure both maximise the performance of their capital. But it requires a more forensic approach to retail development in the future, with developers/investors, governments and banks taking a greater, long-term interest in how a retailer will trade.

Until then high street retail will continue on a downward spiral, as most of the action moves to the suburbs and retail parks…


* Deep down the same logic applies to domestic housing. In most countries outside the UK & Ireland, houses are regarded as places where people live, and are not seen as investments. In other words a house is valued at approximately 20 times its annual rental…a yield of 5%. This may explain the periodic housing bubbles that occur when consumers lose track of what their houses are really worth...
Incidentally, why not sit down with a strong coffee and try the 20x multiple on your home…?

Will ‘behavioural pricing’ affect your behaviour?

'Behavioural pricing' tailors pricing to individual users - with special offers targeted to certain shoppers, but also taking into account information from social networks such as Facebook or Twitter

Online shops already have an unprecedented amount of information at their fingertips - from whether you've purchased from them before, to what sites you've visited before you arrive at their shop, accessible via browsing history.

If price is simply part of the total shopping experience then it is surely appropriate to match price to shopper need?

In the same way, regional pricing variations in the same retailer’s branches across the country, and even differing prices for the same product in different types of store such as convenience and superstore variants for that retailer, should not be a cause of concern.

Also, reports that Tesco plan to overhaul its stores to reflect location and income of families who shop there, has to be an attempt to improve the shopping eperience 

The real issue with behavioural pricing is potential abuse of the insight, an increasing risk for any retailer attempting to deceive the socially-networked savvy consumer.

Instead of attempting to resist the inevitability of behavioural pricing, suppliers should encourage this move towards more focused shopper-satisfaction by factoring the process into their consumer marketing and varying their trade marketing initiatives according to degree of congruence between consumer-profile of the brand and shopper profile of the retailer.

This will help suppliers to anticipate the evolution of location-based offerings in retailing.

In other words, accept the fact that national conformity and uniform brand positioning is now too blunt an instrument in today’s connected society. This means that patchwork regional brand launches, tailored completely to local tastes will allow a more cost-effective allocation of scarce resources, based upon real need, with pricing simply part of the package.

In fact why not consider the Coca Cola idea whereby a thermometer on the top of a vending machine varies the price of a can with change in temperature….

Peacocks' debt-structure doomed it to failure

According to the Telegraph, Peacocks was the subject of a highly leveraged buy-out in 2006, led by two hedge funds. The structure put in place relied heavily on not only senior debt, but also a tranche of mezzanine finance, and a series of expensive so-called payment in kind (PIK) notes in favour of the two main equity holders. The structure and variety of the borrowings was so complex that the administrator has so far been able to  say only that total borrowings stood at £750m at the point of administration last Wednesday.

With total borrowings of £750m, the company had more borrowings pound for pound than it did annual sales, which came in at £720m in the year to April 2010.

Given the current financial climate and cut-throat markets in which the retailer operates, even a Peacocks NAM with a modicum of financial nous* will have seen the writing on the wall years ago...and hopefully suspended supplies before Christmas?

*  Essentially, a company should operate within a gearing level of 30% i.e. borrowing should not exceed 30% of a company’s net assets. In time the Administrator’s report will reveal the Peacock’s gearing level along with the distribution of remaining funds, with suppliers coming end of the list…

Managing shopper expectations and missing the 'big picture'?

The latest breakthrough 'retro-movie', The Artist, is novel, very entertaining and illustrates perfectly the importance of not forgetting to get the context right as one is swept up in the excitement of producing something really different...
Reports are coming in of audiences in some cinemas demanding refunds because of the small square screen, its use of black & white, and the fact that  'it is silent!!'   Susie W
In other words, never underestimate the consumer's ability to miss the point...
                                                                                                   

Could Kodak's demise have been averted?

A fascinating article in today's Observer by John Naughton explores the possible causes of Kodak's difficulties, revealing that the company invented digital photography, the medium that supplanted film, in 1975. The article explores the issue in depth and includes several useful links.

