'Queen's corner shop' Fortnum & Mason celebrates best Christmas in its history

Amidst the ‘doom & gloom’, a glimmer of hope in Piccadilly retail, at least…

Those of you still working your way through your £5,000 Fortnum’s Imperial hamper (a sell-out selection of carefully packed Beluga caviar, foie gras truffles, cognac butter, a magnum of champagne 2002 and a bottle of 30-year-old whisky) will be pleased to know that your purchases helped grow sales by 17% in December, with online increases of 45%...

See, it can be done…!
Simply follow the rules of good shop-keeping:

• Location, location, location, (ideally with a 305 year tenure...)
• An appropriate offering (need we say more?)
• Focused on the right target consumer (‘know who we mean, nudge, nudge’? )
• Price leadership (meaning hi-hi, none of that EDLP nonsense)
• Space (utilisation & merchandising, the ultimate in morning-suited discretion)
• Supply Chain (rotation, accuracy, a £3m investment in new warehousing and delivery systems to avoid last year’s hamper issues…)
• Private label (differentiation & profit) Think Generation 6, or even 7, i.e. far in excess of ‘national brands’….

…and then the ROCE takes care of itself, and need not be mentioned…

More here

The Prompt Payment Joke....

Given the problem of companies’ increasing use of extended free credit as a source of free finance in these credit-starved times, the government is attempting to tackle the wrong problem, all in the name of protecting the little guy…Ha!, Ha!, Ha!

Even a cursory glance at the Prompt Payment Code will reveal that it focuses on paying within an agreed time. In other words, depending upon the credit period agreement into which a trading partner has been forced, be it on delivery, or within 5, 30, 60, 90, or even 180 days, a company can comply with the Code by paying by the specified date…

The humour starts with the consumer’s cash payment to a retailer. Then, despite zero-defect daily delivery of some SKUs, the retailer feels compelled to demand up to 90 days to bridge the cashflow gap between delivery of goods and payment by the shopper… (Ha? Ha?) 

When challenged to explain the joke, the retailer refers to market ‘norms’, without pointing out that these ‘norms’ have been creeping out from 30 days to the current 45 days in recent years, in readiness for a move to 90, as soon as sufficient retailers have helped to establish this new ‘norm’…

Suppliers who complain are told that there is 'obviously no compulsion' to agree the terms, they are free to sell their goods elsewhere at whatever terms they can agree, ignoring the fact that a customer taking 15 -30% of one’s output does not allow for alternative access to the consumer…  (Ha? Ha?).

But the really ‘funny’ bit is the process whereby larger members of the supply chain simply pass the credit burden back along that chain, “reflecting market norms”, until the point of least resistance is reached, the little guy who re-mortgages to the hilt, or cracks under the strain… (Ha! bloody Ha!)

However, and the biggest laugh of all, in spite of this upfront cash advantage, even the big retailers are suffering sales and margin-wise with some retailers having come to depend on the free-credit norm to such an extent that unplanned falls in consumer demand have caused these cash businesses to succumb to the inevitable….
Their carcases litter the high street…  (your turn!)

Time for everyone to quit the joking, and sort out the real problem?
(For starters, how about passing on the joke, this one needs to go viral…?)

HMV - cause of demise not just online, but good online?

With the inevitability of a slow train crash, HMV’s stakeholders have finally decided to bring down the curtain by refusing to add £300m to the pre-Christmas facility…

We have all had our personal relationships with HMV and each of us picked up different clues, but the clincher for me was going to the Harrods Christmas sale and finding that my favourite department, the HMV franchise, had been replaced by extended consumer electronics, and sadly, Elvis had finally left the building……

However, despite 75% of CD and DVD sales in the UK going online, it needs to be kept in mind that online was not the threat, otherwise even HMV could have cranked up their online offering and made the transition…

The real threat was good quality online…

For instance, many companies have developed a ‘clunky’ online presence that alienates, rather than encourages repeat purchase..

In the same way that corporate web-sites were developed with great initial enthusiasm, but soon become ‘elderly’ through lack of regular upkeep and innovation, so too an online presence needs to be refined to a point that matches Amazon 1-click in all respects, in order to stay in the game…

In practice, peoples’ mediocre online experiences make the following joke funny, but would be meaningless if all online matched Amazon…

The Knock-on effect: Kettle sales lose steam as coffee machines grow ever more popular

With kettle sales dropping by over 7% in five years, it might appear that kettle decline was due to a combination of the global financial crisis, people 'making do' with what they have, and a direct result of cutting back, when in fact our loss in sales may be caused by demand switching to another delivery mechanism, a new consumer-taste via a different appliance (22% of households in Britain now make their own espressos, lattes and cappuccinos). In other words, we are the knock-on effect of other peoples actions.

In practice, management-ego can cause us to assume that the knock-on effect is a result of our actions, rather than caused by others....

This means that direct attempts to stimulate demand can be a waste of promotional funds, when in practice we need to reassess fundamental demand for our product, re-examine its competitive appeal and then invest appropriately in maintaining the share-of-pocket our brand deserves...

And, just-in-case, perhaps diversify into coffee-making machines...?

