What if: a restaurant was run like a supermarket?

Suppose a major multiple decided to apply state-of-art principles to the Horeca sector, using expertise in space management, offering optimisation, efficient service-level and money management to bring something extra to the food service industry…

Space management:
Calculation of sales and profits per sq.ft. means converting annual sales into table footprint like a supermarket gondola, with spaces between tables treated as aisles. In other words, the total sq.ft measure of all tables divided into annual sales would give sales per sq.ft. of ‘selling area’.

Reducing the space between tables would increase selling intensity, with customer comfort and relative privacy a trade-off against increased productivity…

The offering:
Diners would need the equivalent of ‘shopping the aisle’ via a more interactive menu. In other words, it would be apparent that flowery descriptions of menu-ingredients, albeit in franglais, would then seem inadequate, as currently conveyed. However, the temporary provision of an ipad for each guest, listing available dishes, complete with provenance, attractive illustrations pitched at levels that would manage expectations, updated ‘live’ to match kitchen availability, would help in meeting diner need. Unforeseen demand-spikes would obviously trigger emergency deliveries from just-in-time suppliers. The addition of ‘ideal world ‘ needs and other personal details would aid the addition of award points and service improvements, thus providing a basis for follow-up marketing to satisfied guests.

Service level:
The ipad would also help in minimising waiter numbers (virtual self-service?) by allowing guests to place orders directly with the kitchen, with ‘are we there yet?’ queries answered regularly via text updates…(with a suitable app designed to delete expletives, as necessary...).
Meanwhile, live video coverage of the kitchen would facilitate on-going observation/monitoring of the cooking process where so required by anxious guests…Discretionary on/off soundtrack would protect sensitive guests in the event of sudden outbursts of ‘over-excitement’ by the chef/s…

The money:
In terms of pricing, the ipad would provide full details on pricing, by ingredient/unit, per chair, and full table, with a running total monitoring impulse bottles of wine and other add-ons. This ongoing build-up of the 'shopping basket’ would provide invaluable insight to restaurant management, enabling lighting and heating levels to be related to rate-of-sale and adjusted accordingly.

Tables could be priced according to popularity, size, position, degree of privacy and of course discounted via advance-booking…  At the end of the meal, payment could be made in a check-out area, thereby freeing up the table so much faster for the next party.

Finally, a discrete scanner would then ensure that the number of guests attempting to take home the 'menu' as a souvenir, would be minimised...

Impossible, or food for thought?

What if: Airlines sold paint?
What if: Orchestras were made efficient?

Showroom retailing with a difference - you try on clothes in store, but must buy online...

At the Bonobos Guideshop in Washington, D.C., visitors can sip on beer while they try on clothes for size, but they can only purchase by placing an order on the website. The clothes are then delivered for free within two business days.

Target audience: 
The try-before-you-buy strategy is ideal for men who want to look good but hate shopping. Shoppers who book an appointment at a Guideshop - and there are only two appointments an hour, so the shop is never crowded - are greeted by personal shoppers who hand them a beer and guide them to well-fitted clothes, with the benefits of trying-on outweighing any disadvantages

Inventory economies
From the traditional retailer's point of view, where it's very difficult to get the right sizes for each location, the Bonobos model means nothing is out of stock at a store unless it's out of stock companywide. In other words they are able to deliver the same productivity with a fraction of the typical inventory investment

Other trying-retailers emerging
Online eyewear dealer Warby Parker and Gap's Piperlime Internet label have been opening up physical locations for consumers to try on the goods, and Amazon CEO Jeff Bezos plans to open stores, where customers can check out the Kindle line. It's all an attempt to ride on the $150 billion-a-year in sales success of Apple, whose hands-on-centric stores changed the focus from buying to trying.

Bonobos opened up its first Guideshop in May 2012 in New York and now has locations in Chicago, Boston, San Francisco and D.C.. Five more are planned by the end of the year.

The trying future?
It is easy to dismiss the Bonobos approach as one-off, but think why consumers visit shops -trial-  and then eliminate all the elements that do not directly contribute to that process, allowing retailers to really concentrate on enriching the experience, with no distractions...welcome to the new world of ultimate shopper marketing?

