Walmart bases training on British military academies!

According to People Management, Walmart has turned to British military leadership training expertise at Sandhurst, Lympstone and the Ministry of Defence’s Staff College to speed up the development of its managers in America.

However, before eager NAMs reschedule their weekend leisure, the retailer’s leadership training does not include assault courses or shooting exercises, instead it emulates other areas of military academy learning.

Promoting on performance, the academy also works to push people beyond their current capabilities, so attendees are not just trained for their current job, they are trained for the next rank up and the one beyond that and for two more levels beyond that.

In other words, rather like our NamNews training, where even new NAMs are treated like CEOs, as many of today’s ROCE-based leaders will confirm, by personal example…

Coupon promotions in uncertain times, how Risk Intelligence can help

News that coupon redemption is increasing and moving up the social and economic scales may call to mind that coupons have been known to have been ‘too successful’, on this the 20th anniversary of the Hoover Free Flights fiasco. Those with long memories will recall when Hoover's free flights promotion was launched to a wide-eyed British public in August 1992, it seemed too good to be true. Over the next 21 months, many Hoover customers discovered it was. It ended up costing the company £48m…

Anticipating coupon redemption-rates is but one of the uncertainties a NAM needs to be able to factor into the day-job and sleep nights.

There is a special kind of intelligence for dealing with risk and uncertainty. It doesn’t correlate with IQ and most psychologists fail to spot it  because it is found in a disparate group of people such as weather forecasters, professional gamblers and hedge-fund managers…

A new book, Risk Intelligence: How to live with uncertainty by Dylan Evans , can be a NAM’s guide to the twilight zone of probabilities and speculation, a DIY tool to making decisions in all aspects of the role.

Four Steps to Calculating Probability
Essentially, risk intelligence is about having the right amount of certainty, and Dylan outlines four mental steps in estimating a probability and when assessing the truth or falsehood of a statement:

1. First take stock of what you know about the issue (identify the bits of information you already possess that may bear on the issue)
2. Next, for each bit of information, decide (a) whether it makes the statement more or less likely, and (b) by how much it affects the probability that you are correct
3. The outcome of the process should be a hunch or feeling, the strength of which varies according to your degree of belief
4. Finally, translate this feeling into a number that expresses that degree of certainty (use % i.e. 65% certain that this is the way forward)

It helps to distinguish Risk Intelligence, a purely intellectual ability, from Risk Appetite, an emotional trait, more to do with how comfortable you are with taking risks. Risk Appetite governs how much risk you want to take, while risk intelligence involves being aware of how much risk you are actually taking… 

The book goes on to help readers improve their risk intelligence, think by numbers, make use of probabilities (the 100 percent rule), and even evaluate betting odds... In fact, with the right degree of application, the book will point you at everything a NAM needs to help cope with unprecedented times, or even anticipate the outcome of promotions…

In short, it debugs the process of using numbers and probabilities to clarify your thinking, helping you to risk excelling in the day-job, while others are unaware of the risk they are actually taking by awaiting a return to the ‘risk-free’ days of twenty years ago..

Online retailing: Killing the killer-charge at checkout…

News that the OFT are ordering the removal of unexpected charges at online checkout, should not be news, and above all should not be necessary...

Alienating the first-time shopper
The issue does not affect the regular online user, who arrives at checkout knowing all the downside, may grumble at the extras, but completes the purchase.

The real problem is the fact that the online retailer, having gone to the trouble, expense and use of price to attract the suspicious, dithering first-user, and drawn them through the hoops of the online purchasing process, suddenly at checkout presents a surprise extra charge that causes them to hit the cancel-button and head for the shops...

Repeat purchase as the only KPI
Any brand owner can confirm that the upfront expense of attracting a new user can only be recovered if that consumer requires less persuasion to come back a second time, and may break-even on a spontaneous  third visit to the brand.  ‘Telling their friends’ may happen if the brand experience exceeds expectations…

Amazon, the real competitor
Apart from keeping in mind that if the OFT are getting involved, it is already too late, online retailers hoping to survive should re-check their biggest competitor, and hopefully conclude that Amazon’s entire offering is based on comfort, trust and re-assurance for every user, with 1-click purchase a reward for coming back a second time…

Amazon are not growing at 26% CAGR by accident, or by attempting to charge shoppers more than they bargained for… 

Tesco Want Closer Links With Suppliers – Ready?

The Tesco presentation has been well covered elsewhere, and  Philip Clarke’s full speech is available on the Tesco website.

However, in terms of ‘getting personal’, nothing beats the real thing. Best to have been a member of the audience and to have experienced the passion in person. Straight from the main man, a promise to work more closely with suppliers. These guys are really serious about more collaboration with the right trade partners in order to create a more personalised consumer offer, reflecting the current multi-channel environment and anticipating future demand.

In other words, Tesco feel the need to innovate and believe they can best do that in collaboration with suppliers. 

