Charity shops - a dime a dozen in Orpington High Street?

                                                                                                                    map: Daily Mail 15/07/2013
1  Oxfam                         5  Hospices of Hope           9   British Heart Foundation
2  Save the Children         6  Harris HospisCare          10 Cancer Research UK
3  PDSA (Pet Charity)     7  The Children's Trust        11 Marie Curie Cancer Care
4  Age UK                       8  Cancer Research UK     12 Scope (Disability charity)

A question of charity overkill, or a better-than-nothing solution for the high street?

Nestlé Launches ‘ONE SQUARE METRE’ Coffee Shop Concept

Contract caterers, workplaces, universities, cafés, pubs, bars and restaurants are targets of a ‘one square metre coffee shop’ concept called Nescafé Milano Lounge that has just been launched.

It is a touch screen self-serve coffee machine that can deliver up to 400 customised drink varieties, access to nutritional content, aimed at consumer interaction, but outlets can optimise sales through personalised onscreen promotions and videos tailored to their specific business requirements. Its wireless facility also allows access to sales data and management of stock control.

A potential driver of food service performance? 
Apart from building and optimising traffic its square metre footprint should be an encouragement for food service establishments to focus upon a key retail metric, sales and profit per sq. m. {In fact, if food service suppliers encouraged their customers to adopt 'supermarket' metrics, it would help all stakeholders to assess value of goods, services and assets more effectively. Other potential supermarket metrics here}.

In other words, units located in the UK achieving annual sales of £10.8k and net profits of £646 (£1,000/sq. ft. and net profits of £60/sq. ft.) will outperform Tesco…… 

Optimising the NAM's business lunch?

In the era of the free 3-hour ‘business lunch’, in effect a high-powered 'non-business' meeting that appeared to have no fixed agenda, a new NAM tended to be thrown in unprepared, with no training on the basics…

Some precautionary pointers may help

In one of my first business lunches, my Dutch MD rescued me from the confusion of the French menu by suggesting I might like Tournedos Rossini, which  until that moment I had taken to be part of the restaurant’s musical accompaniment… The resulting combination of rare filet mignon with warm foie gras on a bed of wet toast proved very satisfactory and apart from raising the bar on expenses, from that moment I have found an assured request for ‘Tornado Rossini’ was always a safe bet when confronted with a ‘foreign language’ menu.

Unfortunately, I have been less successful with my choice of a standard starter in Pate Maison, finding it tasted different in every restaurant…

For these reasons, I found it useful to conduct a dry run on a new venue in preparation for really important lunches. It obviously raises the cost, but pays off in terms of ability to focus on the hidden agenda in real time…

Following the menu-choice lead of the main guest can aid the bonding, but can also have its pitfalls…
I still blush in recollection of an introductory meal with a newly promoted buyer where I pre-warned the team to follow his lead regardless..

This appeared to work well with his choice of starters, a generous portion of fresh Dublin Bay prawns, dutifully followed by the rest of us. However, when he proceeded to eat them complete with shells, I sensed some loss of my personal franchise as the team crunched their way through their portions…  Looking back, I now realise that he was one of the best leg-pullers I have ever met… beware the hidden agenda

When it comes to wine, it pays to keep it simple and stick with what you know. To this day, nothing beats the embarrassment I experienced having sent back a bottle of ‘corked’ Hirondelle, without realising it was one of the first plastic-capped wines in the UK…

Excessive alcohol consumption can also have its downside in terms stage-management of the occasion. A long-standing MD pal with a hard-earned reputation for being able to hold his drink tended to give himself away by leaning forward towards the end of a lunch and whispering ‘ I would like to give you some infidential confirmation..’ This was always a signal for his NAM to announce some emergency ‘at office’ that only his MD could handle…

In other words, high quality and moderation, with a silent-mobile primed to divert when all else fails…

All other egg-sucking precautions can probably be handled very adequately by well-intentioned grandchildren….

Stinking fish and small coffees - the language of bribery around the world

Well-travelled NAMs may well be aware of some of the euphemisms for bribes but a new BBC report should help to clarify the grey area of bribery and corruption. Phrases including "beans for the kids" in Kinshasa, "a glass of wine" in Paris, and "a small coffee" in most places are all signals that the buyer is ‘almost there’ except for….

