Social Media explained via the Tesco NAM role

Twitter:        I am totally responsible for anything that goes wrong at Tesco…

Facebook:    ...but I still ‘like’ Tesco…

Foursquare:  This is where I bend over backwards for Tesco…

Instagram:     Here is a vintage pic of my last remaining shirt…

YouTube:      Here is me rehearsing saying ‘No’…(see Wikileaks and Foursquare for what actually happened…)

LinkedIn:      These are all the people I think I met in Tesco’s waiting room…

Pinterest:      Here is an untried list of the swansong concessions I intend to demand from Tesco….

Last FM:       Here is a list of the Buyer’s (…and now my) favourite tunes….

G+:              A quick way of going around in circles with Tesco…

However, joking apart, Big T remains the best gig in town!   

The ‘farce’ of airline pricing

Given the Irish government’s decision not to sell their 25% share of Aer Lingus, and the probable EU demand that Ryanair reduce its 29% shareholding in the national airline, it is possible that Ryanair will intensify its pricing competition in an attempt to get the stakeholders back to the negotiating table. This means that airfare pricing could become even more of an unfunny ‘farce’ for even savvy consumers.

Moreover, with even business class flyers resorting to budget airlines in these austere times, it is perhaps useful that NAMs familiarise themselves with the airline pricing process in order to optimise limited travel budgets.

How the pricing model works in practice
To start, new BBC research suggests we may need to reassess some of the things we think we know about air fares. For instance, many of us assume that prices only go up as the date of departure nears.

Prices on routes from London to major European cities including Rome, Barcelona and Berlin were monitored by the BBC every day for six weeks. The aim was to track how fares moved, rather than to compare prices.

The findings show that fares can actually fall and then rise a number of times during the period leading up to a flight. For instance, the price of a Ryanair flight from London to Rome in the middle of April fell on six separate occasions in the six weeks before departure.
Full details of the Ryanair and Easyjet business models and the history of the peanut airlines are available here and here.

A way forward?
Whilst current budget pricing no doubt make sense to the discount airlines, it patently confuses their consumers. In fact a cursory glance at our ‘what if airlines sold paint' example might clarify the issue from a consumer point-of-view.

However, the airfare business models are simply classic examples of demand-based pricing.

If the shopping experience counts for anything, and with price being ‘just part of the total offer package’ we should not be too surprised at the same product being priced differently in convenience/corner-shops and supercentres. The confusion arises from the fact that if selection and ease of shopping are the drivers in an enhanced shopping experience then why are comprehensive selection supercentre prices lower than limited-choice corner-shops?

Moreover, if the price differential becomes too great, an opportunity for arbitrage arises, in that it becomes more advantageous for a Mom ‘n Pop owner to buy from a nearby supermarket than from a wholesaler…, in the same way that a third party van owner can capitalise on even a 2% cross-border price difference.

These unprecedented times will eventually cause us to clarify our approach to pricing from the point-of-view of all stakeholders, or suffer the loss of our business to competitors that have the courage to be fully price-transparent…

Incidentally, the new leather seats on Ryanair are a nice addition in terms of comfort, and not yet reflected in their pricing…  Michael?

Recycling broken gadgets - savvy 'making-do'?

Restart parties could be the savvy way of ‘making do’ via a gadget repair, rather than auto-replacement of a useful tool or appliance.

Ugo Vallauri and Janet Gunter are the co-founders of The Restart Project, which aims to stop people throwing away broken gadgets and other electrical items and, instead, get them fixed by taking them along to a Restart party, as with a recent session in Camden Town Shed, in north London, but next time it could be a church hall, market stall or community centre near you.

The idea came out of work Mr Vallauri has done with Computer Aid, a charity that refurbishes old computers for use in developing nations. Using some basic repair skills of the volunteers that the parties bring together, gadget owners that have lost trust in commercial repairers can access the second or even third life of favourite items. More details of the MO and examples from the Camden Restart session here.

The real issue here is not the fact that some people have found a way of collaborating in a shared-repair experience, in the sophisticated West, but that ‘making do’ has been ‘ennobled’, in that people are  becoming more focused upon stretching existing resources, and talking about it, as a reaction to the pressures of austere times…

…and if even 10% of gadgets are repaired in this way, it effectively takes 10% out of the new gadget market….

Amazon should buy Ocado, says Cantor Fitzergerald analyst

One of America's top technology analysts has said that Amazon should buy Ocado, describing the online retailer as having one of the “most advanced technology platforms” for grocery delivery in the world.

