Shop where you borrow instead of buy - making do via the sharing economy...

                                                                                                                                  pic: Leila Berlin
According to The Guardian, the most popular items in Leila, Berlin's first "borrowing shop*" are the electric drills.

But it's not worth that person buying their own tools, said founder Nikolai Wolfert. "The average electric drill is used for 13 minutes in its entire lifetime – how does it make sense to buy something like that? It's much more efficient to share it."

Scarey...

Members can borrow anything from board games to wine glasses, fog machines to hiking rucksacks, juicers to unicycles. All they need to do to become members is drop off an item of their own.

Virtual tour of Leila here

Borrowing shops are under development in several Berlin districts, with similar projects being set up in Kiel and Vienna. In Berlin-Wedding, 80 artists are working with recycled materials to build Berlin's first "indoor treehouse", which will eventually serve as a "local public thinktank". In Neukölln, the Trial & Error culture lab organises swaps for artists' materials and fashion items.

At the more commercial end of the spectrum, Deutsche Telekom recently helped launch the social network wir.de, which allows neighbours to swap tools and services and sets up communal "toy boxes" in playgrounds around Berlin.

Whilst the idea of the "share-economy" is developing well elsewhere (i.e. Airbnb, which matches travellers to people with rooms to rent, and car2go and even M&S offering customers discounts in exchange for unwanted clothes, which are then donated to Oxfam) there is a sense that the shift away from ownership towards functionality is nowhere as tangible in Europe as in Berlin.

If you add share-economy drivers to consumers increasingly ‘making do’, it may begin to explain the difficulty of driving demand above flatline levels in many categories, everywhere…

And going back to drills, it is well known that drill manufacturers sell millions of ¾ inch drill-bits, not because people want drill-bits, but because they need ¾ inch holes, however produced...

In other words, the most insidious competition can be a product or service that replaces traditional ways of meeting needs. Therefore, training ourselves to focus on functionality and real need instead of want, can help us to anticipate and survive the shock of third-party innovation, hopefully….

* See video on how Leila works in practice here

A changing retail landscape - so what?

If the UK retail landscape is really changing fundamentally - and the combination of 'squeezed middle', latest Christmas results and increasing impact of the savvy consumer seem pretty fundamental - the issue has to be what you need to do about it, now!

Traditionally, a NAM could wait for things to settle down and then take a short break from the fire-fighting before attempting to change course...

However, your 2014 plans have already been put to bed and you are seeing Tesco next week!

Essentially, in any market shift, what really changes is the relative competitive appeal of the various retail players, from the points-of-view of their customers, who then act accordingly. From your perspective, your key focus should be the perspective of your target consumer, as part of your retail customer's traffic.

Fundamentally, your consumer will see the retailer as an 8P combination (Products & Assortment, Pricing, Promotional activities, Place i.e. store location, Personnel, Physical distribution & handling, Presentation of stores & products, and Productivity) and judge the retailer as better or worse than the available alternatives in the market in terms of how well they appear to meet their needs.

In other words, a NAM needs to re-assess their target consumer's need-set in the current climate and then make a judgement as to whether the new market dynamics (squeezed middle, online, convenience etc.) have changed how they view the competitive appeal of your major customer. You need to take a view on how that consumer rates the elements of the 8P mix, as far as your brand and customer are concerned, and decide what the customer needs to change in order to retain market share.

Meanwhile, now more than ever before, major retailers are struggling with fundamental issues of relative competitive appeal, and are - or should be - receptive to commercial insight from realistic and pragmatic NAMs, fresh from the coalface...

This moment of uncertainty represents a window for frank information and insight exchange, like never before..

Time to contact the buyer and warn them that next week's meeting could get pretty fundamental, may possibly take a little longer, but could represent a way forward for you both...?

 

The battle for market share in a flat-line war

In a flat-line market the only way to grow share is at the competitors’ expense, with some help from suppliers…. In other words, the retailer needs to evaluate the relative appeal of their offering, from the point-of-view of the target shopper compared with available alternatives.

In practice, this means that the retailer’s 8 P Marketing Mix – the offering – needs to be assessed, weighted and objectively ranked vs. other retailers’ offerings, in the eyes of savvy consumers.

