Roy of the Rovers - a lesson in fair play?

Last week’s demise of The Dandy brought to mind another childhood source of entertainment and insight, Roy of the Rovers.
Like most other 10 year olds, each week I eagerly awaited the arrival of The Tiger comic, featuring the life and times of Melchester’s star player.

Fair Play?
However, on one shocking occasion, a rival player, in full view of the reader, but out-of-sight of the referee, actually flicked the ball with his hand to enhance his shot. This unlawful move so outraged me I rapidly scanned the rest of the strip in vain for evidence that the move had been noted as the subject of a penalty, at least..
My sense of injustice was such that for the next five weeks I was on the newsagent’s door-step by opening time, awaiting delivery of the latest edition to check whether the authorities had taken any action..

Gradually it dawned on me that perhaps football, life and even business itself was not always fair.

I then began to wonder if there were other potential career-enhancing insights available via Roy’s storyline?

A source of continuous education…?
Unlike more gently-reared modern players, Roy enjoyed a 39 year playing career, until the loss of his foot in a helicopter crash in 1993. To keep the strip exciting, Melchester was almost every year either competing for major honours or struggling against relegation to a lower division, allowing repeating opportunities for readers to develop their numeracy skills, especially in calculating the odds in each scenario.

Planning & focus?
The strip followed the structure of the football season, thus providing  great awareness of deadlines, the need for planning and teamwork, but especially the ability to optimise output within the time constraints of a match, against rivals intent upon minimising the impact of such endeavours.

Global reach?
Geographical insight was enhanced via the team’s foreign travel. In the several months each year when there was no UK football the most common summer storyline saw Melchester touring a fictional country in an exotic part of the world, often South America, where they would invariably be kidnapped and held to ransom.

Negotiation against the odds?
During the first ten years of his playing career, Roy was kidnapped at least five times. This obviously enhanced readers’ negotiation and financial skills, helping them to distinguish cost and value of experience and longevity in a high-output career…

Career application?
Given the benefits of this source of inspiration and early induction, readers that later chose a NAM career appeared to arrive ready-made, exhibiting the ability to demonstrate "real 'Roy of the Rovers' stuff", displaying great skill, or results that went against the odds, in their dealings with the UK trade….

And often without the benefit of much formal training, curiously enough…

Pop-down shops – where train-dodging vendors and shoppers move fast, or else…

                                                                                 vid: Daily Mail
This open air Thai market needs quick wits - because eight times a day a train comes crashing through.
Just seconds before it is a bustling open-air marketplace with stallholders and shoppers haggling over the price of produce.
Then vendors pull back awnings and produce off the railway track, and afterwards restore their ‘pop-up’ shops, as if nothing has happened...

Getting away?
For NAMs who like an active holiday, Maeklong Market is in Samut Songkhram, Thailand, around 37 miles west of Bangkok. (Best book one-way, just in case...)

UK application?
Apart from some regulatory issues, Health & Safety would figure highly, not because of lack of stall-holder flexibility, but mainly due to unreliability of train timings…
Have a hyper-reactive weekend, from the Namnews Team!

Tesco catchup in the UK - a need for context?

Yesterday’s news of Tesco’s improved 3.4% sales growth is encouraging but needs to be kept in context:
- UK refocus: The company has completely refocused on the UK market, and has been spending appropriately (£1bn) since January
- Inflation: With food inflation running at 3.2%, Tesco is only slightly ahead
- Market growth: With the overall food market growing at 3.9%, Tesco is slightly behind
- Competition: Rivals are growing faster (Asda +6.2%, JS +4.6%)
- Fundamental ratios:
            -  where Tesco are:     ROCE12.3%, Net Margin5.9%, Stockturn 17.9 times, Gearing 55.8%
- Fundamental ratios:
            -  where Tesco need to be: ROCE 15%, Net Margin 5.0%, Stockturn 25 times, Gearing 30%
- Outside help: At 3.4% growth rate, a tightly-run Tesco will need considerable supplier support to improve these ratios, and hold UK market share
-      ..especially if they decide to take the nuclear pricing option 

Bearing in mind that ‘It ain't over till the fat lady sings…’, Tesco cannot afford to optimise overseas opportunities until this UK issue is resolved

In other words, Tesco needs to deliver on the fundamental key ratios and hold 31% market share, with growth matching that of the market, before being able to ‘park’ the UK….

