Amazon buys the Washington Post, Waitrose buys the Good Food Guide, same difference for NAMs?

In another sign of the unprecedented challenges newspapers face as advertising revenue and readership decline, Amazon yesterday paid $250m for the 135-year-old Washington Post, breakers of the Watergate scandal… .

In addition to the newspaper, Bezos gets other publishing businesses, including the Express newspaper, The Gazette Newspapers, Southern Maryland Newspapers, Fairfax County Times, El Tiempo Latino and Greater Washington Publishing.

However, the Washington Post represents only a fraction of the company which has expanded into a stable of holdings, including education and health care services and most recently an industrial supplier. The collection of companies that make up the Washington Post is akin to that of Warren Buffett's Berkshire Hathaway Inc, which owns disparate businesses from railroads to underwear as well as a stake in the Post.

Obviously Amazon will bring innovation, a global database and leading-edge online/digital expertise to the mix, but especially consumer-focus, pace and 1-click convenience. 
Above all they will strive to replace all elements that appear to be the cause of newspaper demise, hopefully leaving untouched the core of what the Washington Post is to its readers.

In the process, Amazon, with little experience of newspapers, may happen on a long-term solution to the sector’s problems…

A pointer for traditional media, or the final threat…? 

Meanwhile, Waitose purchase of the Good Food Guide from the Which? consumer advice group, includes the website as well as the 63-year-old magazine.

In contrast with the Amazon deal, here the traffic is more two-way, in that Waitrose gains access to the receiving end of a food service culture, via an army of volunteers who inspect and rate restaurants anonymously, along with enhanced credibility with diner-consumers…

Waitrose also publishes a weekly lifestyle and recipes guide, along with a monthly magazine which will give some scale economies and efficiencies via the new purchase, apart from website synergies.

From a NAM point-of-view, both retailers have just added new dimensions to their relationships with consumers, giving them more insight into making ‘paid-for’ media work, and hopefully more appreciation and understanding of the real value of Return on Trade Investment.

It only remains for NAMs to be able to handle the resulting conversation…

EasyGroup hopes to take on Aldi et al with budget supermarket plan

EasyJet founder Sir Stelios Haji-Ioannou plans to challenge low-cost food retailers by undercutting low prices offered by budget supermarkets Aldi and Lidl, concentrating on affordable, basic 'no-brand-name' packet and tinned foods at bargain prices.

Recent retail figures suggest the UK grocery market is becoming increasingly polarised with the strongest sales gains coming at the top and bottom ends – with the likes of Waitrose doing well on one side and Aldi and Lidl on the other.

Starting with a store in their Croydon building and using a new web site easyFoodstore.com, "coming soon", the company hopes to make a viable return on capital employed.

Several plus-points stand out:

• This solus ‘white’ offering will have a unique focus compared with other retailers
• Stelios may have identified a genuine niche in a market that will remain flat-line to low-end consumers, for many years
• Aiming at ‘an acceptable return on capital’ and buying redundant high street outlets at low cost means the company will have very simple KPIs, with a focus on an ROCE of 10 -12%, in the current climate
• Little shortage of suppliers willing to supply
• Generic branding means goods can be multi-sourced to optimise leverage on cost prices
• The formula is infinitely scalable at low cost, to optimise low-price demand…

The 'downside'?
Stelios is not a shopkeeper, but once-upon-a-time he did not know much about running airlines, either…   

The battle for market share in a flat-line war

In a flat-line market the only way to grow share is at the competitors’ expense, with some help from suppliers…. In other words, the retailer needs to evaluate the relative appeal of their offering, from the point-of-view of the target shopper compared with available alternatives.

In practice, this means that the retailer’s 8 P Marketing Mix – the offering – needs to be assessed, weighted and objectively ranked vs. other retailers’ offerings, in the eyes of savvy consumers.

The 8 P Mix - a harmonious and need-prioritised blend of the following:

1. Products & Assortment: ranges matching consumer expectations, and doing what it says on the tin (short-changing here makes the remaining parts of the retail offering irrelevant…)
2. Pricing: with most retailers now price-matching, price has been virtually eliminated from the equation, leaving the remaining 7Ps as the only real differentiators…
3. Promotional activities: promotions are now about informing and clarity, an attempted basis for like-with-like comparison (trust, values and credibility being implicit, easily eroded, impossible to restore, if competitors manage to build and hold the honesty line…)
4. Place i.e. store location: being available everywhere the customer wants to buy, in a format that optimises location, offering effective store-level assortment, and if necessary show-rooming for the retailer’s online alternative
5. Personnel: vital that the entire organisation, especially front-line colleagues express the offering in harmony with other elements of the Mix
6. Physical distribution & handling: full on-shelf availability, as ‘fresh’ as the pics in the adverts, zero-defect
7. Presentation of stores & products: optimising the presence of those who make it to the aisle (shopper marketing)
8. Productivity: delivering the above ingredients within financial constraints of ROCE performance of at least 15% ( this maintains the share price and minimises cost of support from stakeholders

