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…