More detail and video here 

Tesco to buy Giraffe restaurants for £50m - a long neck stuck out for space-synergies?

Rather than a case of Tesco taking a risk in the search for incremental on-premise consumption, or even to increase store ‘temperature’ in and near the store, this move* should be seen as a way of creating space-synergies in relatively expensive retail real estate. In other words, if the most difficult strep in retailing is getting consumers into the store, it follows that a retailer should then attempt to sell anything that can be legally sold to shoppers.

This latest Tesco initiative will complement rather than replace existing in-store catering and only work if it succeeds in holding people longer in store, and the combination of food-service and retail sales produces incremental profits.

Dilution is not an option.

In practice, the space given to in-store consumption will have to be subjected to the same space productivity KPI of £1,000 sales/sq.ft./annum as the rest of the business, a move that will be watched carefully by those departments that have to sacrifice space to accommodate the new venture. Again, a net profit of at least 5.9% i.e. £59/sq.ft./annum will be a base requirement in order to avoid dilution of overall Tesco profitability.

The pursuit of these numbers (a first for HORECA?) will cause Tesco to examine and refine the on-premise consumption model. They will then search for cost savings and improved efficiencies from mouth-of-consumer all the way back to the green fields. This means better buying through to optimised service of consumption-needs within a store-café…with the added benefit of complementary sales for home consumption.

Experienced Tesco-watchers will know that Giraffe was not an impulse-purchase...

A lesson/warning for horeca owners everywhere?

For retail brands’ suppliers that also provide products in food services, it means harmonising the entire package of prices, terms and service levels, to the standard of their traditional Tesco business…minimum.

Moreover, the latest meat scandal will add ingredients-integrity to an already complicated package…

In terms of knock-on, these moves will add pressure to traditional food services suppliers that have never had to deal with the Big Four…and those in doubt should check out trade funding and deductions, for a glimpse of the New World…

Finally, for multiple restaurants and café players that feel they have little to fear from a grocer entering the battle-for-mouths, or who believe they could deal with this naïve 'competitor' by wringing its neck like a chicken, may we advise caution by paraphrasing the response of a similarly under-estimated player of the Forties: ‘Some neck, some chicken….’

On balance, it could be said that a neck is being stuck out, the only issue is whose…. 

* The Daily Telegraph

How to choose the right customer, when trade-funds are scarce….

Given that even in precedented times key accounts were never created equal, in unprecedented times the differences have become greater and require even more careful classification in deciding whether a customer should be labelled invest, maintain or divest...

In the current climate, it is crucial to redefine what makes a customer special, and deserving of your increasingly scarce attention. This means starting with measuring real Potential, assessing scope for fair-share Partnership, establishing relative Profitability and your ability to Perform, all relative to other key customers in your supplier-portfolio.

Potential
Ignoring history, how important is the customer now in terms of relevance in the market, ability to adapt to new demands, responsiveness to new ideas, high growth phase of its life-cycle, and potential market share?

Partnership
To what extent are you and the customer strategically aligned in terms of urgency? In other words, if you are striving to sort next year’s agenda, and the customer is obsessing about this coming weekend, your minds will never meet.... 
In terms of relationships, would you drink with the buyer in the evenings, without having a reason? 
Is there a good cultural fit, in terms of trust, risk appetite and little need for second-guessing? 
Finally, is your brand profile well represented in the customer’s traffic flow in terms of consumer match?

Profit
If they represent 10% of your sales, do they also represent 10% of your profits, i.e. a fair share relationship is possible?

Performance
How good is your competitive appeal vs. available competition within the customer?

Whilst scoring well on the above criteria will not guarantee a successful ROI each time, at least you will be starting with the right customer….

Discounts for ‘investment in joint growth’ - how to say 'no'…

With retailers hoping to recoup trading losses via additional discounts on agreed invoice prices, it is vital to refuse. This is not only because of the profit implications, but also as a matter of principle.
How you say it can determine the future relationship.