However, unless your buyer is particularly outspoken and direct, then building up familiarity with bribery shorthand may help in establishing whether a NAM and buyer are in Bribery Act territory…

Bribery defined
When in doubt, it is important to go back to basics and establish a clear personal position on bribery. Bribery is quite clearly an overt inducement to the buyer to over-ride the logic of a buying decision where a supplier’s competitor is patently offering a better deal on a like-with-like basis. In other words, the supplier’s offering is equal with that of the competitor except for the additional £10k on the price to fund the bribe.

This point, the first of many, was brought out at the case against the UK potato buyer on 30th April 2012 in court by the prosecution: "A peculiar feature of the corruption was that it was self-funding. [The supplier was] not paying for it, [the retailer was] paying for the corruption of their own buyer and this was achieved by overcharging [the retailer]".

For further guidance on the distinction between gifts and bribery see KamBlog: buyer-seller corruption 

Action for NAMs
The answer for NAMs is always to attempt to revert to the base deal and check that it satisfies objective buying criteria (the buyer’s job needs), like-with-like, before focusing on the buyer’s emotional needs. In practice some of this process occurs simultaneously, but it remains vital that the supplier’s basic offering is defensible and transparent, always, and with 20/20 hindsight…..its the nature of the job, folks.

Meanwhile, if the buyer offers you ‘a small cup of coffee’ at the end of what you thought was a done-deal, best stick to the usual mug of tea, without sweetener, unless he insists, of course…

Debenhams’ Risk review (latest Annual Report 2012, P39-45)

(Download a copy of the Annual Report here)
A virtual primer on risk management, their latest Annual Report devotes six pages to defining and spelling out Debenhams’ position on risk, in terms of chance-of-occurrence and impact-on-the-business. Any NAMs wanting to optimise their trading partnerships with the retailer will need to demonstrate how their policies and process are compatible and complementary in terms of the supplier-type risks covered in the Debenhams’ report, or risk being ignored….

Know your own risk-profile
In practice, this means that the supplier needs to be clear in terms of relative risk profiles of the two organisations, knowing whether as a supplier in their category they are risk-seeking, risk-neutral or risk-averse, and pretty clear on how Debenhams views itself on the same measures, in that same category.

Incidentally, the category-specific criterion is important, given the difference between fashion-clothing and, say Health & Beauty business models. 

Risk-match with the customer
In terms of being complementary, a supplier can either have the same appetite for risk (i.e. both are risk-neutral, or be more adventurous [risk-seeking] based on knowledge of the category, where the retailer is more conservative [risk-neutral] in the same category.

Either way, framing your presentations as ways of helping the retailer to manage their perceived risks has to be a way of differentiating your offering from competitors that make a pitch in the traditional manner…

Debenhams’ Risk priorities and mitigation
See the risks identified by Debenhams on p42 to 45 that could impact/involve suppliers:

Risks:
- Consistent fall in customer spending
- Competitive pressures in existing markets
- Factors influencing the sustainability of the supply chain
- Inability to predict or fulfil customer demands or preferences
- Disruptions or other adverse events affecting relationships with or the performance of major suppliers
- Ineffective brand awareness and marketing programmes

Debenhams are clearly building risk-management into their culture at all levels. They are listing both the risk and the mitigating action in each case. Ignoring the risk-content of the Annual Report could prove to be a major ‘miss-trick’ for NAMs…, whereas seeing an opportunity to jointly manage relative risk with Debenhams, has to be a no-brainer for pro-active NAMs…

Microbrewing to micromarketing - Aldi beer festival boost for breweries

Discount supermarket chain Aldi estimates it has sold £90,000 of Scottish craft beer in five weeks during its second in-store beer festival, featuring 33 beers from 13 breweries.

According to The Herald, the retailer has sold 52,000 bottles out of 70,000 it had in stock in its 46 stores across Scotland and is on target to beat last year's beer festival sales of £93,000. The festival is part of  Aldi’s ongoing commitment to working with local suppliers, according to Richard Holloway, Scottish Managing Director.

A small initiative from a global perspective, perhaps…, but monumental in terms of pressing all the buttons locally…

More details of Aldi’s Scottish beer initiatives here

Incidentally, for traditional branded suppliers, faced with the challenges of global brand-names innovation, again the Scottish micro-breweries can show the way...