The 8 P Mix - a harmonious and need-prioritised blend of the following:

1. Products & Assortment: ranges matching consumer expectations, and doing what it says on the tin (short-changing here makes the remaining parts of the retail offering irrelevant…)
2. Pricing: with most retailers now price-matching, price has been virtually eliminated from the equation, leaving the remaining 7Ps as the only real differentiators…
3. Promotional activities: promotions are now about informing and clarity, an attempted basis for like-with-like comparison (trust, values and credibility being implicit, easily eroded, impossible to restore, if competitors manage to build and hold the honesty line…)
4. Place i.e. store location: being available everywhere the customer wants to buy, in a format that optimises location, offering effective store-level assortment, and if necessary show-rooming for the retailer’s online alternative
5. Personnel: vital that the entire organisation, especially front-line colleagues express the offering in harmony with other elements of the Mix
6. Physical distribution & handling: full on-shelf availability, as ‘fresh’ as the pics in the adverts, zero-defect
7. Presentation of stores & products: optimising the presence of those who make it to the aisle (shopper marketing)
8. Productivity: delivering the above ingredients within financial constraints of ROCE performance of at least 15% ( this maintains the share price and minimises cost of support from stakeholders

In other words, good shop-keeping, and better than most…

The supplier role
Patently, suppliers also need to grow at the expense of competition in a flatline market. In practice, this means conducting a qualitative analysis of their offering through the eyes of target consumers, using the 4 P Marketing-Mix (see specifics here)

However, the real difference in relative profitability will be determined by a supplier's ability to differentiate the offering to match the traffic-mix profile of each major customer. Again, taking as a basis the relative presence of target consumers of the brand in specific customer-aisles, it is vital to tailor the offering to optimise actual shopper behaviour in a way that fits with the retailer’s 8P Mix.

Simply offering the same to each major customer will at best be a compromise in terms of needs-match, and the big guys will ration their partner-shipping accordingly….

Incidentally, Graham Ruddick has a great article in the Telegraph: Tesco-Sainsbury's row draws battle lines for entire retail sector, well worth a read...

Big Brother checking you out, faster?

Supermarket giant Kroger Co. (KR) is winning the war against lengthy checkout lines with a powerful weapon: infrared cameras long used by the military and law-enforcement to track people.

These cameras, which detect body heat, sit at the entrances and above cash registers at most of Kroger's roughly 2,400 stores. Paired with in-house software that determines the number of lanes that need to be open, the technology has reduced the customer's average wait time to 26 seconds. That compares with an average of four minutes before Kroger began installing the cameras in 2010.

Kroger executives say they are continuously improving the QueVision software to better predict shopping behaviour and fine-tune the staffing of the checkout lanes. And they are testing other ways to get shoppers out more quickly, including a tunnel-like device resembling an MRI machine that scans items as they go through, then automatically bags them.

The real breakthrough will be on subsequent shopping trips when willing shoppers can be persuaded to avail of a longer in-aisle experience, knowing that checkout times are 90% faster…  

2013: A year for realistic optimism?

With five flatline years behind us, and a high street littered with casualties, realistic NAMs should be finding it easier to factor in a further five years of the same....

If we accept that whilst politicians operate to a different agenda (re-election) and vocabulary (triple dip = flatline...) those of us still in business are here because we know that in times of zero-growth, any market gains have to be made at the expense of the competition.

This means always seeing our offering through the eyes of an increasingly savvy consumer that is unwilling to settle for anything less than demonstrable value-for-money, a consumer determined never again to outsource their purchase decision-making to marketers or retailers.

In these circumstances, it is vital to strip our offering back to the bare essentials, leaving a needs-based package that represents real value, measured by what people are prepared to pay, over and over again.
Using consumer need as the only real benchmark, realistic NAMs will assess the offering vs. what is available from competition, and will continue to cut until what remains represents true value, and more, to a consumer and ultimately the savvy retailer.

Achieving this level of confidence in our value means realistically factoring in politics, economics and banking into our business thinking, as we constantly strive to achieve acceptable financial rewards for risk in a market environment where the numbers do not appear to add up...first time.

In practice, this means realistically measuring all of our costs and being able to translate them into value that we represent to our customers, and being able to demonstrate our impact on their Balance Sheets and P&Ls...

In such unprecedented times, real opportunities exist in 2013 for those determined to be realistically optimistic, and are prepared to act decisively, while the competition await a return to the 'good old days'...

