Asda adding retailtainment to the shopping basket?

Asda plans to revamp in-store marketing to improve core customer shopping experience, following Asda 'Mumdex' research which looked at how it could support mums and their sometimes over-enthusiastic off-spring.... Momentum, an integrated marketing communications agency have been appointed to enhance Asda’s key commercial trading occasions by creating a programme of retail events to
- engage customers
- ensure the programme delivers a proven commercial return
- strategically align with objectives of Asda’s brand partners
- use their digital and social platforms to promote events to customers.

This raises the issue of the extent to which suppliers and retailers share and optimise consumer insight and shopper insight in programmes that are based upon suppliers' differentiating retailers by shopper-profile, and tailoring trade strategies appropriately.

In other words, folks, in this case, an integrated ‘digital and physical’ opportunity to optimise Asda potential for brands with profiles that are congruent with Asda’s shopper profile…
One to watch, but still a bit to go to match instore theatre in Brazil...

Tesco's strategic options, suppliers' strategic response

What is this about?

Tesco’s core issue is its profit warning in January, ultimately a driver of ROCE, in turn affecting the share price. With 2/3 of its business in UK, any setback causes the company to challenge one of the basic ‘rules’ in global retailing – ‘dominate the home market’. However, any company having more than 25% of a national retail market attracts negative attention from media, politicians and ultimately shopper-voters. Within the home market, supply chain efficiency made some large space redundant unless freed-space is filled via product diversification. Meanwhile, having grown share at the expense of less efficient competitors, Tesco is now being challenged by retailers that are as good as, or better, for a share of a zero-sum, flat-line market in terms of range, quality and service, as it strives to return to the Tesco 'rule of 25'.

Finally, the early retirement of a strong unchallenged leader left at least four people who felt they should fill his shoes…

Where is it headed?

Essentially, Tesco has four complementary options:

• Sell more of its current products to current users (increase basket size)
• Sell new products to existing users (Clubcard data, trade up via diversification)
• Sell current products to new users (use Clubcard data to profile ideal Tesco users and attract more of this profile with current products)
• Sell new products to new users (high risk, given two unknowns)

They need to re-apply this formula in the UK, delivering greater perceived value to shoppers, vs. competition, and then roll this strategy out globally.
They need to re-assess their competitive appeal in the eyes of shoppers, vs. the competition in terms of range, quality and service, vs. price. The leadership issue needs sorting in order that the entire company pulls in one direction, rather than each function attempting to ‘rescue’ Tesco. This was the challenge faced and successfully dealt with by McLaurin many years ago….

How does it affect you?

Essentially depends upon category, geographical spread and degree-of-partnership, but in the short term the above strategy will put pressure on all aspects of the supplier-retailer relationship, especially price and supply-chain efficiency, as Tesco re-appraises its supplier-base vs. alternatives available

What to do about it?

• Re-assess your competitive appeal to Tesco as a company, and brand within key categories, and re-engineer to optimise, where necessary
• Re-evaluate your match with trade partnership criteria (Potential, Partnership, Profit and Performance)
• Invest (time, money, people) in what can demonstrably help Tesco implement its strategies, and meets your ROCE objectives 

Above all, insist on fair-play in all aspects of your Tesco trade partnership, a once-only opportunity…

Unprecedented Treats for Unprecedented Times?

A $200,000 bottle of whisky made to mark the 60th year on the throne of Queen Elizabeth II is on sale in Singapore for a mere S$250,000 ($198,500) a bottle - and it may well find a buyer, (for a buyer?).

No doubt it's a premium sip. Only 60 bottles of Diamond Jubilee were made by the Johnnie Walker unit of Diageo PLC from a blend of whiskies distilled in 1952.

It's also a premium price for Asian aficionados at the month-long Master of Spirits II event featuring specialty wine and liquor put on by luxury travel retailer DFS Group, part of the LVMH empire of high-end goods and services.