In fact, KamBlog readers will have come to this conclusion on 14th August 2012  when we wrote that Ocado’s banking issues represented ‘an Amazonian window’, and again on 26th November 2012 ‘Amazon-the-grocer moves from 22,000 to 150,000 products since July 2010’, making the M25 ‘market’ a natural test-bed…

Why now?
According to The Daily Telegraph, the Morrisons’ deal has put companies that have eyed Ocado for much of the past three years back on “red alert”, including Boots, Amazon and Carrefour, who are considering a licencing deal (a networking tip for your continental colleagues?).

Cantor Fitzergerald analyst Youssef Squali said: “We believe an Ocado deal would bring much more automation to grocery delivery within Amazon and accelerate AmazonFresh’s roll-out across the US.”

Amazon has been testing Amazon Fresh in Seattle for six years and recently expanded it to LA. It is thought to be considering entering 20 US cities.

Why it matters?
The real issue is not the fact that Amazon may be contemplating the inevitable, but that given some pointers, a NAM can be trained to recognise early signals in the market. In fact, by joining up the dots (or having them joined for her),  a NAM can sometimes have at least six months ‘warning’ of a customer move.

This time-advantage has to provide an opportunity to anticipate or even implement a strategic response while competing NAMs are surprised on the day, and have to resort to a reflex re-action…

...and the facts, figures and opportunities are all around us (especially in retailer's latest Annual Reports), all for the want of knowing what to look for, coupled with a creative ‘what if’, or two, combined with the potential synergies arising from a NAM's day-to-day relationship with the customer… 

In fact, ignoring what a retailer says about its finances has to represent one of the biggest and most dangerous tricks a NAM can miss…

Managing the post-rescue Booker-Makro relationship..

As one of our most popular NamNews items yesterday, reports in The Grocer of alleged demands by Booker from suppliers for lump sums/terms-harmonisation raise issues for suppliers.

It may be worth running through your financial options rather than resorting to simply saying ‘no’ and possibly jeopardising a potentially productive relationship..

No one expects you to simply give in to every request for additional monies, but being able to explain ‘why not’ can perhaps build your status in the relationship, leaving the customer to pass on and try a less-skilled supplier further down the line…

Essentially, if you are in the business of fair-share defensible dealings with customers, then anticipating and managing demands for correction of pricing and terms disparities following a merger of two customers will be part of your regular routine, using your normal tool-kit.

However, given the unprecedented times, a reminder of the process when two customers combine operations, may be of value:

Your business relationship with a customer will have the following ingredients
- Gross Margin on sales by the customer
- Credit period
- Settlement discount
- Trade funding
- Deductions

Gross Margin:
This should be the same for all customers that perform the same/similar function in re-selling your product. If different, it would be wise to clarify and be able to justify the additional services provided by the customer that enjoys the larger trade margin. Inability or unwillingness to do so will inevitably result in forced harmonisation upwards, or even de-listing. Handling the issue properly could result in the newly-combined customer adopting the additional services across the business.

Credit Period:
It is a no-brainer that a newly merged customer will want the same credit-period as its new partner, and if a defensible rationale does not exist, expect a demand for harmonisation to the longer credit period, with possibly a two-year back-haul ‘to recover the benefit we would have enjoyed’….  It would be unwise not to have calculated the cost of credit in advance for each of the customers and worked out the impact of ‘harmonisation’, before the customer asks…

Settlement discount:
If you operate a settlement discount to encourage early payment, hopefully it will stand ‘like-with-like’ comparison between the two customers…?  Ideally the discount will pay the same rate for the same reduction in payment periods. Why not check it out on our settlement discount tool and work out the inevitable customer demand in advance, rather than in the heat of a ‘demand’ session?

Trade funding:
If, like most suppliers, you operate 20-25 trade-funding ‘buckets’, it would be wise to check out ‘who gets what, and why’ for each of the two customers, quantifying cost to you and value to the customer in each case (our latest version of NamCalc covers 33 trade calculations). In practice this means working out the incremental sales required by the customer to generate the lump sum equivalent to what you give in trade funding…i.e. a customer with a net margin of 3% needs incremental sales of £33k for every £1k you invest in their business… (£1000/3 x 100)

Deductions:
These depend on service level, contracts and the ability of the customer to measure  and claim for real loss.
Best to clarify your options ‘just-in-case’ and if tempted to procrastinate, remind yourself that in the US, deductions can represent up to 7% of a supplier’s sales…

‘Lump sums for rescuing Makro’:
In taking over Makro, a commercial decision was made within the normal constraints of the takeover process i.e. it was not possible to consult with suppliers in advance, so presumably all costs were factored into the agreed price at a known level of risk that did not include incremental help from suppliers….  In the same way, as Makro drifted downwards, most suppliers will have assessed the risk and cost to them of the company going bust and will have factored this into their trade strategies.