S:    I think I must have missed something. You are asking for a 4% discount on the prices we agreed 7 months ago? …and you want to apply the reduction to all deliveries made since that date?
B:    Correct!
S:    So, the agreement you and I made was unauthorised? Should I be seeing someone else to agree price increases?
B:    No, I have full authority
S:    Therefore, if I can show you why we cannot roll back the agreed price increase, the original agreement stands?
B:    No, this is an order from on high, it over-rides all agreements…
S:    Obviously your call, but it seems like your board is now doing the buying…..perhaps I can provide you with some outside rationale that you and your colleagues can use internally?
B:    I’m listening…
S:    First, your request is unique, no one else is asking for retro-reductions, so me and my colleagues have to assume that we have robust agreements with all other customers, companies that stand by their decisions. If we gave in to your request, we could de-stabilise the rest of our trading relationships.
B:    This is just you and me, the others need never know…
S:    Wrong, nothing is ever just you and I. Your demand means that, as an ethical company, I have to walk away.
B:    So be it
S:    Before I go, let me explain the size of your potential loss.   As you know, in our part of your category, we represent of £840k of your annual sales, ex VAT.
B:    How do you know that?
S:    Easy. With a 27% retail margin our annual sales to you of  £605k translates into £850k sales out, ex VAT, apart from trade funding and credit. Now, given our precise fit with your target shopper, the loss of our business would obviously be possible but a bit of unnecessary hassle to replace. Besides you and your colleague-buyers will most likely come up against similar resistance to going back on agreements in the market place.
B:    That’s our business
S:    Right. Now let me explain why we have to walk. We make a Net Margin of 6.7% on your business. From our published accounts, you can see we sell £7.5m per annum in the UK, on a Net Margin of 9%. This means you are already diluting our UK profitability. Also if we gave in to you, as an ethical company, we would have to offer the same deal to other customers.
B:    Just because they cannot buy properly is no reason to penalise us…
S:    No, think about it. If we reduced our overall Net Margin to 6.7% we would reduce our net profit by £172.5k   ( 9% of £7.5m = £675k, 6.7% of £7.5m = £502.5k, difference is £172.5k)   This means we would need incremental UK sales of £2.6m if we gave in to your demands. (£172.5/6.7 x 100 = £2.6m)  So you can see it’s not going to happen.
B:    I still need the money….
S:    You obviously know your bosses better than I, but are you saying you need the reduction in principle, or the money it represents?
B:    I think the money would do it for now…
S:    OK let’s talk about what’s involved if we count a 4% reduction on 7 months purchases.  (£605k/12  x 7 x 0.04 = £14k)  So you want an extra £14k from us
B:    I hadn’t realised it was so little…

SuperNAM:    Depends on how you look at it. With your net margin of 3.2%, it represents incremental sales of £437.5k… What we need is a bit more support instore for our additional £14k. How about an extra  couple of facings that currently cost £7k each, with a couple thrown in, free-of-charge so we can share the possible over-facing risk?
Buyer:           You reckon you can generate incrementals of … ?
Adventures of SuperNAM (16)

Where next, for survivors of Phase 1...?

Both suppliers and retailers are emerging from an unprecedented four years where even long established trading relationships have been put under stress and power abused, with many casualties in the process.

The drive for cash has resulted in grossly unfair payment terms, and the obsession with low shelf prices has brought about the meat crisis, the mere tip of a fundamental challenge to brand integrity, where the consumer has been short-changed in terms of discrepancies between  content and what it says on the tin… NAMs need to manage and optimise personal power and influence in order to cope with the fall-out.

But this is not enough…

We need to accept that we are headed into a flat-line decade under the scrutiny of a super-savvy consumer, demanding demonstrable value-for-money and who is unwilling to outsource any purchasing decision-making to marketers or retailers. Moreover, her demand for demonstrable value-for-money will extend back up the supply-chain and will impact all supplier-retailer relationships..

For NAMs in particular, this is going to be the era of adaptation, swift footwork, ingenuity, embrace of the unexpected, a rejection of accepted procedure, and above all focus.

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…