'Spending what you save' may not be the answer, either....

As consumers, however savvy, we all have our own approach to dealing with the global financial crisis, each determined to reduce our dependence on the buy-now-pay-later model.

However, saving-before-you-spend may not be the answer to reducing consumption.

For instance, a pal of mine recently went to the summer sales to buy a £500 suit, and spent what he saved as follows:

- £500 suit in sale @ 50% discount, pays £250
- £250 jacket in sale @ 50% discount, pays £125
- £125 shoes in sale @ 50% discount, pays £62.50
- £62.50 shirt in sale @ 50% discount, pays £31.25
- £31.25 tie in sale @ 50% discount, pays £15.62
- £15.62 singlet in sale @ 50% discount, pays £7.81
- £7.81 socks in sale @ 50% discount, pays £3.90
- £3.90 shoe polish in sale @ 50% discount, pays £1.95
- £1.95 shoe brush in sale @ 50% discount, pays £0.97

....leaving £0.97 in his money-box towards the autumn sales…..

Google Revs Up Its Online Retail Efforts With Third Party Customer Service Ratings

According to an article in eWeek, Google has reached a deal with customer service ratings vendor STELLAservice to provide buyer satisfaction data to online customers who want to buy items from Google Trusted Stores merchants and other Google partners. The program is aimed at boosting the confidence of buyers before making their online purchases from companies that they haven't dealt with in the past.

STELLAservice uses a nationwide network of full-time mystery shoppers who evaluate retail Websites and their customer service using unbiased methods, according to the company.

This will also give Google more information about what people are buying and what retailers are selling online, thereby making it easier to use the insight to drive up their ad revenue.

In addition, the move will represent a credibility-advantage over current traditional community-driven comments and reviews. Websites where purchasers post reviews of their experiences are no longer working out in practice.

However, whilst third party customer service ratings will help, we all know that ultimate success in helping people buy is down to exceeding customer expectations from enquiry to fulfillment, and beyond.., better than available alternatives, even Amazon…

The big retail cleanup
Given the stakes and stakeholders, it is becoming apparent that online will ultimately raise the service-level bar and spell the end of rogue and incompetent retailers, everywhere...leaving the field to those that can make a difference, a substantial difference! 

Aldi - hard discounting to themed promotions for the royal savvy shopper

Ever wonder why Aldi retain share after a downturn? Obviously in a recession they pick up students and oldies who tend to remember a bargain, and often treat them royally...

However, a new dimension has entered their marketing mix in the shape of themed promotions pushing categories, in limited range discounting (although you would never know it). 

Those in doubt may be reading the wrong newspapers. Why not take a look at The Daily Mirror, check the links and see if any of your promos match up to Aldi’s latest..?

This month Aldi have:

Light bites
Try our three yummy recipes – perfect for al fresco dining.
Al fresco delights: Easy-to-make summer recipes for BBQs and picnics

Baby boom
Everything you need for when your bundle of joy arrives.
Baby love: Take advantage of Aldi's baby and toddler event in stores today

Starry night
Tent-astic deals for the ideal family staycation.
Carry on glamping: Aldi's guide to the great outdoors

Ah, go on, take a look, you’ll be in good company -  Aldi are even advising Kate & Wills to take note of their baby promotion….

Seriously, is it time you did something about Aldi, seriously?

High Street affordability?

Whilst shoppers may be deserting the high street in favour of cheaper, faster alternatives out-of-town, the fact that retail costs are rising by 21 per cent and sales by 12 per cent, raises the issue that retailers may also be finding the high street too expensive…

As always those retailers fortunate enough to have a pivotal impact on some high streets are able to aggressively renegotiate leases and rents. This week, for example, sees the deadline set by Sports Direct for landlords to accept either sales-based rents at its Republic fashion chain or sharp rental cuts, thus causing landlords to share some of the risk of operating in a declining channel.

However, retailers’ “average” sales conceal wide variations. These are partly product-based – jewellery, for example, has done much better than appliances in the past four years – but they also reflect changes in shopping channels. These changes make it increasingly difficult for retailers to account for sales by channel
The alternative ways of shopping explain why, as Julie Carlyle, head of retail at Ernst & Young, says “retailers are struggling [with] how to put this in their accounting”.

In addition, the high cost of home delivery vs the £5 fee per drop, will need revising upwards to reflect actual-cost reality in the accounts, or credibility will suffer...