Meanwhile, a Happy and Positive New Year, from the NamNews Team! 

Delivery leverage for on-time supply - Walmart pays upfront

Mexico's leading retailer Walmex has made early payments totalling US$326 million to its suppliers to make sure they deliver products on time for Thanksgiving and for the Christmas season. This has to be an indicator that when the circumstances are right, even the world’s biggest retailer will pay for goods in advance.

When you take into account that retailers in Mexico pay in 60-90 days, it can be seen that Walmart are in fact paying up to 6 months earlier than suppliers would normally have been paid…

Why a retailer can pay upfront
In practice, being cash-rich in that the consumer pays on receipt of goods, a retailer is capable of, and willing to pay in advance, on delivery or up to 90 days later, with or without settlement discount. In the case of private label, a retailer can even contribute to the investment in special plant, buy the raw material and ingredients and even contract to purchase at a given price for up to five years in order to help the supplier to amortise investment.

It all depends on the deal….
For this reason, it is vital that suppliers always have a clear idea of the financial dimensions of their relationship with individual retailers. This means being realistic about the pulling-power of their brand vs. available alternatives in the eyes of both consumer and retailer.

Running the numbers, both ways...
Based on this potential leverage, it is essential to calculate each element of the deal in terms of actual/estimated cost and also the incremental sales to the retailer in order to break even. It is then necessary to calculate what the retailer ‘gets’ from the brand in terms of margin, free credit, settlement discount, trade funding and above-the-line support in addition to service level, rotation, availability, exclusivity and priority when stocks are scarce, all set against their sales equivalent required to generate this total investment.

In other words, by listing the brand, a retailer on 5% net profit needs sales of £20k for every £1k received from a supplier…this needs bringing out in negotiation!

Going to ‘see’ the buyer without having run the numbers in this manner is worse than going in blind, especially if your competitor, without your brand benefits, knows and can use the financials, has eyes wide open…

Incidentally, before emailing the Asda buyer, it might be prudent to keep in mind that with planned purchases of $6.4bn in Mexico for Q4, Walmex are in fact paying for $326m in advance, i.e. 5% of purchases…

'Making do' taking demand out of the market...?

With hopes for a continuing pre-Christmas sales revival dashed today amid signs that consumers are still limiting spending to essential items, it is perhaps useful to consider the impact of people ‘making do’ with existing products and postponing purchases of replacements in these uncertain times.

Housing demand
Essentially, taking big purchases first, how many householders are trading refurbishment and ‘extending’ for the purchase of a ‘new house’ that is a better match for growing family needs. Think of even a third of homeowners, with unprecedented access price–comparison facilities on sales costs, legal fees, removal charges and especially property values, deciding to postpone a house purchase for even a year, taking 33% out of the market

Cars & home entertainment
Similarly making do with the family car for a third year may add a little to upkeep costs, but takes another slice from new car demand. And what if large companies decide to apply the same logic to fleet replacement…?

The same with (age permitting), mobile phones, laptops, home entertainment, etc, etc, etc.

Austere eating...
When it comes to food, the impact of ‘making do’ on out-of-home eating is already obvious as people increasingly retire indoors, hopefully via a ready-meal+wine upgrade... Meanwhile, if consumers are stretching sell-by limits and not binning meal left-overs but are in fact re-heating for even one meal in three, we again have at least a third of demand removed from our sales forecasts…

The way forward...
Realistically, in an environment where only politicians and vested interests are optimistic, we need to factor these ‘making do’ drivers into business budgeting, accepting that our business models are based on ever increasing demand, and realise that in a zero-sum game, any growth is coming at the expense of the other guy.

In other words, assume that a third is knocked off your next year's sales, and seek ways of replacing those sales at the competition's expense, via a better match with consumer need...

Accordingly we need to find a way of identifying what the consumer thinks is important in our category, and communicating (and delivering ) the real difference our brand represents, better than, and at the expense of, our competitor, in a way that makes a savvy consumer come back for more…

Bad customer service - the downside of social networking...?

UK shoppers seek customer service support by email (49%) or phone (43%), younger shoppers are highly likely to turn to social channels when these touch points fail, with 46% of under 25s and 33% of 25-33 year olds using social networks to air their grievances more publically.  A new study, commissioned by Rakuten’s Play.com, consisted of an independent survey of 1,000 UK consumers.