In other words, good shop-keeping, and better than most…

The supplier role
Patently, suppliers also need to grow at the expense of competition in a flatline market. In practice, this means conducting a qualitative analysis of their offering through the eyes of target consumers, using the 4 P Marketing-Mix (see specifics here)

However, the real difference in relative profitability will be determined by a supplier's ability to differentiate the offering to match the traffic-mix profile of each major customer. Again, taking as a basis the relative presence of target consumers of the brand in specific customer-aisles, it is vital to tailor the offering to optimise actual shopper behaviour in a way that fits with the retailer’s 8P Mix.

Simply offering the same to each major customer will at best be a compromise in terms of needs-match, and the big guys will ration their partner-shipping accordingly….

Incidentally, Graham Ruddick has a great article in the Telegraph: Tesco-Sainsbury's row draws battle lines for entire retail sector, well worth a read...

True like-for-like comparison - the impossible dream?

In yesterday's Telegraph, Mike Coupe made an elegant, if rod-for-own-back, case encouraging the consumer to aim for true like-with-like comparison when considering an on-shelf purchase. 

Specifically, a shopper should factor in provenance or origin of the goods as part of the total offer, especially in the case of fresh produce. He also correctly  points out that the quality standards should apply all through the category, and not just the high end. In other words, shoppers deserve to have their needs met, all the way to the stomach, and beyond, whatever the price-point.

The problem is that we as consumers have become lazy. 

Having been aggressively aroused from a 30 year credit-fueled dream, where we outsourced our thinking in terms of unrealistic reliance on politicians, and bankers in the expectation that they could be taken at their word, allowing us to get on with consuming....confident that if a product or service failed to deliver, legal machinery existed to punish those who mislead us.  Clearly, the last few years have demonstrated that we are all on our own, so to speak...

The issue is expectation management. 

As we all know, branding was invented to assure purchasers that the contents would live up to the expectation created by the description on the tin. However, even this 'guarantee' can be jeopardised by one disaffected night-shift worker popping behind a packing case and 'interfering' with an unsealed tin, before putting it back on the line...  As consumers, we still need to check the contents before eating.

Even more so in the case of fresh produce. In practice ethical sourcing is an aspiration, not a guarantee of quality. It is impossible for a retailer to give a 100% guarantee without sampling 100%, and we are unrealistic to expect otherwise.

When the product comes from 'out foreign' our traditional  upbringing taught us that we need to be doubly cautious  of origin and treatment of the animal concerned in evaluating sources, again totally confounded by the fact that the horse meat crisis demonstrated that even closer to home even vigilant  sourcing can allow faulty content to slip through...

Think about it, if a horse carcass can be purchased for £15, and sold for £700 as beef, then someone in the chain will be tempted to take a short-cut.

At best we can take a reasonable guess - our call - based upon a reliable retailer's best efforts, in deciding that one product is a better deal than another.
And if a brand or retailer appears to short-change our expectation, at least most if us still have the ability to vote with our feet, and perhaps tell a friend....

On-shelf like-for-like price comparison – what’s the problem?

News that four retailers are moving to £/100g onshelf pricing is only surprising in terms of the apparent reluctance of other retailers to make no-brainer decisions…

Aldi, The Co-operative, Waitrose and Morrisons have made a quantum leap that will result in other retailers playing catch-up…

The savvy shopper
Consumer-shoppers are now better-informed than ever before…and they ‘walk’ when confused or suspicious. For anyone trying to sell them anything, this should be sufficient to encourage the seller to make the proposition and its comparison with available alternatives as easy as possible i.e. £/100g or £/100ml. The shopper is thus presented with a logical way of comparing Product, Price, Presentation and Place on a like-with-like basis, with emotion and other qualitative elements of the proposition playing their part in justifying any price premium vs. the competition.

Difficulties with multi-buys?
One excuse appears to be difficulties in expressing multi-buy offers on a £/100g basis…

When I buy a jar of my favourite coffee at the regular price, I occasionally check jar size for possible reductions i.e. ‘disguised’ price increases (people are counting pennies out there, can anyone still believe they are not checking value-for-money, 24/7, and are totally insensitive to pack-reduction 'short-changing'?).