However, for me the money-quote is in the final paragraph where Naughton quotes an extract from a lecture by Rebecca Henderson of MIT in which she imagined what a Kodak executive might have said to the developer of the first digital camera:

"I see. You're suggesting that we invest millions of dollars in a market that may or may not exist but that is certainly smaller than our existing market, to develop a product that customers may or may not want, using a business model that will almost certainly give us lower margins than our existing product lines. You're warning us that we'll run into serious organisational problems as we make this investment, and our current business is screaming for resources. Tell me again just why we should make this investment?"

Why indeed?

Coping with post-Christmas cash shortages…

Coping with post-Christmas cash shortages…

Shoplifting-to-order has emerged as a way of removing  some of the wasteful duplication and inefficiency of ‘grabbing what you can’ allowing more time for the planned-theft and increased pricing stability in the knock-off end of the market. Ranging from choice cuts of meat to full x-box packages, the fenced-offer can be tailored to most market segments and levels of need. It is even possible to access detailed instructions on skill development in all stages of the shoplifting process including preparation, shop-floor behaviour, blind-spots and other lifting techniques, leaving the store safely and even coping with being caught…

Time to drill into your sales-stats and factor shoplifting-to-order into your still buoyant sales in early 2012?

Have a soul-searching weekend, from the NamNews Team! 

Walmart launches video-contest for suppliers

Walmart has highlighted the internet’s potential to change the way companies source goods by inviting entrepreneurs to pitch their products in a video contest that will bypass the strict protocols of its buying department.

Called “Get On The Shelf”, the winning product will be sold at the retailer’s US stores and online after an internet vote, like TV shows such as American Idol, in which members of the public will be asked to choose the best pitch uploaded to a Walmart website.

Suppliers in any Walmart categories can create and submit videos of their latest products at www.GetOnTheShelf.com (See examples of current submissions here).

The public will then vote online for the top three winners at GetOnTheShelf.com. The three will be sold on walmart.com and the top winner will also automatically get shelf space in select Wal-Mart stores around the country.

Suppliers (US only) can submit their video pitches until Feb. 22. The first round of voting will happen between March 7 and April 4 to select 10 finalists.

Apart from the possibility of gaining a listing with the world’s biggest retailer, this initiative presents a terrific opportunity for suppliers to cover some of their production costs by gaining access to all the consumers that Walmart attracts to GetOnTheShelf.com.

The real issue is how soon Walmart will decide to adapt the technique to some of their routine sourcing (cost saving for suppliers, cost reduction, every little helps…Get it?)
Also if the initiative 'can make it there, it can make it anywhere' ...(apologies, Frank!)

Time to check out your video-pitching skills and upgrade the Skype connection?

Tesco, a rediscovery of good shopkeeping…?

Essentially, the future of Tesco lies in global retail, with profitable dominance of its home market a pre-requisite..

However, a market share of more than 25% of food becomes a political issue, attracting the normal criticisms of ‘abuse’ of power over suppliers, planning authorities and even the consumer in terms of real choice.

Achieving and potentially exceeding 31% in the UK had to present a problem for Tesco, despite attempts to generalise its offering via non-foods, thus allowing it to claim an ACV share of 12%, well short of the problematic 25% threshold….

Meanwhile, the rush for overseas growth caused them to miss some tricks in the UK.

‘Black Thursday’ was simply a massive correction, and a recognition that savvy shoppers want value instead of more choice i.e. via improved quality, range and service, in a flatline market environment, on the brink of another recession.

The issue of superstore overcapacity is an important side issue in that the growth of online non-food means less physical selling space is required, putting more pressure on selling intensity (sales per sq.ft.) of remaining SKUs. Given that it would be virtually impossible for other retailers to match Tesco’s space productivity via alternative use, then ‘spare’ superstore sites will be difficult to sell off. This means that these and underutilised stores will thus become a continuing drain on profits…

Unfortunately all of this this means Tesco and its suppliers will have to share the cost of £300-400m for the change, or risk wiping out this year’s profit growth for the No.1 retailer…

The way forward for UK NAMs is to assess degrees of congruence between brand consumer-profile and Tesco shopper-profile, map out Tesco’s appeal vs. other retailers from the consumer-shoppers’ point of view, and position their brands as ways for Tesco to improve quality, range and service, better than the opposition.

