Aldi poised to double UK stores, how they impact suppliers and shoppers

Aldi is planning to double the number of its UK stores to 1,000 over the next 10 years as cash-strapped middle class shoppers drove a fivefold increase in underlying profit to £102.9m last year. Having entered the UK in 1990, Aldi gradually responded to successive economic downturns by gradually expanding its UK base.

“We’ve seen a shift in the socio-demographics,” said joint MD Roman Heini. “Obviously we have kept the existing customers ... so we still have the C1, C2 and D customers but we certainly now also see more A and especially B customers in our existing stores and also in the stores we have opened this year so far.”

He believes Aldi is winning customers from “basically all other retailers”. Confirmed Aldi-watchers will have already seen this pattern develop in Germany and other countries. Examples of prices and deals here.
The win/lose pattern for suppliers was set 25 years ago...

Handling Aldi in 1985… 
Twenty five years ago, given the inevitability of UK entry, my advice to UK clients at the time was to add Aldi to the customer portfolio of an experienced NAM, two years in advance of entry, with a brief to keep the board informed of how the company and competition were dealing with Aldi in Germany and other countries.

As a result, they were then ready to deal with the first call from Aldi UK, with prices, terms and a recently discontinued version of their brand packaging for launch in Aldi branches. This did not endear them to their marketing colleagues, but it did allow them to make defensible moves with the new retail model.

Mis-handling Aldi, bigtime…
Meanwhile, another client ignored the advice and promptly slammed down the phone on the first Aldi call…It was almost ten minutes before they received a call from the head of their German affiliate, demanding to know why they had been so rude to the company’s biggest customer in Germany!

Moreover, to show that there WERE hard feelings, Aldi UK put notices in their shop windows saying that as xxx company had refused to supply them with products that could be offered at lower shelf prices, they were obliged to offer better than average discounts on the competing brand…..a signal to other suppliers not to underestimate the influence (and potential) of new retail models…!

KAMs' Highs & Lows

Early in a career, KAMs have to decide whether they want a roller-coaster ride or prefer a gentle see-saw at the quiet end of the playground.

Apart from the excitement, the former takes courage and can be more rewarding, but the latter no longer carries any guarantees….

Facebook gets physical...via new gift service to sell real goods

According to the FT, Facebook has launched a gift-service that allows users to send novelty items to friends, via revenue-sharing agreements with its partner-retailers.

The Amazonian elephant in the room…
However, despite the advantage of background personal insight, Facebook missed a big retrospective-trick by failing to anticipate the need for physical location details and not requesting personal addresses when members’ originally registered with the social network. Furthermore, given Amazon’s 1-click innovator’s advantage, Facebook is condemned to forever playing catch-up to the online retailer’s speed, efficiency and database…

Fulfilment issues for trade-partners
Given that volume-gifting will be mainly low-priced novelty items, partner-retailers face the triple whammy of securing addresses, 'instant' shipping of low-value items and awaiting their share of revenue, in a world where fast single-step purchase is king…

For suppliers, the issue becomes one of being able to anticipate the volume and speed required should a novelty gift-item catch on big-time with the Facebook community (for openers, think hundreds of millions…fast!).

Overall assessment
Better for Facebook to revert to virtual, and find digital gifting-options that meet the same needs…(or even partnering Amazon…). This could represent a real opportunity for service-suppliers to evolve ways of digitising their offering via Facebook (i.e. ‘Have a Guinness on me for your birthday!’ NB. an example only…nothing beats the real cash-based shared-experience !)

(but meanwhile, no harm in Facebook seeking ways of harvesting physical addresses from their vast connected-community, just-in-case…)

The top 10 high street stores to haggle in?

Latest research shows that most high street retailers are responsive to haggling, to varying degrees…
In a poll of 2,544 people, Martin Lewis of MoneySavingExpert.com  found that most high street players will respond to haggling, with the following success-rate for determined shoppers.

The top 10 high street stores to haggle in
Retailer       &    Success rate (of those who tried)
1. Comet              78%            6. Asda             60%
2. B&Q                78%            7. Tesco            58%
3. Currys/PCW    78%              8. Wickes          56%
4. Homebase        69%            9. Sainsbury's 54%
5. John Lewis       63%           10. Debenhams 53%
Source: MoneySavingExpert.com

How this approach can help in negotiating with buyers.
Given that many buyers can sharpen their negotiating skills simply by dealing with more suppliers per day than a NAM can manage in a week, coupled with the fact that role-reversal can add insight re the other party’s position, then taking every opportunity to haggle at store level could be your way of raising your negotiating game to new levels of expertise. (See here and scroll down for Martin’s Top 20 haggling tips)

For a real immersion in your customer’s culture, why not start easy and gradually move down the haggling league table before selecting your customers outlets for your experiments?