Corrective Action?
One approach can be to consider Omotenashi – a Japanese customer service style to deliver enhanced customer service. Meanwhile, for pointers, see how Rakuten approaches customer service using Omotenashi by stepping  away from the vending machine retail model and aiming to go the extra mile when delivering great customer experience.

Why this is important…
As any branded NAM will appreciate, the cost of persuading a consumer to try a new product is so high, unless they are delighted/surprised at what they find in the tin (see Aldi Xmas pud) and thus require less investment to encourage a return visit, the upfront marketing investment never achieves payback mode.

The survey indicates key influences of a second visit:
o 39% – Loyalty programs & rewards
o 20% – Strong after sales support
o 14% – Personalised offers shared after purchase

Moreover, it is only on the third visit to the brand that consumer satisfaction may result in them telling one of their friends…

Alternatively, if the experience is not satisfactory (i.e. we don’t meet their needs) the disaffected consumer will complain to 10 of their friends, and that was before the arrival of social networking…

P.S. See here for details of the survey’s key findings

Tesco Bank - a double-edged sword for retailers?

News that Tesco is only months away from breaking into mainstream banking with current accounts signals the arrival of real competition in the banking sector.

This is a real opportunity to heighten savvy consumers' awareness of value-for-money applied to banking services, helping  consumers to understand that voting with their feet can be an option in banking as well as all other aspects of their consumption.

Tesco tactics
The introduction of 'grocery tactics' like multi-buys, bogofs, money-off offers and, heaven forbid, loyalty points on debit cards, will all help to break down what remains of traditional banking 'mystique'.
Moreover, the inclusion of user-friendly like-with-like comparisons will encourage consumers to develop and use a basic level of numerical skills in choosing financial products, without having to second-guess the provider.

Traditional banks that do not follow suit will lose business to those that are not afraid to clarify their offerings.

The opportunity
There are 15 million Tesco Clubcard holders of whom 6.5 million are loyal and regular users. Tesco needs to converts only a fraction of them to make a sizeable dent in the other banks’ business.

All Tesco have to do is run an efficient, value-for-money service that delivers no-quibble financial products that just exceed expectation, at fractionally less than what it  costs elsewhere...

In the process, Tesco might usefully benchmark itself against the Coop Bank, a competitor that is perceived to have emerged from the global financial crisis with its reputation untarnished.

But...

The sting in the tail is that having sharpened their ability to assess value-for-money and gained more confidence with the numbers, the savvy consumers will then apply this incremental savvy to their regular shopping, and thereby raise the retail game in the high street.

A really incremental gain for Tesco, if they play their cards right...

The 'Per 100' comparison - upfront clarity & brand equity?

Now that we have all settled into an acceptance and appreciation of the advantages of decimal measurement (1971, 41 years ! ) and some are no longer stopping at traffic-lights, perhaps it is time for retailers and suppliers to aim for clarification rather than confusion in communicating price and value to shoppers?

Revealing pricing...
Expressing the shelf-price per 100g/100ml along with the SKU price would surely add clarity to the (deliberate?) confusion caused by random use of Kg/g in shelf-label unit pricing, BOGOFs, extra-value packs, and especially the use of shrinking-packs to disguise price-rises….

Converting the savvy consumer
Most of us have acknowledged the emergence of the savvy consumer, a person who is determined never to outsource their purchasing decision-making to marketers and retailers ever again, and yet we continue to serve up pricing indicators that at least cause confusion if not suspicion in shoppers who think for themselves, like never before…
Moreover, these same shoppers, with no credibility-baggage, are now equipped like never before with the means of ‘telling a 100 friends’, in complaining about a product.

Evaluating the real brand
Sure, the ‘per 100’ comparison forces the brand to rely upon Performance, Presentation and Place in a like-with-like Price evaluation with the available competition, causing the shopper-consumer to fall back on the brand equity we have taken so much trouble to build and sustain over the years.

If the brand is that good, it should be able to stand the heat…

Tesco's nuclear price option, if all else fails...

How to prepare for the inevitable?

No one, including Tesco, can say exactly what will happen, but it would be reckless of any stakeholder not to attempt to shorten the odds by eliminating  or factoring in some of the ‘obvious’ variables in the meantime…

The company patently has deeper pockets and greater scale-advantages than other players, but any positive momentum has to be sustainable in the long term, in order to avoid wasting gains made here and abroad over the past 20 years.