At the same time, a quick check of the on-shelf price per 100g allows me to compare with other coffees. Incidentally, if there appears to be a uniform price increase across the category ‘to reflect ingredient cost-increases arising from a rainy night in Georgia, or Sao Paulo’, then I switch to tea-bags until the craving becomes unmanageable…

If I succumb to a 3-for-2 offer on a 200g jar that normally retails @ £5.80, I am getting three jars for the price of two 200g jars i.e. 600g for £11.60 = £1.93/100g, compared with the regular  rate of £2.90/100g, so I load up…

Simple, unless the retailer – or supplier – does not want me to make that comparison…
And if I even half suspect that this is the case, I am tempted to revert to tea-bags, at another retailer, along with the rest of my average £70/week basket…

Customer going bust - the incremental sales impact!

Yesterday, the administrator announced that lenders and suppliers to toy and model retailer ModelZone face losing up to £11m after it collapsed into administration. Of this, the company owed more than £9m to the secured creditors Lloyds Banking Group, leaving approximately £1.5m to the suppliers, the unsecured creditors.

In other words, the suppliers will receive nothing - the anticipated £4m from the stocks sell-off will go the bank - meaning that suppliers will need to recover their losses via incremental sales elsewhere, whilst their ModelZone stocks end up competing with them in the markets at 50% or more discount….. a double whammy?

Getting it in perspective
£1.5m seems a small amount by comparison with the £9m owed to the secured lenders- a dangerous idea that could prevent us from appreciating the significance of the loss.

In the same way, we have somehow become so accustomed to ‘a trillion here, a trillion there, soon we’ll be talking about real money’ in the global financial crisis that it no longer seems like a joke…  In other words the big numbers appear to have raised the bar on financial pain for suppliers and customers.

How the NAM can break through the apathy
Because of this ‘insensitivity’ to ‘mere millions’ it is vital for the NAM to find a way of expressing loss in a way that is not necessarily alarmist, but yet causes the organisation to take the issue seriously. For instance, a supplier on a net profit of 5% needs incremental sales of £30m to recover from a loss of £1.5m, in the current climate (!), competing against its own liquidated stock selling at ‘50% off’ in the marketplace…

Now do I have your attention?

In the same way, NAMs have to impress upon their colleagues the importance of
- making credit worthiness a top KPI and not just a job for the credit control department
- picking up and communicating every delay in payment, instead of regarding it as a ’one-off’ glitch
- delivery drivers noting stock-gaps of key lines in the customer’s depot
- merchandising colleagues reporting on store-staff morale and on-shelf availability

The carrier of the can
But the main focus should be on the NAM’s ability to read the situation at the supplier-retailer interface, via a combination of updated analysis of the customer’s latest published accounts and the constant realisation that the NAM will have to pick up and implement the incremental-sales-tab in the event of a misjudgement….

Incidentally, using the same ‘incremental sales’ approach, the GSCOP Adjudicator might make more impact by referring to the potential £1bn fine for bullying suppliers not in absolute terms, but as the incremental sales of £20bn required by a retailer making a net profit of 5%, or are we back in the land of funny money?

Drowning in complexity - how to simplify without being simplistic...

An independent survey of 1,293 HR leaders worldwide has revealed how complexity in today’s business environment affects key business indicators and the degree to which managers lack confidence in their ability to handle that complexity (Hat-tip goes to Jeremy Blain for the link).

Results show 60% of survey respondents indicated that they did not have full confidence in their organizations’ ability to manage complexity. As a result, complexity has a very significant impact on key business indicators such as sales revenue, employee productivity and motivation, customer loyalty, organizational profitability, and sustainable long-term competitive advantage.

As part-time fire-fighters (if the job has become full-time fixing, it becomes a whole new ball-park, another time) NAMs need to be able to absorb and factor in new trading issues – and since 2008, most issues are new – and bring in results, despite the distractions such as tech-induced data-overload and increasing layers of complexity…

This means being able to simplify, without making an issue simplistic.

For instance, your customer has just received a take-over bid, ‘out-of-the-blue’... First of all, nothing, especially a takeover, happens unexpectedly to those who are constantly on the watch for signals, and NAMs are particularly well placed pick up and place key signals affecting their major customer in context, better than anyone in either organisation.  However, such signals, as with other key issues, come buried in a mass of data and complexity.. The benefits of being able to anticipate and act  while others are awaiting the next press announcement, hopefully go without saying?