Some precautions
Given the prevalence of security cameras, it might be worth donning off-duty clothing and a hint of make-up to avoid your next encounter with your buyer becoming a retaliation session…

Going for broke?
Finally, the retailer most resistant to haggling in the survey was Boots (it figures?) with a success-rate score of 29% - a real opportunity to refine your haggling skills, especially if you handle a different account…

Kellogg's new tweet shop - pay with social currency...

                                                                                                pic Retail-focus
According to a report in Retail-focus, Kellogg's have opened a new pop-up 'tweet' shop on Soho's Meard Street in London. The standalone store – thought to be the first to allow customers to pay by Tweet instead of money – marks the company's move into the savoury crisps market and is open until Friday 28 September.

The shop is lined with hundreds of packs of crisps, a 'try before you buy' snacking area, a 'community noticeboard' that captures social media reaction to the unique retail space, and a  packet of new Special K Cracker Crisps can be bought by Tweeting a message about the snack range.

A real fusion of brand, medium and consumer, without retailer intervention..

Another potential use for empty shops in the high street?

Sao Paulo, 120mile traffic jams (+kidnapping)…

Next time you are stuck on the M25 on the way to Cheshunt, spare a thought for your colleague KAMs in Brazil, where traffic jams of 120 -180 miles in Buenos Aires are routine, wjth the added threat of being kidnapped for those KAMs working for major suppliers..
Several years ago while running a workshop at local headquarters of a multinational client I was informed that my personal bodyguard was essential in order to avoid the inconvenience and cost ($50k) of having to pay my ransom in order to conduct the workshop without interruption.
However, the $50k was a mere trifle compared with what they would have had to pay to release their global chairman, who paid a surprise visit from Europe, transferred from the airport by helicopter, landed on the roof, and participated in the workshop for 30 minutes before flying back to Europe again, all before the local mafia discovered he was in the country!.

The secrecy left me only moments to add a couple of spontaneous pleas for more local-KAM empowerment, before attempting to continue the session as planned.
Nice to be appreciated, if only via the price of a ransom…

Tesco to build national network of online-only 'dark stores'

They are not open to the public but used to assist nearby shops unable to keep up with internet orders. Tesco already has four dark stores in London but internet boss Ken Towle said on Monday that another two would open in Crawley and Erith, near Dartford, and it was scouting other cities, including Birmingham and Manchester, for locations.

Future dark stores
Towle said Tesco's would need "tens" rather than "hundreds" of dark stores. Speaking last week, Tesco chief executive, Philip Clarke, said Tesco.com "provides all the growth we have in our core food businesses these days".

Where this is heading
Besides representing a threat to Ocado, Tesco with 50% of an online grocery market that will be worth 6% of total grocery spend by 2016 (IGD), the market leader is still at an early stage in its rebalancing of online-and physical store presence that will reflect online demand, with an increasing dark store weighting that will provide a means of reducing online overheads and help to subsidise the cost of home delivery.

In other words, it will always be difficult for online grocers to break out of the '£5-per-drop' mode, so lower-cost dark stores will help by releasing more of the retail margin to help cover delivery cost losses   (See posting below)

Home Delivery charges - a one-way subsidy?

Given that picking, bagging and making a home delivery costs supermarkets up to £20, the £5 charge actually represents a subsidy for the service.

This leaves the retailer with four options:

• Absorb the loss: impossible on current retail margins, especially as the online/physical shop ratio increases?
• Charge more for instore purchases: An increasing an unacceptable burden on those that want/need to shop instore.
• Charge £20 per delivery: a significant turn-off for many online shoppers?
• Or radically increase the minimum order size: a likely mismatch with real shopper need?

Going for scale
Some retailers may see significant scaling up of home deliveries as a possible solution, with the milkman’s street-agreements as a way forward (in the final days of home delivery of milk, dairies agreed solus access to individual streets in order to make individual milkmens’ routes profitable), a practice that might cause issues with the competition authorities, nowadays…

A radical business model?
However, for radical thinkers, the way forward may be via a significant scaling down of store sizes and numbers to better match a shrinking need for physical presence as online increases. With less physical overheads, the average retail margins of 25% could be used to fund home delivery, thereby evolving a new retail model that fully acknowledges a future balance of online and physical retailing.

Otherwise, Amazonian third party online retailers will emerge to take up the space, profitably…