Discerning palates, and expats' excessive longing for the old country apart, this differential vs. a spirits’ bogof at Tesco has to be a reflection of the gap  building up in societies everywhere… the issue is whether this gap will continue to increase to breaking point, or whether new governments will take steps to keep the lid on via attempts to return to normal supply and demand in markets everywhere… Either way, time for suppliers to reassess trade strategies and avail of opportunities, ahead of  competitors locked in old patterns…

Incidentally, should any potential expat buyers like to take a first class trip back to the UK and pick it up locally, the same package - the vintage whisky in a crystal decanter with silver trimmings, two crystal glasses and a leather-bound booklet - is priced at 100,000 pounds ($159,100) in Britain.

Three chias for new wonder-food!

Salvia hispanica, commonly known as chia, is a species of flowering plant native to central and southern Mexico and Guatemala

With more omega-3 fatty acids than salmon, a wealth of antioxidants and minerals, a complete source of protein and more fibre than flax seed, the seeds have been dubbed a "dieter's dream", "the running food", "a miracle", and "the ultimate super food", by advocates and athletes.

To chia cheerleaders the seeds do no wrong. They claim chia reduces inflammation, improves heart health, and stabilises blood sugar levels. A few tablespoons are touted as remedying just about anything - without any ill effects.

"In terms of nutritional content, a tablespoon of chia is like a smoothie made from salmon, spinach and human growth hormone," writes Christopher McDougall in Born to Run, the bestselling book about an ultra-distance running tribe in Mexico who fuel their epic jaunts with the seeds. The book is credited with shining the spotlight on chia as food for athletes.

"If you had to pick just one desert-island food, you couldn't do much better than chia, at least if you were interested in building muscle, lowering cholesterol, and reducing your risk of heart disease; after a few months on the chia diet, you could probably swim home," McDougall adds.

In the UK, the seeds are only currently allowed for sale as a bread ingredient, but over the next few weeks, the Advisory Committee on Novel Foods and Processes is poised to allow chia seeds in a wide variety of products including baked goods, breakfast cereals and nut and seed mixes.

Available at Holland &Barrett Online

Have a really chiaful weekend, from the Namnews Team! 

Payday Loans - an effective solution?

Payday loan providers are there to serve a local need in terms of low-income consumer survival. However, attempts at justifying the 2,000-3,000% interest rates by reference to high servicing costs of small amounts borrowed, coupled with ‘high’ risk of default are inevitably attracting government attention. In practice, much of this risk is eliminated by effectively taking ownership of borrowers’ salary/wages cheques until loans have been repaid, with any default-losses well covered by the usurious interest rates charged to those who pay…. In the end, the eventual changes to legislation will be too late and inadequate-for-purpose in restraining providers that in the old days would simply have been run out of town…

An effective solution

Instead, the government should acknowledge that those members of the community in need of income-supplements between paydays should be offered government-backed temporary loans using the payday loan model. This could include taking ownership of pay-cheques/income supplements, but offering low-level interest rates, a move that could help to stabilise household finances and freeze out current payday-lenders overnight…..

Use of Fixed Charge Cover to spot a customer going bust?

Given the financial turmoil of the past three years resulting in further retail casualties such as Game Group, and a number of others on the brink, it is obvious that the ‘usual ratios’ such as ROCE, Net Margin, Stockturn and Gearing may be insufficient in terms of providing early warnings of trouble for suppliers.

What makes a retailer vulnerable?
A recent article in Moneyweek.com flags up the fact that if a retailer leases rather than owns its shops, it is faced with regular fixed charges for rent that must be paid, irrespective of the level of sales and profits. Moreover, if a retailer also has fairly high gearing, the interest payments represent an additional fixed cost on the business.

These Fixed Charges are ‘Lease costs’ and ‘Interest on borrowing’ and need to be compared with the ‘available Operating Profit’ i.e. the Operating profit less Fixed charges.   (these can be found on the P&L ('Interest paid' and 'Operating Profit') and early in the Notes to the Accounts ('Lease expense'), after the Balance Sheet
(NB when you find the figures, check them with your finance colleagues). 

