Money-laundering Convenience on the High Street?

NAMs that may have noticed an increase in the numbers of High Street betting shops - those who have not, are probably working in the wrong areas - cannot miss the Fixed-Odds-Betting-Machines (FOBTs), often four per shop.

FOBTs can  be used for money laundering by paying cash into the terminal, making low-risk bets which involve a small relative loss, and withdrawing most of the proceeds as a voucher which are exchanged for cash at the shop counter.

Academically interested in how it works?
The most popular game is Roulette, which as you know pays out even money on Red and Black, and usually 35+ to 1 on the ‘Zero’ on the wheel.

NB. Thanks to Anonymous below, I have now made enquiries via 'trusted trade sources' and find that there is a £100 betting limit per game, so the amended illustration works out as follows:

A punter places £47.50 on Red, £47.50 on Black and £5 on Zero. A win on Red or Black pays £47.50 plus the original stake, and the £5 on Zero is lost.

The punter cashes in and walks out with £95, freshly laundered…  In other words, for a small charge i.e. the lost bets, most of the money is ‘cleansed’...

An FOBT allows players to bet on the outcome of various games and events with fixed odds, mainly roulette. The minimum amount wagered per spin is £1. The maximum bet cannot exceed a payout of £500 (i.e. putting £14.00 on a single number on roulette). The largest single payout cannot exceed £500.

The terminals arrived in Britain in 2001 and were lightly regulated from the outset. Punters in bookmakers found that they could bet £100 every 20 seconds on roulette. The temptation of high-speed, high-stake casino games in the high street proved irresistible: there are now 33,345 FOBTs in the UK.

Like all casino games, the "house" (i.e. the casino) has a built-in advantage, with current margins on roulette games being theoretically between 2.7% and 5%.

So it can be said there are still signs of life, and death, on the High Street… 

Return On CONVENIENCE Employed - the real reason for the Big 4 switch to convenience?

With small local stores offering higher Returns On Capital Employed - leasing rather than owning means less capital employed – allows major retailers to compensate for the diminishing ROCEs on their traditional estates. Following the global financial crisis Big 4 ROCEs have reached 10-12%, while Walmart still turn in 19%+ per annum…and as you know, ROCE drives share price performance…

Mintel forecasts Britain's convenience sector sales will grow 5 percent to £43.3bn in 2013 and jump to £54.1bn by 2018. Since the economic downturn, careful consumers now prefer to buy little and often and do so in the shop around the corner rather than out of town superstores, to save on the rising cost of petrol.

Recognising that small local convenience stores, along with the internet, will be the main driver of future sales growth, the Big 4 are all prioritising investment there.

Both convenience and online business require relatively little capital compared to developing large supermarket spaces. But crucially, while the profitability of online grocery is not yet proven, the returns from convenience stores can be, albeit without the benefits of scale economies in terms of running costs….

Apart from the obvious gains in terms of profitability and meeting more shopper-needs, this business shift, combined with supply chain efficiencies making two facings do the work of four in large space retail, has to mean increased space-redundancy in the Big 4’s larger outlets…

In practice, whilst the move to online and convenience will compensate in the short term, unless the major retailers find alternative uses for some larger outlets, overall ROCEs - and share prices - will continue to fall…

In the meantime, NAMs can help by emphasising ways in which their brands can be used to drive retail ROCEs in both formats, but this time with a ‘guarantee’ of a more attentive, share-owning buyer…

Personal one-hour supermarket delivery service launches in London

Pocket Shop, a start-up website, has launched the ultimate in fast grocery deliveries – promising to have top-up bread, eggs and milk in the hands of London customers less than an hour after they click ‘send’.

Its Amazon-based system works by allocating online orders to one of Pocket Shop’s team of 20 trained buyers around the capital, using a GPS-based algorithm similar to those employed by taxi-ordering smartphone apps. Pocket Shop could scale the business by using crowdfunding techniques to recruit more part-time buyers.

A text message alerts the buyers, directing them to the nearest Tesco or Sainsbury’s supermarket. An app on the buyers phones then displays the customer’s shopping list with instructions on the optimum way to navigate the aisles. The company offers a ‘superstore’ range of 150,000 products at prices comparable to shopping in Local and Metro convenience stores. Waitrose and Marks & Spencer will be included soon, the company claims.

A key issue might be long term profitability in that the major mults claim that home delivery costs £20/delivery compared with a £5 charge… In other words, although Pocket Shop apply a product mark-up and a 1-hour delivery charge of £6.50, they presumably have to pay the buyer…

But if it works, and think saturation of Greater London for starters, then this represents the ultimate in personal convenience, for those willing and able to pay. Having reached critical mass the concept could morph into a personal pick-up service for dry-cleaning, prescriptions, and even pensions…

Then time for Amazon to move from back office to front of store?

Making more of existing traffic in supermarket convenience….

With more than 1-in-20 shoppers are leaving supermarket convenience stores having failed to spend all they intend, according to him! research & consulting, it follows that improved availability will optimise existing traffic, without adding another shopper...

At a time when every little helps, it seems a no-brainer to respond to the 5,000 shoppers surveyed at supermarket convenience stores, including Tesco Express, Sainsbury’s Local, M-Local and Little Waitrose, that report the main reason for these failed purchases is poor availability. Moreover, failure to buy one product in smaller format stores, when shoppers only need two or three, means a significant proportion of a shopper’s needs are left unfulfilled.

Losing business in the aisle
As you know, a brand’s consumers exhibit different need-sets as they shop different store formats, and retailers need to tailor both the offering and layout to suit, or suffer business drift…

In the current climate, suppliers and retailers invest heavily in presenting the offering to the consumer. It seems a pity to discard that consumer as shopper when they respond via a more convenient store of their choice…

Moreover, any additional traffic arising from more satisfied shoppers ‘telling a friend’ will be truly incremental.. 

'Boots the Grocer' - How Walgreens and Musgrave are helping them become a force in UK convenience…

Given that Walgreens, Boots 45% partner’s experience of food in pharmacy, give c15% of their store space to food, coupled with the Musgrave trial of food-to-go in Boots’ branches means that ‘Boots the Chemist’ could become a big competitor in the UK convenience landscape.

A new report from him! focuses on the Boots / Musgrave food range trial, and new exclusive shopper feedback shows that shoppers are excited about the extended range of food products being trialled in 11 Boots stores.  Looking to Boots to provide healthier alternatives, 58% said that they are likely to buy from this new food range at Boots in the future.

Why this initiative matters to everyone...
Given their track record, traditional suppliers to Boots will not underestimate the ability of this global player to expand synergistically via the right partners. Moreover, this logical brand-stretch via healthy food from a quality convenience retailer, combined with Boots retail footprint and regular traffic, has to represent a major breakthrough in the convenience sector, for both retailers.

Implications in a zero-sum market
The obvious implications in terms of relative space, ease-of-access and increased buying muscle means that it is important therefore that all suppliers tap into the Walgreens food background and link this with Musgrave’s quality convenience-experience in order to adequately factor this innovative food range trial into your trade strategies…

Full details of the Walgreens-Boots merger, the Boots-Musgrave trial and shopper reactions in the him! report