1. Share-price maintenance: As you know, Tesco’s share price has still not budged since its 20% drop following the January profit warning.  Any share price improvement will still be driven by ROCE performance, in turn driven by Net Profit on Sales, and Capital Turn, so these ratios cannot be allowed to be diluted, even in the short term i.e. this will require a combination of cost-price reductions, optimising of credit terms/settlement discount trade-offs, increased trade funding, strict application of deductions and improved service levels…

2. Deep-cut pricing: in order to sustain its current marketing approach aimed at retrieving lapsed shoppers, any price changes have to be credible and sustainable – cosmetic  cutting of a handful of KVIs will be insufficient. The ‘typical ‘shopping basket will obviously have to be cut sufficiently to attract the attention of a savvy shopper, not just the media. However, to maintain any shopper ‘regains’ the company will have to make across-the-board cuts permanent and sustainable, in order to avoid unnecessary de-stabilising of strategies currently in place.

3. Brand–Own label balance: this may be allowed to shift a little from its current 50/50 to perhaps 45/55 in acknowledgement of not only the credibility of the Tesco brand, but also the own-label pull of unprecedented market-change. It will not be allowed or encouraged  to move to levels of 65/35, if the company has learned anything from its last 30 years in the UK market…

4. UK/Rest-of-world balance: The UK as a feeder for o/seas development? NB. Like any globally-ambitious retailer, Tesco needs the security and cashflow of home market dominance in order to drive rest-of-world growth.

5. Market share: Here Tesco has three options, recovery of lost share, stop the current loss of share, i.e. maintain market share at current level, or allow market share to drift down to 25%, thereby removing it from the ‘kicking–post’ role in terms of being a political scapegoat, and a target for grievances of special interest groups. Of these, we believe the more likely will be the ‘maintain current share’ option, then using internal efficiencies to drive profit improvement...

6. Food/non-food balance: who knows, but the fact remains that Tesco's approach to non-foods reflects many of the advantages of being able to apply fmcg food principles to categories that were hitherto regarded as requiring ‘special ‘ treatment  because of tradition routing to consumer.

7. Online/ traditional retailing: Any marketing instinct would cause Tesco to follow natural development of a market, online being no exception…


Supplier action:

In the meantime, suppliers need to be clear about their own limits in terms of willingness to fund what happens. Suppliers also need to take advantage of Tesco’s temporary ‘weakness’ by insisting on a fair-share, pro rata  stance in return for any help given.

Use of a Buying Mix analysis will help in assessing Tesco’s pulling power vs. alternatives available (JS, Asda, Morrisons, Waitrose, the Co-op and ‘all others’ ) based on the retailing 8P marketing mix, all seen from the point-of-view of lapsed customers. It is also important that Tesco and its suppliers do not forget the current customers, those most vulnerable to any neglect in terms of being susceptible to the appeal of the opposition….

Developing an ‘obvious‘ context using the above factors, but fine-tuned to their specific categories, suppliers (and retail competitors) should then devote the remaining weeks/months to monitoring and modifying  the above factors/variables to incorporate latest data, before retiring to the fall-out shelter…

E-comparing prices, like-with-like...?

Yesterday’s top NamNews item on Mobile Food-price Checks indicates that shoppers increasingly want to know how food prices compare at point-of-sale.

To be precise, they are seeking a true like-with-like comparison of Prices, thus leaving them free to evaluate Product performance, Presentation and Place, in order to complete their decision to purchase.

The issue for suppliers and retailers is whether the product or brand can stand the comparison…

In other words, in a true like-with-like comparison of the four Ps, would the competitor’s product win ‘hands down’?

In which case, we can but jeopardise long term equity and credibility by making a direct comparison more difficult. Instead we should perhaps use our energy to objectively assess all category members vs. real consumer need, and then re-engineer our product offering, stripping out all redundant attributes, in order to provide a better match with that need in terms of value for money, compared with alternatives available.

Eventually, this open comparison will drive price indication and consumer choice at point-of-sale, with e-comparison merely accelerating and amplifying the process….