In other words, the Fixed Charge Cover (FCC) indicates the ability of a company to pay its Fixed Charges, irrespective of sales and profit performance. Failure to pay can result in liquidation.

The following analysis compares the ‘big four’ multiples in order to illustrate the calculation in practice.

Given that these are the most financially healthy retailers in the UK, other retailers could be vulnerable..

Some of the differences are interesting in that, for instance Morrisons, because it owns most of its shops, and has relatively little borrowing, combined with a good net margin, means that with an FCC of 13.3, Fixed Charge Payments are no burden to the company. However, in the case of Tesco and Sainsburys at 2.9 and 2.2 respectively, FCC is obviously more of an issue.....
Application to other retailers?

However, the real value of the ratio is in its application to most medium and smaller retailers that are running short of cash and are finding that Fixed Charge Payments are pushing them to the edge….

As in all cases of pending liquidation, those creditors that are first to spot the danger, can have the advantage of withdrawing their credit before the liquidator is appointed.
Ignoring the Fixed Charge Cover indicator?

If you still feel that all such matters are the responsibility of the Finance Department, remind yourself that if a customer goes bust owing you £150k, and your pre-tax net profit is 5%, you will need incremental sales of £3m to recover…

In which case, perhaps the application of Fixed Charge Cover analysis to your customers’ latest Annual Reports will help…?

Google's self-driving car for the high-focus NAM?

For those who need high-intensity preparation and in-depth post-rationalisation of encounters with the buyer, perhaps it is time to consider Google’s computer-controlled car as a must-have upgrade?

In the video, Google's self-driving car takes Steve Mahan, who is legally blind, to a Californian Taco Bell to pick up a snack.

Google released the video to celebrate that it has safely completed 200,000 miles of computer-lead driving.

The video shows Mahan sitting in the driver's seat as the car steers itself, using radar and lasers to make sure the road is clear. The car takes him through the drive-through of Taco Bell, then to the dry cleaners, a logical destination, given the trip’s continuous sudden-shock potential…

According to Google, the passenger in a Google car can take control in three ways: via a brake pedal on the passenger side that can stop the vehicle, via an emergency stop button on the centre console that can be reached by anyone in the vehicle, and by means of the laptop the Google representative is seen holding. In all three cases, the car can be stopped, but not remotely controlled except by the driver's steering wheel, he said. No mention was made of the need to reboot fast if the car ‘crashes’ in the fast lane..

And if all else fails, a final option can be a pit-stop at the dry cleaners…

For a comprehensive selection of Google April 1^st might-have-beens...

Choose your airline carefully….

Those NAMs tempted to use a value-carrier to escape the High Street doom and gloom are advised to check the airlines maintenance records before switching suppliers…

A pilot for a Chinese carrier requested permission and landed at Frankfurt for an unscheduled refuelling stop. The reason became soon apparent to the ground crew: The Number 3 engine had been shutdown previously because of excessive vibration, and because it didn't look too good. It had apparently been no problem for the tough guys on the ground back in China: as they took some sturdy straps and wrapped them around two of the fan blades and the structures behind, thus stopping any unwanted wind-milling (engine spinning by itself due to airflow passing thru the blades during flight) and associated uncomfortable vibration caused by the sub optimal fan.

Note that the straps are seat-belts ....how resourceful!  After making the "repairs", off they went into the wild blue yonder with another revenue-making flight on only three engines!  With the increased fuel consumption, they got a bit low on fuel, and just set it down at the closest airport (Frankfurt) for a quick refill.

That's when the problems started: The Germans, who are kind of picky about this stuff, inspected the malfunctioning engine and immediately grounded the aircraft. (Besides the seat-belts, notice the appalling condition of the fan blades.)  The airline operator had to send a chunk of money to get the first engine replaced (took about 10 days).  The repair contractor decided to do some impromptu inspection work on the other engines, none of which looked all that great either.  The result: a total of 3 engines were eventually changed on this plane before it was permitted to fly again.

And to think we were all worried about toys coloured with lead paint!

Why not have a stay-at-home weekend, from the NamNews Team!