Keeping the best for Tesco, on condition...
However, I would suggest that they feel the need to such an extent that they will go to third parties should suppliers be found wanting…  This means saving your best ideas for Tesco, thereby potentially accessing 31+% of the UK market.

In return, it is vital to demand a fair-share relationship, based on a robust financial partnership, all wrapped up in a contractual agreement, of equal value to each side, in terms of both letter and spirit of the deal…

Getting there means being able to calculate the real cost to you, and being able to demonstrate the full financial value of your offering to Tesco, convincingly…

This time it is different
Tesco are serious, and they need serious trade partners.  In going for broke with Tesco, you are going to make your biggest UK customer bigger.
It is therefore vital that you also secure a fair share of the action…

Incidentally, participating in the live personal experience is truly incremental.
It probably explains why the IGD Convention is a sell-out every year – a key issue being the location of a venue large enough to accommodate all applicants…! 

When Major Customers Become Major ‘Share-holders’...

Yesterday’s news that a major pizza manufacturer fell into administration following the loss of a major contract, raises the issue of risk in dealing with large customers.

With the possible exception of those supplying M&S, major customers’ share of a supplier’s business tend to replicate retail market shares.

Fair shares in the marketplace
In other words, in the food sector, the major mults’ shares of a typical food suppliers business might be
- Tesco            30%
- Asda             17%
- Sainsbury’s    16%
- Morrisons      12%

With Health & Beauty, the shares would obviously be skewed in favour of Boots, sometimes taking  a 30+% share.

To access the full potential of a product, this suggests that a  supplier should aim at achieving these relative shares in the marketplace.

Dealing with a customer you like...
However, given the differences in relative compatibility*, a supplier can find that they ‘get along’ better with some customers, making it ‘easier’ to collaborate, resulting in that customer’s share becoming greater than its market share. This can sometimes lead to a point where it can represent more than 40% of the business, a position that is not desirable for supplier or retailer, given the consequences of termination for each party, including possible negative (and often undeserved) media coverage for the retailer..

Fair share and risk
Given the risk profile of the supplier (risk-seeking, risk-neutral or risk-averse) it is important to attempt to achieve and maintain ‘fair shares’ as per above.

In the event that a customer begins to ‘over perform’ it is obviously important to follow it all the way, at the same time diagnosing probable causes and attempting to replicate the process with other major customers. In which case the Ansoff Matrix on developing business, could provide a few pointers…

In the current climate, we may devote so much time avoiding the possibility of a customer going bust, we can run the risk of a customer being too successful, with equally catastrophic consequences…

* See qualities of a good trade partner

Tesco Bank - a double-edged sword for retailers?

News that Tesco is only months away from breaking into mainstream banking with current accounts signals the arrival of real competition in the banking sector.

This is a real opportunity to heighten savvy consumers' awareness of value-for-money applied to banking services, helping  consumers to understand that voting with their feet can be an option in banking as well as all other aspects of their consumption.

Tesco tactics
The introduction of 'grocery tactics' like multi-buys, bogofs, money-off offers and, heaven forbid, loyalty points on debit cards, will all help to break down what remains of traditional banking 'mystique'.
Moreover, the inclusion of user-friendly like-with-like comparisons will encourage consumers to develop and use a basic level of numerical skills in choosing financial products, without having to second-guess the provider.

Traditional banks that do not follow suit will lose business to those that are not afraid to clarify their offerings.

The opportunity
There are 15 million Tesco Clubcard holders of whom 6.5 million are loyal and regular users. Tesco needs to converts only a fraction of them to make a sizeable dent in the other banks’ business.

All Tesco have to do is run an efficient, value-for-money service that delivers no-quibble financial products that just exceed expectation, at fractionally less than what it  costs elsewhere...

In the process, Tesco might usefully benchmark itself against the Coop Bank, a competitor that is perceived to have emerged from the global financial crisis with its reputation untarnished.

But...

The sting in the tail is that having sharpened their ability to assess value-for-money and gained more confidence with the numbers, the savvy consumers will then apply this incremental savvy to their regular shopping, and thereby raise the retail game in the high street.

A really incremental gain for Tesco, if they play their cards right...

Premier Foods - the split-up options

Following Premier Foods appointment of a new COO with a brief to help see the grocery and bread businesses managed as two distinct divisions in recognition of the different “opportunities and challenges” facing each business, it might be useful for NAMs to explore the options and possible actions available to the company. This could add insight on how the company will manage the trade and also help you anticipate the impact on competing brands.

Essentially, the company needs to increase its perceived value in the market and thus raise its share price. This will not only give it more autonomy but will also make it easier to sell all or part of the operation at the appropriate time..

The emphasis will therefore be on improving its Return On Capital Employed (ROCE), a driver of the share price.

Step 1
The first step has to be a split of bread and groceries, given that they are totally different business models.