Breaking the Rules in Supermarket Banking

The succession of own-goals by the traditional Big Four banks and daily revelations of fresh abuses of trust, have provided unprecedented opportunities for supermarket banks to grow market share in financial services...
However, keeping that share will depend on breaking the following self-destruct rules established by traditional providers:

• Hook ‘em in and ‘abandon’ them within the mix: great introductory deals for new customer and then revert to uncompetitive terms
• Exploit habit: Most people assume that their salaries will automatically appear in their bank accounts, direct debits will be paid on time and they can withdraw their own money from a cashpoint as required
• Inertia optimisation: make every move complicated in order to reinforce a perception of being held captive
• Establish standards-in-common with rivals to ensure a move elsewhere is not worth the trouble (collusion? See LIBOR)
• Avoid the personal touch via use of retro-IT automation, all geared to re-inforce the above
• Reduce comparability of offerings and exploit the customer’s numerical dyslexia
• Establish performance reward-mechanisms that operate out-of-phase with actual results
• Ignore the threat of efficient online everything
• Target the un-savvy consumer, forgetting  that all consumers are savvy, given the right help and encouragement
• Forget the basics, focus on cross-selling before establishing and deserving trust…
• Remember the customer is never right…

Easy? 
But what if the above rules are a pre-requisite of successful (i.e. profitable ) high street banking?
In other words, perhaps a whole new business model is required using customer-centric operations, dedicated to meeting shopper-needs and transparent, defensible and competitive prices, where proof of repeat business, in retrospect, becomes the only basis for reward of all stakeholders…
In which case supermarkets start with most of the aces already in their hands…

Farmers Escalate Milk Price-Cuts Protest

The impact of the price cuts ‘amounts to a combined profit warning for the overwhelming majority of dairy farmers in this country’ and reports indicate that supermarkets are to be targeted by blockade-protests from farmers. In some cases, given the fact that cows need milking daily, farmers plan to distribute the undelivered milk free-of-charge outside supermarkets.

In fact, in 2009 continental farmers resorted to more extreme measures such as spraying three day’s supply of unused milk onto fields and at the police.

A call to action
Yesterday, an unprecedented meeting of farming unions called for the immediate reversal of milk price cuts imposed on UK farmers since 1 April. The NFU chaired the meeting of leaders from NFU Scotland, NFU Cymru, Tenant Farmers Association (TFA) and Farmers for Action who came together in an industry show of strength after a catastrophic three months for the sector.

The representatives called for all milk price cuts imposed on farmers since 1 April to be restored by 1 August. They also plan a crisis summit in London on Wednesday 11 July.

Impact on consumer-retailer-supplier relationship
As savvy consumers, we need to run the numbers and realise that constant pressure on shelf-prices pushes back up the supply chain and in the case of clothing can eventually end with child labour abuses in third world countries. In a similar way, relentless pressure on milk prices can result in farmers going bust.

As savvy retailers, we need to run the numbers to ensure that in attempting to meet real consumer-needs, on-shelf availability is not traded off against the need for competitive pricing.

As savvy suppliers, we need to run the numbers to ensure that the total-offer-package meets consumer need better than available competition. In other words, we need to strip back any aspect of Product, Presentation and Place that may be superfluous to consumer need, and sell at a Price that represents better value than the competition.

Going forward
We then need be able to apply a similar numbers-based rationale in assembling a needs-based trade package that enables us to negotiate ‘fair-share’ deals with trade-partner retailers. These are retailers that can appreciate, and accommodate, the realities of each stage of the demand-supply chain in running efficient and effective routes to savvy consumers, in an open, needs-based market environment, offering a package that represents better value than the competition…..

All else is detail.

Touch but don't press - How daily Apples have become unhealthy for the competition

Latest figures from Kantar Worldpanel reveal that in the UK, more than one in seven people now have a tablet in their household and over 52% of the population own a smartphone. Couple this global realisation that tapping keys have become increasingly out-of-tune with consumer intuition and it can be seen why Apple have forced Microsoft, Blackberry and Nokia into catch-up mode…forever in pursuit of Apple’s innovator advantage.
In other words, Apple have made ‘screen-touching’ the only future…

A touching retail experience
Add to this the escalating success of Apple’s retail outlets, and it can be seen that the company is successfully applying the same fundamental creativity to retailing by populating its outlets with non-virtual Apple people! In fact, over the past five years, the company created 35,852 retail jobs, all acting as representatives for one of the best known brands in the world, optimising their unique combination of retail plus online plus a daily dialogue with enthusiastic users that few tech companies can duplicate.
In practice, their stores are more about being the front line for Apple advertising, rather than a ‘normal’ retail experience.