See here for a list of 50 Scottish beers with the best names (+pack-shots + ingredients + selling points), ranging from Sheepshaggers Gold - “The Best Beer Baa None”, to a personal favourite, Beet Red Beer - “You can’t beet red beer”, brewed by Barney, a pal of mine in Edinburgh….

Motorway prices and the Savvy Motorist

Motorway service areas are charging up to four times the high street price for basic food and drinks, according to new research by the Institute of Advanced Motorists.

With instances of charges up to £2.09 for a 500ml bottle of water vs. a 95p high street price, and a basic cheese sandwich costing £3.99 at some motorway service stations, as opposed to just £1.00 on a nearby high street, it would be reasonable to expect savvy motorists to carry basic provisions in order to reduce costs of using motorway facilities.

One approach might be to charge for washroom facilities, a la the old Ryanair on-board joke, but even this may reveal limits that cause the ultra-savvy driver to perhaps make less socially acceptable alternative arrangements when taken short...

To take a more positive approach to optimising the mix of holiday/guilt/pamper mode that prevents too critical a response to travel retail prices at airports, and taking note of the grocery multiples response to equivalent problems, perhaps motorway service operators should focus on enhancing the shopping experience, whilst reducing prices to a level that is just about acceptable in terms of value for money...(see Buying-mix-analysis ref competitive appeal)

This could present opportunities for NAMs to treat the service station as a retail business unit, and apply shopper marketing and category management techniques already proven in a classic retailing environment.

In applying this consultancy approach to the Motorway services station opportunity, the proactive NAM may also find it beneficial to add value by coaching the facilities manager on negotiating more realistic site rentals with the landlords, a key cost driver in travel retail...

Calculating the actual outcome of a negotiation session - the real P&L of the deal...

As we begin (!) to emerge from the effects of the global financial crisis, survival-minded suppliers and retailers can benefit from maintaining strict financial measures and controls in optimising the joint-profitability of their trade partnerships.

One area that may need attention is ensuring that deal-evaluation includes the factoring-in of all concessions, both financial and non-financial. 

The following approach may help. 

As you know, negotiating a deal is essentially a process of compromise, in that instead of simply selling product at the regular price and making our normal supplier gross margin (50%) on the deal, we effectively dilute that margin by making additional financial and non-financial concessions to the buyer.

Financial concessions:
Financial concessions could include discounts, rebates, advertising & promotional allowances etc.

Non-financial concessions:
Non-financial concessions could include advertising & display material, POS, demonstrators, analyses of Sales, Promotional and Category data, etc.

We try to dilute the negative impact of giveaways by ‘insisting’ on receiving equivalent concessions from the buyer that ideally will replace any losses in negotiation.

For this reason it is essential to convert all concessions into their financial equivalents in order to keep a running check on giveaways and receipts during the negotiation process.

In practice, it is best to develop and manage a Negotiation P&L as follows:

Deal Analysis
Total sales to the customer in this deal at list price                             £250,000
Less Gross Margin of 30%                                                                 £75,000

Net sales to the customer                                                               £175,000

Less the Price concessions we gave:
- Quantity discount 3%                          £5,250
-   Advertising allowance 7%                   £12,250
-   Early payment discount 1.5%              £2,625
-   Listing fees                                         £6,500

Less the non-Price concessions we gave
-    POS material (estimate £5,000)          £5,000
-    In-store demonstrators                        £3,500
-     Samples                                            £2,500                                                

Total given away                                                                              £37,625

Less Concessions received from the customer
-  Earlier payment                                      £2,500
- 20% increase in facings                           £8,750  (estimate 10% sales increase)                                                                                                i.e. assume supplier 50% gross margin                                                                          
-  Exclusive in-store promotion                   £10,500 (estimate 12% sales increase)
i.e. assume supplier 50% gross margin

Total received from customer                                                          £21,750    

Net amount given away in negotiation                                            £15,875 
i.e. 9.07% of sales given away in negotiation

The above application hopefully demonstrates why factoring in the non-price concessions and insisting on buyer reciprocation is vital in negotiation.

It then remains to add value and devalue to optimise concession-exchange in the process.....simple!