Payday loans - a question of insight?

After a year-long investigation by the Office of Fair Trading (OFT), it is thought lenders will face advertising curbs and be under closer supervision.

Big deal!

With much lending at the ‘budget’ end of the market depending on the premise that people simply do not understand percentages, much less APR, the emphasis should surely be on helping people fully understand the situation they are entering via a payday loan.

When the key issue is the impact of weekly repayments on a pay-packet, a potential borrower, already panic-stricken because of inability to cover outgoings, ignores interest-rate and duration of the repayment-schedule.  For these non-savvy consumers, 4,500% APR is meaningless, however large the typeface, or the frequency of explanation.

Might we suggest that a compulsory headline such as:
“If you borrow £100, you will owe us £4,600 after 12 months!” might have more impact?

The lenders can be expected to soften the impact in the remainder of the advertisement, but at least they will be forced to use reality as a starting point.

Amazon-Tesco: Optimising the most targeted TV audience in the world…

As Tesco and Amazon compete in developing different routes to market dominance, they each represent an unprecedented threat to both the traditional entertainment industry and other retailers…

Amazon TV production
Amazon's recent move into original TV production mixes the tactics of traditional network TV with innovations from the online world. It does not sell a stand-alone video subscription service like Netflix - instead, it bundles streaming video with its Amazon Prime membership program, in which shoppers pay an annual fee of $79 for two-day shipping on most of their purchases from Amazon.com. They are creating pilots for about a dozen shows, anyone of which becoming a breakout hit would attract people to Amazon Prime, the only source…

Established TV and movie players seem unperturbed by Amazon's efforts, considering the company just another entrant, among many, in the quest for original content (!).

Streaming Tesco
Meanwhile down the block, having bought an 80% stake in the Blinkbox film and TV site in 2011, Tesco is preparing to launch two specialist ebook and music retail websites later this year. The three Blinkbox retail sites will sit separately from Tesco’s main online store and will only carry subtle Tesco branding. However, the supermarket will advertise the sites heavily in store and use them to ensure that customers in search of specialist online sites for books, music, films and TV box sets continue buying from Tesco. 

The real breakthrough will be Tesco TV, a new television station that will be available to members of Tesco’s ClubCard loyalty scheme, free of charge, and will offer a mix of archive films and television shows.

Amazon and Tesco, in their different approaches to the market, are evolving ways of capitalising on their unique access to their tribes, deriving synergies which other retailers have already underestimated to their cost, and which traditional entertainment producers are not even dreaming about… 

Researching the customer - The Moscow Rules?

Whilst some NAMs may feel the need to disguise their real intent (and appearance) on customer premises, despite having no agenda, these spying tips may help in piecing together the customer  profile.

The Moscow Rules:
1   Assume nothing
2   Never go against your gut
3   Everyone is potentially under opposition control
4   Don't look back; you are never completely alone
5   Go with the flow, blend in
6   Vary your pattern and stay within your cover
7   Lull them into a sense of complacency
8   Don't harass the opposition
9   Pick the time and place for action
10 Keep your options open
Source

Alternatively, why not spend an online pound in Companies House and let the latest published Annual Report provide some focus, and the bulk of the jigsaw, leaving eyes and ears to fill in the real gaps…?

When you have to go by bus....

Time to have a word with your local council  about mobile amenities...?

High Street Winners & Losers: 'Just gimme the facts, NAM'*

High Street store closures: Just the facts... 
The BBC have highlighted analysis from PwC and the Local Data Company revealing that chains shut an average of 20 shops a day last year.

The facts: 
WINNERS
Payday Loans +20%
Pawnbrokers +13.2%
Poundshops +13%
Supermarkets +3.6%
Coffee shops +3.4%
Betting shops +3.3%
Charity shops +2.7%

LOSERS
Computer Games -45%
Health food -24.7%
Card shops -23.4%
Recruitment -15.1%
General clothes -8.7%
Women's clothes -7.2%
Banks/financial -2.9%
Net change in units in 2012. Source: Local Data Company

Who?
See KamBlog for list of 'casualties'

Why?
At the very least, the above figures reveal chronic over-capacity. This is only partly driven by retailers' inability to evolve an omni-channel response to the emergence of online.

Why now?
In turn, this overcapacity reflects equivalent levels of supplier-side ability to produce more than is now required as we continue to awaken from a thirty year dream of borrowing-based demand….

New demands from the super-savvy consumer
A new complication has been the meat crisis, merely the tip of an iceberg that is becoming a fundamental challenge to brand integrity. This is causing the super-savvy consumer to demand proof that ingredients actually match up to on-tin descriptions, adding this new requirement to their now constant demand for demonstrable value for money.

How to survive and thrive
For those that are managing to survive this mother-of-all-wake-up calls, paradoxically the way forward has to be a step back to basics, a fundamental review of consumer need, a realistic comparison with alternatives available, and then a stripping-back of the brand-offer to a precise fit with need, and priced accordingly…all communicated and made available, however, wherever and whenever the consumer beckons…
This is the new fact-based reality, folks….