The result is that store groups are coming under pressure from investors and analysts to be clearer about the contribution online sales make to underlying sales performances.  With some retailers adding online sales to their traditional outlet like-for-likes, and accounting separately for online growth, there is an increasing pressure to satisfy analysts’ (and suppliers’) needs for insight on where the business is coming from, and going to….

By the same token, suppliers need to be able to spell out the contribution made to a retailer's bottom line by their combination of margin, free credit, trade funding and deductions, in order to arrive at accurate and defensible payments of performance-based reward.

Whilst some stakeholders may simply be interested in overall sales and the bottom line, and the marketers focused on consumer lifetime value, in these unprecedented times accurate measurement of reward for risk remains crucial.
New ways of defining assets, factoring in show-rooming and shopper value will need to found.

Meanwhile, it is only by examining a credible return on the capital tied up in the business, compared with available alternatives, that a sufficiently robust picture emerges, sufficient to justify additional investment by all stakeholders, amidst all of the uncertainty…

Improving the buyer's Net Margin, without giving more Gross Margin

B:  I’m glad you’re here. Following last week’s release of our latest annual report, I’m getting a lot of grief from upstairs about our overall margin being lower that other retailers, so we need extra margin on your lines

S:  Yep, interesting reading, especially your 3.5% net vs. most of your competitors hitting 5%, minimum. One of the reasons I booked our appointment this week was so we could build your latest data into our discussions and explore possible synergies

B:  I said more margin…

S:  OK, let’s clarify a couple of basics. As you know, your report P&L is showing your overall Net Margin, having covered all costs in the business. First we need to be clear that our selling prices to you, compared with your selling-out prices, gives you a Gross Margin of 27%, the same margin we give to all other retailers. Second, I am not able to increase your Gross, it is just not going to happen, we are already operating on a knife-edge, what with the trade funding, free credit and the time I spend on your account

B:  Well, if it’s too much trouble looking after your biggest customer…

S:  Not quite our biggest, but certainly one of our more important ones, especially because of the potential to help you improve your net profit on our lines..

B:  Tell me more

S:  Fine. As you know, our different business models mean that you have to focus in-depth on your 400 category business, whereas we being a supplier focus on our category operating in every route to consumer. In other words we need to be expert in every possible way of retailing our particular category. We need to know a lot about a little, while you need to know a little about a lot…

B:  Well, if you are going to waste the final few minutes of this meeting doling out clichés…

S:  Apologies, just been on a workshop, was dying to try that one out…

B:  Five minutes!

S:  OK, we can help by pointing you at what other retailers do to optimise our category

B:  I hope you don’t tell them our secrets?

S:  You know me better than that, we are talking about broad principles of retailing, if only to reassure you that others have found different ways useful, without compromising any of us

B:  OK. How can you improve my net margin?

S:  Great! Essentially, like other retailers, it costs you 15% of your sales to run a shop, add 2% for thieving and wastage, 5% for Head Office, leaving 5% from our 27% gross margin as Net Margin. You should be making at least 5% on our lines ( give me more detail and I can be more specific)

B:  Keep going…

S:  As I see it, your problem is you are carrying too much cost in the system, in other words, your operational costs are taking up too much, vs other retailers

B:  How come?

S:  We have a pretty efficient delivery system, and other retailers get more out of it by letting us have guaranteed forecasts early enough to schedule deliveries optimally. They also share a lot of insight with our people to help mesh the two systems and reduce overlap and the need for excess buffering. Also, by knowing more about your systems we can configure our shipments to help you have easier, more economic process at your end, all the time cutting your costs. The improved integration means less damaged or defective stock, easier handling, more economic use of labour, and ultimately, more economic use of space

Buyer:   What do you need from me?

SuperNAM:  Great!  First we all need a meeting involving our distribution and logistics teams, so we can set the parameters and then let them get on with it. You and I can then focus on the really interesting stuff like how our category plans can drive your top line…


Adventures of SuperNAM (20)

Le Petit Dejeuner Reverse-Charge?

Joe, a recently retired Dublin grocer, decided to treat his wife Bridget to a long weekend in a Parisian hotel in Place Pigalle, in celebration of their ruby wedding anniversary.

The next morning, pausing only to indulge his lifelong habit of recording the serial numbers of each large denomination euro note in his wallet, they went to a nearby café where Joe ordered a couple of double expressos and some croissants for their sidewalk breakfast.