• Bread is a fast moving, high rotation (daily), high wastage (10+%), short shelf life (days/weeks) and narrow margin business, especially supply-side, whereas
• Grocery is slower moving, low rotation (2 monthly), lower wastage (2+%), long shelf life (1-2 years), more generous margins supplier and retailer

Bread: Premier need to strip out cost, sell-off non-core parts, simplify and explore possibilities of sharing the distribution burden

Grocery: Here they need to continue emphasis on a limited number of power-brands and sell off anything non-core

Step 2
The company will then be in a position to apply the ROCE principles to what remains on the two businesses.
ROCE = Return on Sales  x Sales/Capital Employed  i.e. improve the margin and speed up the rotation of capital (factories + stocks, debtors and cash)

Companies are either in a narrow margin, fast rotation business, or they are in a higher margin, slower rotation business. This is why splitting the bread and grocery businesses is a long overdue no-brainer….

Step 3
First they need to focus on improving Net Margin by

• Increasing their selling prices and sales (more advertising on fewer power-brands, up-skilling the negotiators)
• Reducing the levels of discount and promotional expenditure ( did I suggest it was going to be easy?)
• Reducing the levels of sales and distribution costs (hence hiving off the bread business, and need for special vigilance on trade funding and compliance)
• Driving volume, especially bread but also grocery power-brands ( move to more responsive social media )
• Changing the product mix to focus more on higher margin items, (consumers permitting…)
• Minimise ‘specials’ in terms of tailor-made deals/trade arrangements of any kind, (they just cost more…)

Step 4
Then comes increasing the Rotation of their Capital by

• Driving the volume of sales as high as possible, using existing or lower levels of Fixed Assets (factories, plant), + Current Assets (stocks, debtors and cash)
• Getting paid faster via settlement discounts, ‘delisting’ any financially unstable customers
• Improving sales forecasts i.e. if they forecast 100% and achieve 95%, then 5% of sales become ‘passengers’ with their costs shifting onto the 95% that are sold, thereby hitting the bottom line
• Generally, improving their ability to convert business cost into revenue…

These moves will drive the overall ROCE, increase the share price, and make each or both of the companies easier to sell, if necessary.

If all of this seems a bit theoretical, why not watch this space over the next six months? You will then be looking at historical moves, whereas some of the above points may help you anticipate and take appropriate action NOW, when it really matters…

What next for the Tesco NAM?

Given yesterday’s long-heralded results, it might have occurred to Tesco NAMs that their best option might be a discrete pitch for the JS account management role. Better, however, to try to place Tesco’s results in perspective before making irreversible moves.

Essentially, for the past ten years Tesco have been going-for-broke in trying to achieve global presence, at an obvious cost to their UK business. The City have never really looked beyond the UK scene in assessing their potential, seeing overseas initiatives as high risk and costly.

Basis of global retailing
In the process, Tesco lost sight of one of the basic principles of successful global retailing – maintain profitable dominance of the home market. Otherwise, domestic issues arising from a major share and the resulting pressure on special interest groups become over-distracting in terms of pursuing global presence.

Putting Tesco in today's context
We have to remember the following:

1. The world is currently undergoing one of the most fundamental changes and unprecedented upheavals ever experienced, affecting the fundamentals of capitalism, let alone buying and selling…everywhere
2. The embryo savvy consumer has morphed into a mature adult determined to settle for nothing less than demonstrable value for money, in most places
3. The younger generation have bypassed ‘naïve’ mode and are coming ready-equipped with the views and technology of mature-savvy, with no baggage (think how few are watching TV or partaking of ‘mainstream’ anything…)
4. January’s profit warning has forced Tesco to re-balance its business model, re-focusing on UK performance
5. So, it has cost £1bn, and hit the bottom line, big deal…(Have you been into your local newly-focused Tesco lately, where even a little has helped…)
6. They still have 30% share of the market, almost double the net margin of JS and the scale to make a difference to savvy shoppers...the ones who count...
7. Rest-of-world business has always represented issues for Tesco, and in the current global climate, they are coping better than most (seen Carrefour's results lately?)
8. The US is proving to be a slow burn, and draining global profits at £78m per annum, a small price to pay to establish their presence in one of the world’s most challenging markets. Tesco still represents ‘small & fresh’ in a market that tends to be ‘big & stale’, and needs to scale back, cut costs and achieve break-even, knowing that if they pull out now, no future CEO will ever stick her neck out and try again….
9. Tesco have managed (by luck or judgement, who cares?) to avoid the big Euro-countries that are participating in a slow train-crash, with unimaginable consequences...(forget MSM, read the blogs)
10. Meanwhile their CEE, and Asian businesses are ready to capitalise on any whisper of an upturn…and the UK abounds with opportunities for NAMs to help Tesco innovate, like never before...

In other words, no need to dust down the CV yet…