* 'Just gimme the facts, MAM' was a catch-phrase from Dragnet, perhaps the most famous and influential police procedural drama in media history. The radio and TV series gave millions of audience members a feel for the boredom and drudgery, as well as the danger and heroism, of real-life police work.

Jack Webb wrote, produced and played lead Joe Friday. He insisted on realism in every aspect of the show. The dialogue was clipped, understated and sparse, influenced by the hard-boiled school of crime fiction. Scripts were fast moving but didn’t seem rushed. Every aspect of police work was chronicled, step by step: From patrols and paperwork, to crime scene investigation, lab work and questioning witnesses or suspects. The detectives’ personal lives were mentioned but rarely took centre stage.
A bit like the new-era role of the NAM, really…..

Best prices ever, but still 'just browsing'....

                       pic:Brian Moore, Moorgate 25th February 2013

An e-pic closure tells the story.......

Measuring value for the buyer? When the buyer needs convincing his gain is greater than your cost...

S:    …and, as you know, we still need to solve this problem of your out-of-stocks Thursdays…how about upping the weekly order?

B:    No way, I am already hitting my buying limits. How about delivering more frequently?

S:    Unfortunately, the 20-unit size of our shipping outer means you would then breach your on-going stocking quantities. I really want to help, but I need some basic information…

B:    I thought you were meant to be the expert on our business?

S:    I can give you some general solutions based on my assumptions, but the more data you let me have, the more precise will be my recommendations. Let’s agree the size of the problem first.

B:    I lose a day’s sales by running out of stock on Thursdays because your inflexible distribution system delivers to our depot on Fridays…

S:    We deliver on Fridays to optimise our coverage of this part of the country, keeping your cost-of-goods low. So, what are your daily sales of our brands?

B:    Confidential…

S     OK, let’s use assumptions for now:  you sell £5.5m of our brand per annum, making it just over £15k per day, at a gross margin of 35%, right?

B:    Near enough, but where is this getting us?

S:    So, if I could eliminate your out-of-stocks on Thursdays, it would represent £15k extra sales per week, £780k per annum, an annual extra gross margin of £273k  (£15k x 52 =£780k x 0.35 = £273k)

B:    How can you help?

S:    The obvious answer is for us to deliver on Wednesdays, but that means re-routing, extra mileage and other costs. Our logistics guys tell me it would cost us an extra £1.5k per trip, making it £78k per annum.

B:    Just a cost of doing business, and £78k is not a lot to improve customer service level.

S:    As a matter of fact, with our published net profit of 12%, this incremental cost of £78k needs incremental sales of £650k for us to break even (£78k/12 x 100). Your extra sales of £780k of our brand means £507k sales for us (£780k x 0.65, allowing for your 35% gross margin), so I need something from you that will generate additional sales of £150k per annum.

Buyer:          …I suppose if we are getting incremental sales of £780k per annum…
SuperNAM:     Great!  How about the two extra facings I’ve been wanting this past few months? 

Adventures of SuperNAM (15)

When the buyer says 'the retail margin is too small'... How to shift the buyer's point of view

S:   ....and with our retail margin of 22%....

B:    It's too small.  Our average margin for the category is 28%

S:    So, your average category margin is bigger than your overall company gross margin of 23%?

B:    How do you know that?

S:    Simple, I downloaded your annual accounts from Companies House @ £1 per document. See, on the P&L, second line....  But anyway, let's work with your category margin, providing you tell me your average category stockturn per annum.

B:    No, our stock rotation details are off limits... I shouldn't even have told you our category margin...

S:    Hang on, the more information you give me, the more I can tailor-make a business solution for your category. I have a limited sized cake, and the better I slice it, the greater the value for you. But anyway, for the moment, I can work with your company data.

B:    I'm listening, but make it quick...

S:    Right. As you know we deliver our top selling SKUs to you daily, a stockturn of 250 times per annum, but let's take an average of weekly delivery for the brand, 50 times per annum.

B:    So?

S:    So, our annual sales of £350k of the brand to you means that at any time you are sitting on £7k stocks of our brand, £350/50...

B:    And?

S:    And, with our 22% retail Gross Margin making you £77k Gross Profit per annum on a stock investment of £7k, in other words, you are making £77k Gross Margin Return On Inventory Investment (GMROII*) on our brand. As you can see, £77k divided by £7k times 100 means you are making a Gross Return of 1100% on our brand, a little better than the 22% you were complaining about earlier?

B:    I don't quite get it...

S:    No problem, it took me a week to get my head around it. Our brand is a bit like a bank in which you deposit £7k and you get interest of £77k per annum. In other words 1100% interest!

B:    We make that on all brands....

S:    In your dreams...joking!...   Let me explain?

B:    It had better be good....

S:    Your average company Gross Margin is 23%, in other words £184m on sales of £800m, and your average stock-turn is 17.5 times per annum, as you can see from your balance sheet showing Stocks of £45.7m. Dividing the £45.7m into your sales of £800m on your P&L, means your company is making £184m on your average stocks of £45.7m, an average GMROII of 403%, compared with your GMROII on our brand of 1,100%!

Buyer:            Suppose I told you that our average category stockturn is 27......
SuperNAM:           Now you're talking....

Adventures of SuperNAM (14)
* GMROII