It hopefully goes without saying that calculating and demonstrating the financial value of the brand to the Tesco P&L in return for 100% compliance has to be pre-requisite for both parties in making this change, like never before…

ATM demand after Christmas?

Thieves have stolen money from a cash machine in Manchester after digging a 100ft tunnel underneath a video rental store in Fallowfield shopping precinct.

Obviously picking up tips from a Colditz DVD from a previous visit to the Blockbusters branch, they installed lighting and roof supports, and were also believed to have drilled tiny holes into the floor of the store through which they poked telescopic cameras to check their progress.

However, at an estimated 6 months dedicated to the project and an estimated £6k cash-haul, any Blockbuster NAM could have told them the potential ROI was not worth the effort...
A lesson for all NAMs attempting the impossible in financial darkness?

The future of Specialist retail?

Three decades ago, the rule of thumb in US retail was that there was room for three big players in each product category. “Good, better, and best,” as Walter Loeb, a veteran US retail consultant, recalls.

But today, it appears that each category has room for just one specialist chain, competing with Amazon, the world’s biggest online retailer by sales, and Walmart,

The issue for UK retail is how specialist retail will fare in categories such as electronics, alcohol, books and toys. The major multiples are growing at the expense of specialist retail, by focusing on these non-food categories, cherry-picking SKUs and reflecting scale economies via deep-cut prices, as retailers do…

Moreover, suppliers cannot afford, or be seen to give additional price support in different channels. Realistic customer profitability analysis will also prevent any other subsidising of specialist retailers by suppliers.

This has all been compounded by the emergence of the savvy consumer using smart phones and price-comparison sites

It follows that it is not possible for full-range specialists to compete and survive on this basis, however good their retailing abilities.

However, given that specialist retailers serve an important purpose of ‘explaining’ the category and ‘educating’ users, it is vital that they be treated differently by suppliers in terms of remuneration via performance-based-reward. In other words, a supplier should regard specialist retailers' activities as part of their advertising programme and reward them accordingly. Specialists can also benefit from help in providing category-specific instore entertainment, an enhancement of the shopping experience.

Otherwise, it is inevitable that even a 1-specialist chain, Tesco/Walmart and Amazon may be unsustainable in a flat-line market…

A home delivery service using local independent shops?

If you don't have time to visit the butcher, the baker and the fishmonger, someone else can do it for you

Growing fast, Hubbub was launched 12 months ago and now uses more than a dozen shops and six delivery vans (bright yellow ones – watch as they crop up everywhere soon). Currently it just serves an area of London which stretches from Kentish Town, via Islington and Hackney to the City, but the plan is to roll it out across the whole of the capital early this year and following that, the rest of the UK.

The clever bit about Hubbub is that if you log on in, say, north or west London, you will be only be served by the shops in your immediate vicinity, so you will be directly supporting your local businesses.

Scale issues remain but once they achieve critical mass, this has got to  be a winner, surely worthy of some support from suppliers and retailers..?

The Iron Lady - Lessons for NAMs in Thatcher remake?

Gordon Reece, a former television producer, has been widely credited with masterminding Mrs Thatcher’s change of image, advising her to adopt a softer hairstyle, get rid of her “fussy” clothes and stick to a high neckline and pastel shades. Crucially, he also advised her to lower the tone of her voice and speak more slowly and closer to the microphone to make her voice husky, intimate and, above all, less hectoring….

A team of well-known experts in their respective fields then focused on each aspect and helped to bring about the subtle changes that all boiled down to being herself, with emphasis..

Politics apart, in terms of learnings for your NAM role, by all means wear a ring in your nose, a pony-tail and goth-gear if that is your preferred weekend presentational mode but it just means that you have to work a bit harder to neutralise the resulting ‘negative‘ influence on a more conventional buyer, more accustomed to visits from competitor NAMs wearing horn-rimmed glasses and hair parted on the left…

However, whilst you may (or have to) be open to corporate advice on how best to present yourself to the buyer, ultimately, like Maggie, you are the one in charge…

A final pre-austerity treat for those not tired of Christmas fare?

