Co-op profitability has a cost

For many years the Co-op was run as a ‘breakeven’ organisation in strict application of its shared-profits culture.

As anyone in mainstream business will appreciate, in order to result in breakeven, it is wiser to aim at say 5% net profit, and the result will probably be 0% or perhaps even 0.5% profit.

Reality of 'breaking even'

Aiming for breakeven in business can be a way of ensuring a loss-making year…

This breakeven approach and its consequential loss-making caused the failure of individual societies, resulting in them being absorbed into healthier parts of the movement. However, the Co-op still remained a confusing and inefficient trade partner for leading–edge suppliers, resulting in minimal levels of support, with most discretionary funds going to major customers that ran their businesses in a more traditional manner.

The penny drops…

Several years ago the Co-op apparently began to embrace the idea of making a profit, and even began to refer to ROCE and other KPIs in their annual reports.

All very encouraging for suppliers as the Co-op began to produce acceptable returns, encouraging increased investment of trade funding as a way of producing a viable alternative to the Big Four.

Testing the change in philosophy

The real test of this change in philosophy required the global financial crisis (a challenge to capitalism everywhere) to cause the Co-op to embrace the other side of the coin, cost-cutting and redundancies.

Latest reports indicate that the Co-op Group is preparing to further slash its food division’s workforce, as it seeks to cut costs amid tough trading at its grocery operation The job cuts in the food property team are part of its Unity Programme. This is the Co-op’s project to deliver a more co-ordinated strategy and efficiencies across over 4,800 retail trading outlets, including pharmacy, banking and funeral care.

The need for persistence

Despite the social cost, the Co-op needs to continue with this strategy, not only to maintain its profitability, but to demonstrate to its trading partners its determination to justify a level of partnership that compares with that currently given to the Big Four.

Above all, realistic suppliers need to support and cooperate with the Co-op, in this, the completion of their transition to ‘mainstream’ retailing…

Working out in the early hours….

If you find that managing the increasing pressures of the 9-5 NAM Agenda leaves little workout time to increase/decrease adrenaline levels, why not sacrifice sleep-time (+ four hours max means one is constantly wired, with less effort required to wind down/up….) join the NamNews Team and find a 24/7 gym?

NAMs, KAMs, Night owls, insomniacs, shift workers and other denizens of the dark are finding less need to fit their workout time into the nine-to-five world of ‘normal’ folk..

Increased availability

More gyms are remaining open round the clock, experts say, spurred by advances in surveillance and security technology, clients' ever more fluid work habits and a generation of multi-tasking consumers.

"At 6:00 a.m. you get the professionals going to work. Late morning you see a lot of stay-at-home moms. 

Extend your network

Overnight I tend to see more creative types," she said. "More piercings, more tattoos. I have met interesting people at three or four in the morning."

Go on, have a proper 24/7 weekend, from the NamNews Team!

The Battle Against Obsolescence in the High Street

The high street is successfully fighting for its life on many fronts, but in some categories it is a lost cause, and scarce resources should be focused on realistic revival prospects.

For instance, given the inevitable drift of business to new delivery systems like downloading, in categories such as DVD sale and rental, along with retailing of CDs, books and even games, it is important to distinguish denial from planned demise in a product or category lifecycle.  Anyone in doubt need only think of the declining fortunes/demise of Blockbuster, HMV, Borders and GameStop for some high-profile examples of the trend.

The inevitability of the life-cycle 

Essentially, it is important to accept that all brands go through a natural lifecycle from innovation to growth, maturity and decline in response to market demand.  Whilst the latter stages can be delayed, the process of prolonging active life usually becomes increasingly expensive and produces diminishing returns.  However, in some circumstances, the life of a brand can be prolonged profitably by constant innovation and ‘reinvention’ in the absence of serious threat from substitution.

Retail format life-cycle...