Helping people buy...
However, this experience of the ultra-softsell, in an open-table environment littered with products in constant use by enthusiastic shoppers, and continual access to human advice, can be addictive. In fact, this tactile experience, coupled with the realisation that the price cannot be bettered elsewhere, makes buying compulsive.
A frustrating lesson for ‘normal’ retailers everywhere….

Applying the Apple lessons to your business
Seth Godin extracts 10 iPad lessons to enhance your product launches, especially in niche markets.

Can you risk being out-of-touch in an Apple-free personal-corporate life balance that does not include a daily bite of the inevitapple?

Pound shop revolution hits the big supermarkets!

More than one-in-six products being sold in supermarkets are now priced at exactly £1 or £2, highlighting how the pound shop revolution has started to affect long established rivals.

Supermarkets, and also chemist chains, have started to rely on distinctive red stickers, and very clear £1 or £2 prices in a bid to attract shoppers on a budget, as well as those consumers fed up trying to work out complex deals.

The combined demand by pound shops and the Big Four has to be a driver of both scale and relative permanence of the £1 offer, until a prolonged bout of inflation morphs it into £2, the new £1…

Welcome back to the post-Jubilee realities, from the NamNews Team! 

Talk about speed to market?

                                                                        pic: http://www.foodnewsie.com

A fruit so new it is yet to be named, but described as a pear disguised as an apple, is to go on sale next week at M&S.

A spokeman said the fruit -- dubbed a "papple" -- looks and tastes like an apple but has the skin and texture of a pear, and is a member of the pear family.

Dubbed T109, the new SKU  is grown in New Zealand and is a cross between European and Asian pear varieties, which resulted in a fruit similar to an apple, the retailer said.

Given the high degree of trade concentration of its native market, T109 should find the cut ‘n thrust of the UK and Irish retail scenes fairly familiar...

The bigger issue for M&S may  be the product description at HM Customs, that innovative lot who like to separate their apples and pears…i.e. the new name may be the least of M&S problems…

Meanwhile, have an actirest but fruitful weekend, from the NamNews Team!

Target to delist Kindle, fed-up ‘show-rooming’ for online...

Target, the US mass market discounter, communicated the decision to stores last week, and underlines growing antagonism between Amazon and bricks ‘n mortar retailers, which are threatened by the online retailer’s aggressive discounting, entry into new merchandise categories and attractive shipping service.
Target reported last November that the Kindle was the best-selling tablet in its stores on the day after the Thanksgiving holiday, typically the busiest shopping day of the year.
Target has in the past complained about the practice of “show-rooming”, a growing habit by shoppers to view a product in-store and then buy it from an online seller.
Apart from threatening the stability of routes to market for a number of key non-food categories, this move raises an important issue re the relationship between suppliers and specialist retailers.

Specialist shops viability
Essentially, as you know, the purpose of specialist shops in categories such as toys, bookselling, consumer-electronics and home entertainment is to meet a fundamental consumer-shopper need to physically experience the product. When specialists’ retail prices are so out of line with alternative formats, it is inevitable that having ‘pressed the buttons’ on a piece of electronic equipment in a specialist outlet, the shopper will invariably make a purchase online at a significant discount. There is no legal way of ensuring fulfilment of the sale by the specialist retailer unless via a price differential that is so low that purchasing elsewhere is not worth the trouble.

Even the mass retailers are under pressure from Amazon 
It has to be expected that as bricks ‘n mortar specialist shops cannot compete with online providers they need help in optimising their business model. The major multiples have reached market dominance by taking state-of-art retailing to new highs, in effect becoming expert shopkeepers.  In fact, these major multiple retailers have set global standards in state-of-art retailing that have redefined shop-keeping, and these standards need to be met by specialist retailers in order to survive.

Role of the supplier in helping the survival of specialist retailers
In practice, suppliers need to be retail business consultants to specialist and independent shops, helping them to adapt state-of-art retailing techniques and practices to their operations.  However, as the cost of this level of service would rarely be covered by the size of the resulting order, suppliers need to change their approach to calculating the profitability of some customer types. Because specialist and sometimes independent customers are ‘educating’ the consumer and ‘show-rooming’ the product, they are in fact performing an advertising function for the brand. They therefore need compensation by way of additional margin and help in becoming more effective shopkeepers.