As a supplier, it is now time to decide the extent to which you are prepared to offer a little help…

Living above the shop – optimising incremental space in retail

Houses and gardens have been built on top of the eight-storey Jiutian International Plaza in the densely populated Chinese city of Zhuzhou, where residential space is scarce at ground level.

In Brazil, false ceilings within reach of shoppers are used to merchandise Easter-eggs  with shoppers helping themselves (and paying!) during trips in the run-up to Easter.

Making chewing gum more Six-siting 
On a more mundane but equally creative level, unfazed by a dual-siting tradition, Adams gum were able to secure six separate sitings of their medicated chewing gum in Loblaws of Canada  by creating incremental space via blister-packs on walls and columns throughout the store near dental, confectionery, medicine, kids lunch and strong-tasting food categories, each site separately coded to check ROI per location.

In other words, when pressed for space in retail, creating incremental space can be the answer…

Application in the High Street
In the same way, incremental restoration of the living space above the shop could be a way of reviving UK high streets (see High Street revival recipe )

The online space-threat
However, for the truely creative thinker, the real use/threat of incremental space in retail has to be the growth of online in a flat-line market means that with a 13% share and growing at 14%, physical retail space in the UK is already 13% over capacity….
This means that retailers have to be increasingly open to ideas for optimisation of existing and incremental space by imaginative NAMs…

Couldn’t work here?
Perhaps these initiatives need to be forced a little, in these unprecedented times? 

An Amazonian window?

Yesterday’s news that Ocado is in risk of breaching its bank covenants, coupled with its fall in share price, could represent a takeover opportunity for Amazon

Loan covenant definition:
A condition with which the borrower must comply in order to adhere to the terms in the loan agreement. If the borrower does not act in accordance with the covenants, the loan can be considered in default and the lender has the right to demand payment (usually in full).

Minimum financial ratios
The borrower is required to maintain a certain level in key financial ratios such as:
- Minimum quick and current ratios (solvency & liquidity)
- Minimum Return on Assets and Return on Equity (profitability)
- Minimum equity, minimum working capital and maximum debt to worth (leverage)

Market impatience
Given that Ocado is forecast  to make a loss of 1.5% in 2012 and 2013, it is unlikely that in the current climate, the markets will be prepared to tolerate any further delay in achieving acceptable levels of profitability.
Moreover, a leading retail analyst has warned that online grocer Ocado is in significant danger of breaching its banking covenants this year, owing to a toxic cocktail of a "pile of debt and falling market share".

Ocado’s dilemma
Essentially, Ocado has reached a point that often causes problems for an undercapitalised business needing to fund the development of critical mass.
They have broken the back of grocery home delivery in an M25 enclosure that has the potential population to provide a profitable opportunity for the right company.

The Amazon opportunity
Amazon meanwhile needs a way of adding groceries to its repertoire and showing it can match traditional providers in terms of service level, profitably…

We believe that taking over Ocado would provide such an opportunity.

As you know, Amazon entered the UK grocery market last year with a piece-meal ‘multiple-delivery’ model that failed to impress anybody other than those people who saw it as merely an opening gambit.
Moreover, in July last year it was mooted  that the acquisition of Ocado might represent a good opportunity for Amazon, at a time when Ocado’s market capitalisation was £1bn.

With Ocado’s market capitalisation now having fallen to £365m, we believe that the likelihood of a bid is a running certainty…

NB If you want to catch up with Amazon see our free paper Amazing Amazon

Just a virtual Hut?

Following the success of Amazon, it is unlikely that many will underestimate the potential of The Hut, especially given the direct involvement of Terry Leahy and now Stuart Rose…
For those who may have been a little distracted by the 7 years preparation for the Olympics, The Hut sells fast moving consumer goods that are non-perishable with high levels of repeat purchase, and premium luxury products with higher average unit sales and strong consumer loyalty.

Investment and backing
The business has expanded greatly since their launch in 2004, and with the help of c£75m (raised over three years from both individual investors such as Terry Leahy and financial institutions).

