Stores charging shoppers a 'showrooming' fee

Reports of stores charging* shoppers up to $25 to TRY ON clothes in a backlash against the time-wasting trend for 'showrooming', raises some issues that might respond to some creative thinking tools:

Suppose a NAM ran the store?
This creative leap hopefully removes all the prejudice relating to 'how we have always done it' and takes a fresh view, hopefully from outside the business. A NAM in charge would switch the emphasis from selling the goods to helping people buy..., taking into account the existence of competition from a shopper's perspective.

Given that most shoppers already think that online provides a cheaper alternative, a NAM would see the danger of simply adding to the cost of reality shopping, making the price difference even greater. Instead, the NAM-retailer would perhaps explore options re absorbing the additional cost of 'try-ons' by linking the purchase to the shop's online facility, and failing that, a payment from the supplier.  If the same product were  available via alternative online retailers, then an introduction-fee arrangement could be agreed, perhaps in return for reciprocal direction of online shoppers to the showrooming facility, thereby converting a 'dithering shopper' into a sale, to the benefit of all..?

With the NAM's experience of the upfront effort and advantages of a long term relationship with the customer vs. a transactional sale, the potential lifetime value of the shopper would be automatically factored into the instore-encounter, at operating level, one-to-one, and not left at mission-statement level....

Showroom owners are right in counting the additional costs and potential wastage of a 'try-on' customer, but they miss a trick in not seeing the total value of having a real person appear in the aisle, already in the market for a purchase, ideally with the wherewithall (money) and highly susceptible to the personal conversion-skills an online provider can only dream about..

A NAM would not have to be told twice... 
[ For NAMs that need reminding, we are always available to help :) ]

* Press article here

Generic inevitabilities in Ireland

New pricing system for generic drugs to be implemented this year aimed at significantly reducing the cost of generic drugs.

The Irish Medicines Board is drawing up lists of interchangeable products for 20 substances most commonly prescribed. This has to be the start of a process that will give the county the benefits of a 90% reduction in the cost of some medical treatment.

This inevitable move could have been predicted by anyone choosing to compare the prescription-drug/generic-drug pricing structure wherever a state-funded medicine system is in operation. In fact, readers of KamBlog will have had 9 months to anticipate this morning's announcement in the Irish Times.

In October 2012 we wrote:

Radical changes overdue
With generics = 5% of the €1.85bn drug bill in Ireland vs. 80% in the UK (Dail Questions: Reilly, 25th Oct 2012), and generics prices in Ireland = 2% less than branded prices but 12 times UK generics prices, we would suggest it is inevitable that:

The government will legislate to increase generics usage to something approaching the UK %. Prices of generics will then be forced down to levels comparable with the UK (think legislation or encouragement of parallel importing, or both).

Consequence
In other words, on current levels of consumption, a 50/50 split of generics and branded, and generics pricing being reduced even by 50%, the annual drug bill will be reduced to €1.4bn, minimum… More here

However, the real issue has to be the benefits for a NAM of realistically facing up to the inevitabilities of market developments, conducing a couple of ‘what ifs’ on the probable consequences, taking a couple of appropriate actions to minimise the damage and then reverting to the day-job and making ready for the next engagement with Tesco…

Have an inevitable weekend, from the NamNews Team!

Shop window coverage of the G8 summit...?

                                      Flanagan’s – a former butcher’s in Belcoo Pic: Bryan O’Brien
Hundreds of thousands of pounds have been spent on a Fermanagh facelift in Northern Ireland as the county prepares for the G8 summit in just under three weeks’ time. More than 100 properties within range of the sumptuous Lough Erne resort which hosts the world’s wealthiest leaders, have been tidied up, painted or power-hosed.

Just a few weeks ago, Flanagan’s – a former butcher’s and vegetable shop in the village of Belcoo– was cleaned and repainted with bespoke images of a thriving business placed in the windows. Any G8 delegate forgetting to wind down the rose-tinted limo-window on the way to discuss global capitalism would easily be fooled into thinking that all is well with the free-market system in Fermanagh.

But, as anyone outside the venue knows, the facts are different…..

In a high street in any other part of the UK, disguising empty shop windows can be a means of encouraging the consumer to spend, instead of being put off by reminders of ‘triple-dip’ flat-lining…

Covering shop windows close to a G8 summit becomes a political statement….

However, our world leaders know more than we the political realities and consequences of their decisions and hopefully the sight of Flanagan’s will generate more than a sound-bite on arrival at the Lough Erne resort....

'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)