Essentially, a NAM can manage most complexity by searching for answers to the following questions, fast!

- What is this about?
- Where is it headed?
- How does it affect me?
- What should I do about it?
- How?

What is this about? i.e. takeover bid
Read wide and fast, a mix of mainstream media and blogs, combined with the views of key people in your network. Despite the appeal of various lines of investigation, resist and merely dig out facts relevant to your question, remembering that you are aiming at producing an ‘elevator pitch’ i.e. an explanation that can be put across between floors on a lift-ride (apologies for culture-mix, but lift-pitch does not quite express it)....     As the in-house expert on the customer you are going to be asked for a detailed strategic reaction minutes after the CEO has read the news…If you are not her first choice for a view, mmmmm….

Where is this headed?
Given this morning’s bid is already history, the only sensible place to play is in the future, while others indulge in ‘analysis paralysis’ and other clichéd approaches to making sense of something that requires immediate action…(your fire-fighter mode).

Think future in several time-frames to generate deeper insight. In other words, thinking laterally, what are the immediate consequence of the bid, 1 month later, 6 months on and finally a year later, and pencil in appropriate actions for each time-frame. Think through the various parties affected by the bid, say consumers, the customer and suppliers. Explore positive, minus and interesting aspects of the bid from the point-of-view of each party, all well established lateral thinking process...

How does this affect me?
You now have a pretty comprehensive grasp of the issue and its consequences, along with the anticipated views of those concerned. This should be sufficient to take a stance on the bid’s impact on you,  your company and your brands.

Converting everything into financial impact will then lend the exercise a little immediacy and urgency, if per chance the pace has slowed….

What to do about it?
Again many of the required actions will be obvious, again requiring financial fleshing-out and factoring into amended trade strategies (you simply need to have been at the receiving end of a single takeover bid to know exactly what happens, and what to do about it…)

A key element should be a risk/opportunity analysis assessing what could go wrong/right, and exploring impact on the business and chance of occurrence…fast.

How to do it?
Can take a little longer but outside experience, objectivity and contacts can save time, and lend some fire-power to your recommended actions…

So, five questions later, you have an outline trade strategy, and judging from the average 5 minutes that NAMs devote to KamBlog postings, it is still less than ten minutes since you heard about the bid…..

TV goes to the dogs with first channel for canines - a breakthrough in discerning viewing?

Lonely, bored dogs left at home all day while their owners are at work could soon be getting some digital company - a TV channel with programming just for pooches. DOGTV, a 24/7 channel designed specifically for man's best friend, will air nationally next month on the U.S. satellite operator DirecTV, with hopes of attracting dogs in some of the 46 million U.S. households that have at least one.

Given the quality of alternative viewing choices it has to be presumed that significant numbers of suppliers’ regular advert-targets might choose to watch DOGTV with their pets…

This raise a number of issues:

• Who is the real target here?
• How will doggie viewing patterns compare with humans’ passive behaviour i.e. a real challenge to content and advert appeal?
• If the TV station upgrades its output for increased engagement, how will human couch-potatoes cope with the resulting excitement?
• If the dog barks in response to a specific advert, does this indicate approval or the opposite?
• As the sounds include a range of frequencies tailored to a dog’s sense of hearing, how can owners monitor the messages reaching their pets?
• Presumably someone put a proposal on a table somewhere and raised adequate start-up capital i.e. there has to be a potential revenue stream here, or a hidden agenda, the final nail in the traditional TV- coffin?

The real opportunity?
For those of you now seriously considering the potential of this new medium, it may help to know that the real competition may be the proposed content … The channel won't be showing the canine equivalent of "Modern Family," "Mad Men" or "Downton Abbey" but will feature programs with music, visuals, animation and the occasional human that are designed to relax, stimulate and ease the loneliness of home-alone pets. This means that the advertising has to be sufficiently compelling that dogs will time their ‘natural-breaks’ to coincide with the content rather than while the ad-breaks are airing, perhaps the ultimate Kanine-Pee-Indicator…?.

NB. Caution ref high-pitched sound:
A pet-food marketing pal of mine Ray Wilsmer tried this idea many years ago using a Great Dane lying asleep on a couch in front of the TV. Ray crouched behind the TV with a high-pitched dog-whistle which he blew several times during screening of his commercial, without managing to awaken the dog… Eventually Ray crept behind the couch, leaned over, positioned the whistle on the dog’s ear and blew with such vigour that the dog committed a massive social indiscretion all over the couch…

Finally, before you ask, the station is already planning a TV channel for cats…