However, if we accept that a home entertainment retail format offering video-rental and sale, like a brand, has a life cycle, we need to acknowledge that the format passes through stages such as innovation, growth, maturity and decline, as night follows day…  Here the download alternative provides convenience, choice and ‘instant’ gratification in a way that is impossible for traditional outlets.  As the download providers take increasing shares of these categories, in time their low cost-base will allow them to complete the process via price-cutting the traditional outlets out of existence.  In these circumstances it is important for traditional home entertainment retailers not to deny the inevitable, but rather to proactively manage the maturity and decline of their format.

Meanwhile, at the receiving end... 

For store-owners, the ultimate question of how long the mature and decline phases will last has to be replaced by one reflecting the owner’s lifestyle expectation in terms of return on investment, coupled with their risk-profile (risk-averse, risk-neutral or risk-seeking).  This will help the owner to determine a satisfactory risk-reward relationship that will help them to decide whether to persevere for five or ten years, or seek a radical reinvention of the home entertainment format.   As entrepreneurs at heart, store-owners will be accustomed to making business decisions that offer a realistic balance of risk and reward in a market undergoing constant change.

Obsolescence is but another variable in the game….in which suppliers have a strategic role

Private Label - The Fifth Generation?

                                                                                                        pic: BBC
No longer content with even the Finest Fourth Generation, Senbikiya sells only perfect fruit - with a price tag to match!

As you know (!), giving fruit as a gift is a common custom in Japan. But this fruit is not your normal greengrocers' produce, complete with bumps, bruises and blemishes. The pick of the crop is grown with exquisite care and attention to detail - and commands an eye-watering price when it comes to market.

Instore refinement

Classical music plays softly over the speakers in the Senbikiya shop in central Tokyo. The uniformed members of staff are politely attentive, ushering the customers to chairs and crouching down beside them to take their orders.

The ceilings are high, the fittings elegant, the lighting tasteful and the displays are beautiful. But this is not some designer handbag emporium or high-end jewellery store.  Senbikiya is a greengrocers!

See 10 pic Slideshow

The ultimate assortment 

There are apples, the size of a child's head, with evenly red, blemish-free skin on sale for 2,100 yen, or $25. That's each, not for a bag. Senbikiya Queen Strawberries come in boxes of twelve perfectly matched fruits at 6,825 yen, $83. Even on a slow day they sell 50 boxes.

Then there are the melons, each perfect, of course, and topped with identical T-shaped green stalks. They're 34,650 yen, or $419, for three.

Given Japan’s gradual emergence from 20 years of austerity, could the launch of a Tesco Fifth Generation in Private label be a more credible sign of the UK’s faltering steps out of recession via new levels of quality…?

Co-branded promotion featuring Coca Cola and a Metro Private Brand in Romania

                                                                                                 pic: Brandprivat
Brandprivat, a consultancy in Romania, have reported a promotion that broke this weekend.

This featured a simple mechanic: Buy one box (4 bottles Coca Cola 2Ltr) and get 2 packs of pasta (Spaghetti 200g under Fine Food brand). Fine Food is a mainstream private brand from Metro Cash & Carry (part of the Metro Group, Germany).

The package for Fine Food spaghetti was a ‘limited edition’ as it featured Coca Cola’s logo with a strapline: “meals with Coca Cola are more tasty”…  

Could this be a breakthrough example of collaborative innovation between suppliers and retailers of this scale?

In these unprecedented times, suppliers are seeking to optimise innovation resources on the best possible revenue sources, whilst retailers are seeking both product and instore innovation. Retailers also need to not only innovate in terms of the products they carry, but also on the shopper’s experience.

Suppliers and retailers therefore have a primary goal in common: to please the consumer and grow market share. Collaborative innovation seems to be a ‘no-brainer’..

All that remains is the need to reach some accommodation on the relative importance of store equity and brand equity…

Pawnshops move upmarket in unprecedented times...

