Discount stores boom as upmarket shoppers brag...

The economic quagmire has provided the perfect breeding ground for general merchandise discounters, who have expanded aggressively – more than filling the void created by the collapse of Woolworths in 2008. Analysts at the IGD predict the value retail sector will be worth £8bn by 2015.

Classless appeal
But the key to discounter success is their classless appeal. Mature NAMs will remember their first visits to Aldi Berlin in the early 1990s, and their bemusement at the shopper transport parked outside – ranging from students bikes to state-of-art Mercedes. As we all knew at the time, this could never happen in the UK….

City paying heed
The growing might of chains such as Poundland, Wilkinsons and Home Bargains means the City is starting to take notice. Stockbrokers Shore Capital believes discount retail is the fastest growing area of the whole market, with the strongest performers potential candidates for stock exchange listings or takeovers by quoted chains further down the line.

The forward working environment 
Given their arrival at critical mass in a flat-line economy, we reckon that discounters are merely at the start of a five year opportunity to gain share in the UK. NAMs need to second-guess the politicians: they have been telling us about imminent recovery for the past five years.
Having thus established politicians' credibility, with little change to EU/global economic conditions, is it likely that we can expect any real uplift in the next 5 years…?

Competition hots up...
The competitive landscape ranges from single-price chains such as Poundland and 99p Stores to general discounters such as Home Bargains and B&M Stores. But the rapid expansion of what were once regional, often family-run, companies means the retailers are now treading on each other's toes.

A zero-sum future?
This means that market will operate on a zero-sum basis with any share gains at the expense of not only other retailers but also of other discounters.
In other words suppliers have to prepare discounter strategies that are in harmony with  overall trade strategies, taking care to avoid inadvertent compromise or conflict.

This means that suppliers need to factor discounters more aggressively into their organisational structures and trade strategies, ‘permanently’…

Permanently? Bear in mind that the other characteristic is that discounters thrive in a downturn, but rarely surrender any gains in market share in a rebound… 

Marks & Spencer - an inevitable takeover?

Yesterday’s news of a possible bid for M&S obviously had an impact on the share price. However, the key issues for NAMs have to be
- the likelihood of takeover
- by whom
- impact on the business

Likelihood of takeover:
Apart from the usual indicators (ROCE, Net Margin and Stockturn where M&S is more or less in line with the big four) a key measure has to be the Market Capitalisation/sales relationship i.e. cost to buy the company vs. its sales.
                   
MktCap/Sales (latest figs, the higher the better, in terms of value of the company)
- Walmart         58.5%
- Tesco             42.1%
- JS                  27.3%
- Morrisons       38.5%
- M&S              60.3%

At £6bn MktCap it can be seen that M&S would be relatively more expensive to buy than Walmart, in terms of sales generation.

Possible players:
Essentially three options: another retailer, a Private Equity Fund or a Sovereign Wealth Fund

• A retailer: unlikely (competition rules, difficulty in improving fundamental ratios) insufficient synergies
• Private Equity Fund, unlikely given the need for 5year exit via re-flotation, difficulty in sell-off of real estate assets in this timeframe/climate to liquidate debt, no obvious improvements in key ratios possible vs. the competition
• A Sovereign Wealth Fund (a Government Agency like Mid-East or China), likely as a long term investment, a much slower burn vs. prevailing money-rates in the market, via existing management until they are found wanting…

Impact on the business:
A more stable supplier-retailer environment, with an emphasis on steady financial performance, long term, with access to money for investment in ideas/acquisition/global expansion in the business.

Base requirement for NAMs to calculate cost and value of supplier package to the new M&S, a good basis also for their dealings with competing retailers…

M&S docs:

Latest Annual Report 

5 year record 

The 'Per 100' comparison - upfront clarity & brand equity?

Now that we have all settled into an acceptance and appreciation of the advantages of decimal measurement (1971, 41 years ! ) and some are no longer stopping at traffic-lights, perhaps it is time for retailers and suppliers to aim for clarification rather than confusion in communicating price and value to shoppers?

Revealing pricing...
Expressing the shelf-price per 100g/100ml along with the SKU price would surely add clarity to the (deliberate?) confusion caused by random use of Kg/g in shelf-label unit pricing, BOGOFs, extra-value packs, and especially the use of shrinking-packs to disguise price-rises….

Converting the savvy consumer
Most of us have acknowledged the emergence of the savvy consumer, a person who is determined never to outsource their purchasing decision-making to marketers and retailers ever again, and yet we continue to serve up pricing indicators that at least cause confusion if not suspicion in shoppers who think for themselves, like never before…
Moreover, these same shoppers, with no credibility-baggage, are now equipped like never before with the means of ‘telling a 100 friends’, in complaining about a product.

Evaluating the real brand
Sure, the ‘per 100’ comparison forces the brand to rely upon Performance, Presentation and Place in a like-with-like Price evaluation with the available competition, causing the shopper-consumer to fall back on the brand equity we have taken so much trouble to build and sustain over the years.

If the brand is that good, it should be able to stand the heat…

The doubling rule - why Amazon will outgrow Walmart, soon...!

The doubling rule, or Rule-of-70, provides a simple way to calculate the approximate number of years it takes for the level of a variable growing at a constant rate to double in size.
This rule states N = 70/rate-of-growth, where N is the number of years it takes to double.
More detailed maths treatment here
The same rule can be extended to the Rule-of-110  (trebling size) and the Rule-of-140 (quadrupling size).

Amazon example:
Given Amazon’s CAGR (Compound Annual Growth Rate) of 26%, the Rule-of-140 shows that based on its current sales of $48bn, its sales will be $192bn in 5.4 years.
By comparison, Walmart’s 2012 sales were $444bn, with a CAGR of 3.1%...
Amazing Amazon catchup here 

Exponential growth really explained…
For more about how exponential growth and the Rule-of-70 can explain and impact every aspect of your life, upside and downside, we urge you to invest 10 minutes in watching the above vid. (4.5m views to date...)

Nothing will seem the same again…ever.

Increasing network productivity now, before you need it

In a flat-line economy, NAMs are faced with a dilemma: can networking be a ‘natural’ instinctive process, or does it require method in order to be mutually productive?
Unfortunately, reaching high levels of network productivity can take more years than are available, especially in unprecedented times.

Instinctive networking: 
Before the uncertainties arising from the global financial crisis, networking for NAMs and other functions was a casual, ad hoc process conducted offline in spare time, with little concern or need for measurable output.

High output networking:
Now, with many ‘networkees’ fighting for survival, and flooded with incoming overtures, networking entry-barriers are high, making response-achievement even more difficult.
We believe that a systematic, focused approach can help you now, before you need it.

See our free 3-page guide here 

Tesco's virtual store, the end of QR?

Tesco’s virtual store at Gatwick is proving popular*
A subtle point to note on the video is the fact that Tesco are using barcodes for product scan-identification rather than QR codes….
Could Tesco be ahead of the QR game?.

The premature demise of QR codes
According to US blog: The Shelf Edge the QR code is dead.
'The problem is that few marketers understood, or understand, how to use these codes; they were a novelty at best, but one that in practice offered little real value to consumers. It was this lack of value that contributed to the codes’ demise'.

Opportunities or Threats in the UK?
Given their relative novelty in the UK, perhaps QR codes should be used more imaginatively by linking users to a mobile-optimised sites that offer real value?

In other words, someone needs to think through the fundamentals of consumer need, and optimise the technology to match, while there is some life remaining in QR codes?

* See video onsite usage and commentary by passengers on here.

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!