Only if the takeover of Makro results in genuine incremental business for the supplier, will additional payments be negotiable…

A supplier that has completed the calculations outlined above will be better prepared than most to handle the resulting session with Booker…

[Incidentally, if you have not had a request yet, it may be because of your position relative to other suppliers on the radar…. So a 'what-if' on the above options may be worth a moment of your time?
If you are stuck on any aspect of the application, why not give me a call?]

'Try it first' perfume service boosts sales for The Fragrance Shop

The days of unwanted perfume or aftershave presents sitting on the bathroom shelf may be coming to an end after The Fragrance Shop launched a “try it first” service, designed to boost online sales. It provides customers with a free sample of the purchased fragrance, meaning they can test it before opening the full bottle and return the fragrance for a full refund if they do not like it.

The Fragrance Shop credits the scheme with helping them show a 15% increase in sales to £81m in the year to March 31, with a click-and-collect online ordering service accounting for 17% of sales.

Representing what can be the final hurdle for the 'new user' savvy shopper, this initiative gives The Fragrance Shop a clear competitive advantage over traditional, albeit upmarket purveyors of fragrance, by removing the 'risk' element in making a decision to invest in a product where the reassurance or even 'permission' of other stakeholders/partners may be required to endorse or even authorise a purchase.

In other words, trial and discussion in the comfort of the home become an active part of the buying process, especially for online purchases..

A pointer for savvy C&T suppliers who might gain an advantage by supplying a small sample (or two) in each pack.....?  

€1m revenue at tuck shop with captive audience

How they hit the numbers in Dublin’s Mountjoy jail-shop
Figures just released indicate that whilst sales revenues dipped by 7% to €1.2m in 2012, profits increased by 17% to €124k, making a Net Margin of 10.1%. Annual sales per shopper worked out at €2,268 per shopper, based on an average guest-list of 540 members, with high levels of store-loyalty, and little evidence of promiscuous shopping behaviour.

How do they achieve these results?

• Availability: with a shopper mix that includes murderers and other individuals prone to violent expression of their needs, zero-defect availability records are second to none…
• Shopper behaviour: In common with other retail, the shop can not only track customer movements before and during the shopping process, but has the additional advantage of being able to predict future location of the shopper 24/7 with a high degree of certainty…
• Shrinkage: given the degrees of shopper expertise, it is not too clear if shrinkage levels are equal to, or exceed international  averages
• Tight offering: despite latent demand for basic DIY tools and general outdoor gear, categories are limited to toiletries, cigarettes, tea bags, biscuits, and other items
• Database: the company database possesses degrees of customer insight a normal retailer could die for…including finger-prints, DNA samples, previous ‘form’, membership of affinity-groups, etc
• Payment: perhaps understandably, no money changes hands between the prison-officer manning the hatch and prisoners; all purchases are made ‘on tick’, with no reported instances of any difficulties in enforcing payment on due-dates, via cell-visit, if necessary…

NAM precautions
NAMs conducting store checks in ‘The Joy’ should exercise caution at all times and would be well advised to supress any inclination towards aisle-rage, queue-jumping and even gentle interrogation of fellow shoppers…

Moreover, dressing down for a store-check is not advised in order to avoid any possible misunderstandings when attempting to leave the facility…

Meanwhile, just-in-case, have a get-away weekend from the NamNews Team!

Why cash is making a comeback

Despite increasing reassurances by the banks (!) as to their safety and reliability, the rise of contactless payments and chip-and-pin has gone into reverse. New figures reveal that more of us prefer to use hard currency – whether because our accounts are empty or because we prefer the security of coins and notes.

According to a new report from the Payments Council and Link, which runs the UK's cash machines, the volume of cash payments rose by 200m in 2012, reversing the year-on-year decline over the past decade, with more than half of all our payments in cash, reflecting its easy use and its wide acceptance.

Whilst many prefer the anonymity of cash payment, remembering also to take the batteries out of their phones, or leave them at home, don't drive a car, or avoid walking past their daily allocation of 300 security cameras, and obviously ignoring the potential advantages of a 24/7 alibi, a key advantage of paying in cash means that we are continually confronted with the state of our personal finances. This helps to sharpen our savvy-consumer skills when paying with our ‘real money’…

NAM application
In the same way, NAMs who quantify and convert all concessions into cost and value, capturing the resulting impact on their company P&L, can  more easily demonstrate the value to the retailer in terms of both bottom-line result and incremental sales. This has to represent a major advantage over those who continually add cash & ‘non-cash’ concessions to their offering with little attempt to match and trade their way to a fair-share result.

Like the cash-paying savvy consumer, negotiating with real money automatically builds in the need for KPI achievement and compliance in order to provide all stakeholders with demonstrable value-for-money, besides being a constant reminder of our ability to make a profit or loss, via the use or abuse of 'our money'…