Fine wines are among the items they will accept as collateral for loans, along with family jewels and fine art, a practice spreading from Britain to the US.

Prime Asset Loans, based in Durham, UK, has a specific list of wines it will loan against. In addition to the First Growth Bordeaux, it will also make loans on Burgundy's famed Domaine de la Romanee-Conti and, depending on the vintage, Australia's renowned Penfolds Grange.

"We lend up to 70 percent of the value of the wines and the term is usually seven months," said Richard Mews, a partner at Prime Asset Loans. "Investors are using this type of loan more as it is quick, easy and there are no fees. ... If used properly, it can be a very cheap way of raising short-term funds."

Exporting the concept, the real government agenda?

A British-based pawnbroker, borro.com, with an office in New York recently lent $120,000 in exchange for 128 bottles of Chateau d'Yquem. The golden Sauternes were actually worth an estimated at $250,000. They then listed several other loans that were secured with various vintages of the five First Growths Bordeaux: Chateau Haut-Brion, Chateau Lafite-Rothschild, Chateau Haut-Brion, Chateau Margaux and Chateau Mouton Rothschild. These top wines are regularly sold at auctions where cases fetch tens of thousands of dollars. 

(Worth sending a suitably qualified politician on a states-visit to compound and optimise the special relationship?)

Target users

Borro.com 's clientele, whose net worth ranges from $1 million to $10 million, use the loan "for liquidity - no pun intended. They're mostly small business owners who basically are just waiting on payments and managing cash flows."

Time for NAMs and KAMs to replace the bank by raiding the cellar and sacrificing a bottle or two?

Then why not finish the case via an unprecedented St. Patrick’s Day weekend, from the Namnews team?

Where now for Tesco succession?

Too early to check the hats in the ring, we believe the City will give Clarke a year, following the Brasher development.

Decision time
-  A fast, high-level internal switch would allow Clarke to maintain global momentum. 
-  Going outside for what would need to be a strong, experienced and ‘natural-for-the job’ player would take too long, might simply re-ignite possible internal career-pressures, and could suggest a possible Clarke-replacement option for the City….. 

Marketplace reaction
Meanwhile, competition in the marketplace will be a combination of Tesco defence, with other multiples attempting various degrees of land-grabbing, all now led by very experienced teams focused on optimising this new window at Tesco’s expense.

Supplier action
Suppliers now need to revisit their trade strategies to reflect new competitive appeals in an unprecedented market, and factor in probable moves of the mults. Retailers will not waste time being subtle, so the moves should be pretty obvious.

Then working from 'their' consumer back to the essence of the brand, suppliers should simplify and make the offering very transparent, and echo this in simplified trade strategies, with built-in fair share and compliance conditions, all the way through the supply-chain...

Or sit on the sidelines, have a better view of the race and wait for things to settle down...

Either way, it is going to be tough, very tough for all stakeholders…

Calculating Personal Inflation by ignoring the government basket-case…

Those of you munching pineapples while awaiting tomorrow’s delivery of your iPad3, and freeing up the necessary 50% of waking hours by sacrificing high-level DIY projects via the postponement of the purchase of a new ladder, may find that government measures of inflation will in future provide a more accurate reflection of your version of the rising cost of living.

However, if you are like the remaining 99% of the population, an alternative approach may be necessary…

The monthly inflation figure is essential in gauging how the nation is doing but it’s largely irrelevant and different to individuals.

That’s because the basket of goods the Office of National Statistics measures to monitor prices is a general one.

Simon Read in the Independent offers a simple way to calculate how inflation is hitting your finances:

-       Take a bank statement from a year ago and compare it to today.

-       Look at the things you have to spend on every month – travel costs, energy bills, phone, broadband, food, etc 

-       Add up how much you spent then and how much now

-       Work out the difference as a percentage of last year’s figure

This will give you a rough idea of how much inflation really is ravaging your finances.

Your bank manager will supply the decimal points…