Asking for the bill, and fully prepared to offer a 10% tip, Joe was surprised at the waiter’s demand for €40, and requested an itemised bill. Pausing only to double-check the price-list on the wall, Joe followed the waiter into the café, in time to see him retrieving a crumpled bill for €15 from the waste bin, and asked him to explain the request for €40…

It was the ‘win some, loose some’ response that caused Joe to try to get even…

He handed over a €50 note, and the waiter offered change for €20… Joe held his ground, demanded the full €35 change and took the receipt, left the café and hailed a gendarme.

Inside the café Joe explained to the gendarme and waiter how he had been charged €40. The waiter insisted he had charged €15, and refunded €5 in exchange for a €20 note, so he could not have charged €40. He even opened his purse to reveal a mix of 50s, 20s and some small change…

Joe insisted he had handed over a €50 note and received €10 change, and even had a record of the serial number…

With a ‘win some, lose some’ shrug at the waiter, Joe pocketed the €50 and left to join Bridget on the corner…..

Moral: Running the numbers and keeping a record can pay off in mini-negotiations...and even the odds in day-job sessions…

Walmart to send automated shopping lists to its mobile app

By crunching data about a customer's buying habits, the store thinks it can pop up the things they'll need to buy. Using its ‘bigger than Pentagon’ database, it will automatically create shopping lists for customers on its mobile app

In so doing, Walmart is endorsing its belief that in-store buying influenced by mobile use is on track to be about twice as big as e-commerce sales by 2016.

The app already includes a shopping-list function, which can tell customers where to find their products in the store and give them relevant digital coupons they can redeem through the phone.

Potential revenue stream in offering manufacturers 'highlighting' of their brands already on list?

Next step automated deliveries unless countermanded?
Risky, but if they get it right….

When the Buyer says your supplier margin is too big....

With retailers struggling on 4% Net Margin, whilst many suppliers are in trouble on anything less than 9%, the buyer may claim that you are taking advantage.

S:   Glad to see you have looked up our latest published accounts. I obviously keep up to speed on your profitability, so now we can jointly explore ways of optimising your net margin, without driving me out of business

B:   Well, you are always banging on about lack of money, so I thought I’d call your bluff: Here you are making 9% and we only have 4%

S:   On the surface, it looks bad, and it had me worried first time around. However, deep down we are each trying to balance reward and risk, it’s just that we work in two  different business models..if you take more risk, you need more reward

B:   How come? …and I haven’t got time for a lecture on finance

S:   No way. For me to understand it, it has to be simple: As a manufacturer, we have to research and invest in product ideas up front, a big risk we are prepared to take, provided we can convince our shareholders that the rewards will be adequate. We also have lots of money tied up in state-of-art plant and equipment, whilst you can operate from leased premises, if necessary…

B:   We all take risks in business

S:   Agreed, but your risk is limited to taking in two weeks stock of our new product, and if our advertising and trade funding is not enough to move it, you can sell it at cost and de-list it. No harm done, except to our bottom line…

B:   Yes, but I could have given that space to something more successful

S:   ….and sacrificed an opportunity to experiment with a bit of innovation that might have given you a competitive edge. But let me explain more about why we need our margin to optimise your profitability…

B:   Ok, I buy the need for innovation, but I need to improve my bottom line

S    Fine, we need to manufacture big runs and hold at least 6 weeks buffer-stock of finished goods to cope with fluctuating demand. This allows you to operate on two weeks average stock. In fact, with our daily delivery of main SKUs, your average stock on our lines comes down to 2.5 days, reducing your risk even further.

B:   More like 3 days, but I take your point..

S:   Great, so when it comes to optimising your profit, the closer we work together, the more we can each make…you make more sales, we waste less money..

B:   How come?

S:   Think about it. Our biggest investment is in advertising (5%) and trade promotion (20%). See, you already get the lion’s share! So if we can coordinate our above-the-line campaigns with bespoke instore activity geared to your traffic flow, we get more for our buck, and the more you optimise shopper demand. Provided you manage potential wastage, the increments go straight to your bottom line.

Buyer:   So what do you need from me?

SuperNAM:   Now you are talking! If you give me guaranteed forecasts, we can optimise factory output. If you can pay a bit faster, we don’t have to fund so much free credit, but the real payoff can be via improved compliance instore…

Adventures of SuperNAM (19)