Budgeting tip to help specialist retailers
Should we not therefore charge say 50% of the cost of servicing them to the advertising budget, and continue to call if the remaining cost is covered by size of average order?
Otherwise find a new way of show-rooming your brand and re-engaging the consumer….

Meanwhile, have a long, experiential weekend, from the NamNews Team! 

Argos: the writing is on the wall-chart…?

Home Retail Group's shares were down 13% yesterday, partly because of uncertainty about its ability to revive the current Argos model, combined with a decision to forgo the payment of a final dividend, and especially a fall of 9% in like-for-like sales at Argos….

As you know, investors rely on a combination of rise in share price and dividend in order to compare alternative investments. Faced with a two-thirds fall in share price, a company would normally offer a generous dividend to compensate and retain  shareholders.
But not when the company has already used available capital of £150m to buy back its shares, all to no avail…..

The Guardian’s Nils Pratley gives a number of reasons for Home Retail to be cautious in 2010-2011: the group's return on capital had fallen for three years in a row, along with operating profits, as had Argos' like-for-like sales, and a chart that says it all....

Future of the catalogue-showroom format?
Another Guardian article quotes retail analyst Nick Bubb as saying that the catalogue-showroom format had "died a painful death" everywhere else in the world barring the UK. "In the US, the discount stores such as Walmart and the online giants like Amazon destroyed long ago the convenience and range advantage of the catalogue showroom. Is it only a matter of time before the same pressures prevail in the UK?"

It is obvious that Argos is in trouble because of its categories moving online, and increasing competition from other “click and collect” services. Faced with this scenario, it would be logical to radically cut the capital base ( i.e. close 50%+ of the stores). Instead the company plan to close but 10 stores in the coming year.

On balance, Argos needs to radically reform its business model, and suppliers with a heavy dependence on the company  need to conduct several what-ifs on possible options for their categories in these unprecedented times, fairly quickly…

Buyer-seller corruption, a potential hot-potato for all?

Yesterday’s court case involving large-scale corrupt payments to a potato buyer raises important issues for suppliers and retailers. Given the potential impact on share prices of both parties, coupled with ever stringent corporate and government monitoring in these unprecedented times, it is surprising that anyone is nowadays prepared to take the risk of being a party to corrupt inducements to buy. In other words, it needs just one person with a conscience, or a grievance, to lift the lid….

However, given that the current plaintiff was arrested in 2008, with the case having now arrived in court, it could be said that parties on each side of the seller-buyer relationship harbouring any doubts re. their version of the selling-buying process have had adequate time to reflect on the implications and take appropriate action.

The distinction between gifts and bribery
If buying decisions were made solely on objective, rational criteria, a computer would probably do a better job. Instead, given that the basic offer satisfies the key objective criteria, then a host of emotional criteria/influences/needs come into play.

Emotional needs in buying 
These include needs for avoiding effort, self-esteem, (pride, self-importance, power), to imitate, to acquire money (via saving vs. making, for the company) need for possession (icing-on-cake), investigate (data), create (new), sense of duty, and especially a need for security (avoiding fear). These can include meals out, or even a bottle of whisky at Christmas.

It needs to be emphasised that such attempts to satisfy the emotional needs of a buyer are not corruption, they are merely ‘icing on the cake’ by way of celebrating a done deal, a deal which ticks all the rational, objective boxes.

Bribery defined
Bribery is quite clearly an overt inducement to the buyer to over-ride the logic of a buying decision where a supplier’s competitor is patently offering a better deal on a like-with-like basis. In other words, the supplier’s offering is equal with that of the competitor except for the additional £10k on the price to fund the bribe.

This point, the first of many, was brought out yesterday in court by the prosecution: "A peculiar feature of the corruption was that it was self-funding. [The supplier was] not paying for it, [the retailer was] paying for the corruption of their own buyer and this was achieved by overcharging [the retailer]".

Action for NAMs and KAMs
The answer for NAMs/KAM’s is always to attempt to revert to the base deal and check that it satisfies objective buying criteria (the buyer’s job needs), like-with-like, before focusing on the buyer’s emotional needs. In practice some of this process occurs simultaneously, but it remains vital that the supplier’s basic offering is defensible and transparent, always, and with 20/20 hindsight…..its the nature of the job, folks.