For those amongst our readers still awaiting delivery of their Fortnum & Masons £5,000 Christmas hampers we can reveal that the unforgivable delay has been caused by a disastrous IT failure at the store earlier in December. As you know, the £5,000 Imperial Hamper comes packed with Beluga caviar, foie gras truffles, cognac butter, a magnum of Cristal 2002 and a bottle of 32-year-old whisky. 

Full refunds are available and who knows, perhaps a bogof might shift the unsold stock?  

In which case, why not indulge in a final pre-austerity bash this weekend?

‘We are all special cases’ *Meeting a Buyer’s Need For Special Treatment in 2012.

Given current pressures in the market, coupled with a tradition of attempting to meet a buyer’s needs, the new Age of Selfishness can mean that more ‘powerful’ buyers get more than their fair share, in effect making the strong players stronger…

Unless it is your company policy to eventually end up with one customer, it is important to attempt to meet a buyer’s needs within a context of all other buyers’ requirements. In other words, we need to balance resource allocation across the whole customer portfolio to avoid distortion of our consumer base.

Our starting point has to be our own survival in terms of an acceptable ROCE and Net Profit in a flatline growth environment, over the next five years, at least.

Realistically, this means achieving at least 15% ROCE and Net Profit of 10% for our company and for our business with each of our major customers, minimum…

There are two ways of achieving this, either growing the business, or cutting costs. Given the lack of growth, this means cutting all available slack in the system in terms of stock level vs. service level, trade terms and making trade funding investment conditional upon full compliance.

This exercise will help calculate the size of the ‘cake’ available for the customers, divided in proportion to their potential turnover within our total sales performance and profitability (i.e. ROCE and Net Profit).

Given that our competition are under similar pressures an probably fighting for their lives (and perhaps do not even know it), it is crucial that we maintain a realistic view of our competitive appeal vs. others in the category, and again cut away anything not demonstrably contributing to that appeal.

It is only then that we can consider a buyer’s need for special treatment, counting cost and value all the way..

Welcome to 2012…

*Albert Camus

Thinking straight for 2012?

With the most optimistic predictions indicating at best flat-line growth this year, our role in business still remains that of factoring in latest conditions and taking  action that will stand the test of 20/20 hindsight…

Apart from 'normal' competition, we need to cope with unprecedented forces at work in our markets including ‘making do’, delaying renewal/replacement, recycling goods via pre-owned, re-usable, second-hand sub-markets, with charity shops and pound-stores now becoming mainstream, all potentially reducing demand for our new products and services.   

All of these take on whole new meanings as savvy consumerism works its way up the pipeline.

We need to challenge everything to ensure we get demonstrable value-for-money, everywhere.

The age of credit is being replaced by selfishness as businesses struggle for survival by passing risk and cost back up the supply-chain via demands for extra credit, increased trade funding, anything that will improve competitiveness, all at the expense of other parties, any other parties… 

Realistically, in a flat-line market any growth has to come at the expense of the competition.

It is therefore time for really straight thinking in order to assess relative competitive appeal in the eyes of increasingly savvy consumers and  customers. We need to quantify cost and value by reflex, since without calculation and quantification, our reaction is simply emotional…

In fact, deep down, as everything changes and nothing changes, as always, we are on our own.

All we need is realistic optimism for 2012, in the firm belief that there is always room for a good idea.

All else is detail….

The Great British Understatement, a way of coping with 2012?

Slogging through the jungles of Africa in 1873, Dr David Livingstone recorded an extraordinary example of a species that has since become almost extinct:

The Great British Understatement.
The intrepid explorer was suffering from pneumonia, malaria, foot ulcers, and piles so savage he could barely walk. The roasting heat was punctuated by sudden torrential downpours. Many of his porters had run away, and he had been forced to pull out most of his rotting teeth. He had been attacked by leeches, slavers and hostile African tribesmen. Lurking in his gut was a blood clot the size of a cricket ball that would shortly kill him.

In his tent, by the light of a candle, Livingstone picked up his pen and, using berry juice because he had run out of ink, he wrote these magnificent words:
“It is not all pleasure, this exploration”.

The Times 27th Dec 2011
Ben Macintyre