More on home-coffee developments here

Amazon moves your old CDs into their cloud with AutoRip

Amazon’s new service  means that any AutoRip eligible CD purchased from Amazon since 1998 should automatically land in the user’s Cloud Player, free-of-charge. Starting with 50,000 of the more popular titles, the company anticipates building a library of millions of titles as they work back through customer records…

Added value, at zero-cost
Apart from being able to listen to an album before the physical CD arrives from Amazon, the service allows you to re-access albums purchased in the past 15 years… OK, so some of your old stuff you might never want to play again, even if you still have the original…..but now you have the choice..

Also, for those that like the look ‘n feel of ‘real CDs, it would not be beyond the capabilities of Amazon to build in a sleeve-note library for even more added value.

Speaking of which, just suppose Amazon decide to add books to the initiative…..

To really get a grip on how fundamental a step Amazon have taken, and the impact on traditional retailers, why not pop into your local branch of HMV (still open?) and ask for a spare copy of a CD you bought back in 1998, free-of-charge….?

Alternatively, why not have a Cloud-nine weekend, from the NamNews Team!

(more AutoRip here)

Everything is negotiable, when the chips are down…

Keith Ewing, owner of Number Eight Clothing in Stirling, commented that Independent retailers need to "put their heads above the parapet", as his shop was nominated as one of the UK's "top 100 inspiring shops" for 2013 by Draper's magazine. He listed rent-reviews, online, buying and display as key needs in independent retailing.

NAMs could help by sharing their negotiating expertise with appropriate retailers, as follows:

In practice, independent retailers can help themselves to survive by adapting the supplier-approach to business development:

• Cutting-costs: rent and rates are currently too high in these unprecedented times. Landlords and local government know this and are vulnerable to the ‘walk-away’ threat by retailers. In other words, retailers should calculate the level of rent and rates (seek help from commercial architects that can provide a broader view) that make the business viable, and renegotiate on this basis, ideally via a combination of lower rent and a ‘per cent of sales’ model, to force landlords to share the business risk.
• Driving sales: develop a strong online strategy by mining your customer records and collecting email addresses going forward in order to extend your reach beyond a shop visit. Optimise supplier help by negotiating better prices, terms and supply arrangement and especially instore merchandising in exchange for customer stats and enthusiastic/ innovative collaboration. Suppliers want you to succeed as a counterbalance to major multiple retailers and are willing to negotiate flexible packages for the right customers.

Being a business consultant to the retailer can optimise the trade partnership and broaden the NAM’s expertise in managing other customers.

Sharing negotiating expertise can help....

HMV: the song-writing on the wall?

Given the probability of weak Christmas sales, leading to a breach of its banking covenants, a fall in market capitalisation from £1bn to £10m, and a net debt of £176m preventing it from investing in belated development of multi-channel access to the consumer, perhaps HMV is in need of a radically different business model?

This initiative could be driven by a supplier-base that cannot afford to allow a customer with 20% market share of UK music sales to fail.

Essentially, HMV has become a suppliers’ show-rooming retailer, establishing physical presence and price points for products that are subsequently purchased online, elsewhere.

Staffed by music and entertainment enthusiasts that could explain and demonstrate product, the outlets could perform an invaluable merchandising function, like other specialist retailers provide in the toys category, with the added benefit of some direct sales where possible.

At a total cost of HMV’s current market capitalisation of £10m and combined backing for the £175m debt, competition authorities permitting, a consortium of suppliers could buy the company and convert it into a joint-merchandising/show-rooming vehicle, funded in part from advertising and promotion budgets.

Alternatively, why not let HMV go down the tin-pan, and allow price to be the only driver of sales in entertainment…..?

(How it has come to this)

Keeping independent shops independent - a new business model for 2013?

More than 50 of Itteringham's 120 residents work in their local shop voluntarily, helping to sell locally grown produce first stacked on its shelves in 1637 (Full details and pics here).

This local community's efforts to keep a village shop open by agreeing to work free indicates the degree of help some traders need in order to survive the combined pressures of flatline demand, consumption cut-backs and price-cutting by the multiples.

Whilst these moves may help on the cost-control side of the equation and with suppliers unable to justify lower prices for independents, those whose brands' viability depends on 'full' distribution, need to find ways of helping a retailer to address the sales-driving side of the equation.

In other words, ways must be found of helping the independent retailer to develop the good shop-keeping skills already established by the multiples. Retailers need the help, but under the current business model, suppliers cannot justify the cost of the call, given the size of resulting order required to break even.

However, given that our advertising effectiveness requires adequate levels of distribution and our brand may benefit from in-store discussion and even demonstration, then surely it would be realistic to regard part of function of the brand's presence in independent outlets can be to augment the marketing message and its effectiveness. We should therefore consider writing a proportion of the cost of call off to the advertising budget.

In this case, covering 50% of the cost of a retail call would translate into a 50% reduction in the size of order required to break even.

I leave you to ponder on the potential for shopper marketing initiatives and new variants that could be explored and even refined in readiness for sophisticated application in selected mults....

Support independent retail, you know they could be worth it...!

...and in a year like 2013, anything is worth trying..

Meanwhile, have a great weekend, from the NamNews Team!