Key websites
This investment capital has funded the organic launch of websites across a number of sectors including clothing, footwear, bags and accessories plus a number of acquisitions including gifts, health & beauty HB1, HB2, HB3  and sports nutrition, a total of 16 web-sites.
The Hut Group’s huge customer base is split between Consumer, Prestige and Lifestyle with fashion falling under both Consumer and Prestige

Making The Hut real for suppliers 
The issue for suppliers is how to justify treating the Hut as a major customer, with a share of attention and NAM-talent far in excess of its actual size, when many suppliers  allocate resource and talent based on historical size of business.
These same suppliers normally have no problem allocating their best brand managers to embryo products, leaving their lesser talent to maintenance marketing of established brands.

Treating retailers and brands ‘equally’
This all goes back to the need to treat customers as equivalent business units to brands of the same size, never forgetting that in the end brand equity is sacrosanct.
However, if a customer generates 10% of sales and profit, and a brand represents 10% of sales and profit, then surely they require equivalent resourcing, at least… The same holds for potential shares of the business
Finally, if anyone at board level lacking a sales background needs convincing, it might be worth pointing out that a major customer represents a gateway to the consumer, and is in a position thereby to concentrate or dilute the brand message, depending on how well it appears to fits with the store offering…

The Hut is already too real to either ignore or short-change in terms of resourcing…  

'Eating cake' no longer an option in Andalucia?

                                                                                                  pic: Libcom.org
Unemployed take food from Mercadona and Carrefour.
Earlier this week, unemployed fieldworkers and other members of the Spanish union SAT went to two supermarkets, one in Ecija (Sevilla) and one in Arcos de la Frontera (Cadiz) and loaded up trolleys with basic necessities including milk, sugar, chickpeas, pasta and rice, which have been given to charities to distribute.

With unemployment in the area at 40%, compared with a national average of 24%, the union plans further actions in a protest against austerity cut-backs.

Isolated incident?
Whilst this development might appear to be an isolated incident in a region suffering extreme hardship, it is symptomatic of the pressure building up in many countries as a result of attempts to balance economic disparities.

There are obviously serious social and political issues involved that need to be covered elsewhere.
Equally, we do not believe it is in our remit to advise retailers or suppliers ref their policies on charitable donations. 

Ignoring the symptoms?
However, if either party believes that the business of selling and buying can continue ‘as normal’, i.e. without factoring these pressures and actions into business strategies, their business models will become increasingly unrealistic in terms of predictable output, and will gradually become unsustainable.

Action 
We believe that these unprecedented circumstances require a fundamental review to determine what business the company is really in, where it is realistically headed, at what rate, at what cost, at what level of risk, with what minimum output in a real world, where people are prepared to break the law in order to survive.

Awaiting a return to 'normal' is no longer an option…

Tesco’s ‘arm’s length’ artisan coffee shop business, an approach to 'over-branding?'

                                                                           pic: University of Cambridge
Yesterday’s announcement of Tesco’s entry into the artisan coffee shop business via a non-controlling stake in Taylor Street represents a move to ‘….help build brands where we believe we can add value; much in the same way we did with [garden centre chain] Dobbies, [video and music-streaming sites] blinkbox, and We7’.
It could also an acknowledgement that the Tesco name is ‘over-branded’, at least in the UK.

An incremental option for Tesco? 
This means that Tesco could now begin to capitalise on its ‘back-of-shop’ and supply chain expertise/muscle, leaving all ‘front-of-shop’ activities to their business partners….. "we are investing in the entrepreneurial founders of a new venture. The Tolley family will decide the business strategy….Taylor Street is a successful artisan coffee shop business with a loyal and thriving customer base…"

Why the hands-off approach?
Tesco need play no overt role in the day-to-day business, i.e. front-of-house, but the likely addition of buying muscle, distribution, instore décor/equipment, purchasing of roll-out sites, and potential use of spare space in ‘over-capacity’ stores could provide all the help a small company needs, and can receive from a ‘sleeping’ partner that also has one eye open…
In practice, everything the consumer sees will be Taylor Street/ Harris and Hoole, whilst what the consumer cannot see, will be supplied by Tesco..
A neat way for Tesco to generate incremental profits, without adding to ‘Tesco’ presence in the UK.

The supplier’s options?
From a supplier point of view, the customer gets bigger…
However, this can represent an opportunity for those who really think through and are willing to integrate with Tesco’s options for a company with a 30% share of the grocery sector, and an engine that is capable of far more…