Personal one-hour supermarket delivery service launches in London

Pocket Shop, a start-up website, has launched the ultimate in fast grocery deliveries – promising to have top-up bread, eggs and milk in the hands of London customers less than an hour after they click ‘send’.

Its Amazon-based system works by allocating online orders to one of Pocket Shop’s team of 20 trained buyers around the capital, using a GPS-based algorithm similar to those employed by taxi-ordering smartphone apps. Pocket Shop could scale the business by using crowdfunding techniques to recruit more part-time buyers.

A text message alerts the buyers, directing them to the nearest Tesco or Sainsbury’s supermarket. An app on the buyers phones then displays the customer’s shopping list with instructions on the optimum way to navigate the aisles. The company offers a ‘superstore’ range of 150,000 products at prices comparable to shopping in Local and Metro convenience stores. Waitrose and Marks & Spencer will be included soon, the company claims.

A key issue might be long term profitability in that the major mults claim that home delivery costs £20/delivery compared with a £5 charge… In other words, although Pocket Shop apply a product mark-up and a 1-hour delivery charge of £6.50, they presumably have to pay the buyer…

But if it works, and think saturation of Greater London for starters, then this represents the ultimate in personal convenience, for those willing and able to pay. Having reached critical mass the concept could morph into a personal pick-up service for dry-cleaning, prescriptions, and even pensions…

Then time for Amazon to move from back office to front of store?

Helping Amazon make a profit - what will make a difference?

Graham Ruddick writes in The Telegraph that Amazon is Britain's most influential retailer, and quotes predictions that the company will be the ninth-biggest retailer in the world by 2018, despite having no stores and little profit.

This very useful and detailed article points out that the mighty Tesco has been forced to admit its biggest hypermarkets are outdated and overhaul its non-food range, Comet and HMV have fallen into administration, newsagents have installed lockers where shoppers can collect Amazon orders, and people are now reading books on their Amazon-made Kindles.

Even those retailers operating in sectors where Amazon has made little impact – such as food and fashion – are worried about what happens when it begins to take their categories seriously....

And yet, Amazon makes little or no profit, and will eventually run out of stockmarket patience… In other words, Amazon will have to meet City/Wall Street expectations in terms of ROCE, Net Margin, Stockturn and Gearing, in order to preserve its current share price.

Obviously from a NAM point-of-view, the key issues in terms of Amazon profitability are:
- Where are Amazon now?
- Where do they need to be?
- How soon?
- How can suppliers help?

Where are Amazon now?
Based on their latest accounts, Amazon key ratios are: ROCE: 4%, Net Margin: 0.9%, Stockturn: 8.6 times p.a. & Gearing: 65.4%

Where do they need to be?
Based on most other global retailers, they need: ROCE: 10%, Net Margin: 2.5%, Stockturn: 12 times p.a. & Gearing: 40%

How soon?
Whilst Amazon are obviously racing for scale and spread of categories, given global uncertainties, we would be surprised if the stockmarket did not ‘punish’ Amazon via the share price unless they show signs of delivering the above ratios in the next two years..
This means they are currently in the market for help from suppliers in driving ROCE. 

How can suppliers help?
See detailed approach here in Kamcity Library

NB. If Amazon really want to scale the dizzy heights, they need to aim at the Walmart ratios:
ROCE: 19.6%, Net Margin: 5.5%, Stockturn: 10.7 times p.a. & Gearing: 55.3%

NBNB. If you feel that these unprecedented times require a little more emphasis on demonstrating your financial impact on your major customer, why not email me on bmoore@namnews.com and find out how? 

A light-bulb idea that makes a real difference, free-of-charge...

Just when manufacturers were focused on LED light competition, and power suppliers were adjusting for lower consumption, Alfredo Moser, a Brazilian mechanic had a light-bulb moment and came up with a way of illuminating his house during the day without electricity - using nothing more than plastic bottles filled with water and a tiny bit of bleach to refract 40-60 watts of light into the room below, free….

First he makes a hole in a roof tile with a drill. Then, from the bottom upwards, he pushes a water-filled bottle into the newly-made hole. "You fix the bottle in with polyester resin. Even when it rains, the roof never leaks - not one drop."

In the Philippines, where a quarter of the population lives below the poverty line, and electricity is unusually expensive, the idea has really taken off, with Moser lamps now fitted in 140,000 homes. The idea has also caught on in about 15 other countries, from India and Bangladesh, to Tanzania, Argentina and Fiji.

Another case of consumers, strapped for cash, 'making  do' with cheaper alternatives...
Full light bulb details here 

'Ringing the Changes' scam

Given the low interest rates available on bank deposits, some consumers are resorting to the old 'Ringing the Changes' scam as a way of supplementing household budgets.

If there appears to be a little more shopper engagement than usual ahead of you in the checkout queue, the following may help to illustrate the process:

A fraudster buys a small value item and pays normally at the cash desk.  This is not part of the scam as such but makes what follows look more genuine.

The fraudster then asks the cashier if he can change 10 x £1 coins for a £10 note.

The fraudster hands over 8 x £1 coins and receives a ten pound note in exchange.

At this state the cashier realises that there is only 8 coins and informs the person he is 2 x £1 coins short.

The fraudster apologises and then suggests to the cashier he gives her £12  in exchange for a £20 note.

If the cashier agrees the fraudster hands the cashier back her £10 note along with 2 x £1 coins in exchange for a £20 note.  The fraudster then leaves the shop with the twenty pound note leaving the cashier ten pounds short.

The people carrying out the scam appear competent in distracting the cashier with chat and hand movements to temporarily distract and put them off their guard,

NB. Given recent escalation in the amounts involved and the resulting police involvement, we would caution NAMs to resist the temptation to practice their finance-based selling skills via a dummy-run. In fact, best stick to demonstrating the value of trade-funding… 

Superdrug/A.S. Watson to benefit from ParknShop sell-off in Hong Kong?

Hutchison Whampoa could get $4bn from the sale as Octogenarian Li Ka-shing, ranked by Forbes as Asia's richest man in 2012, plans to sell the business to focus on Hutchison's health and beauty retail operations, which have a bigger global footprint and offer higher margins compared with the supermarket business…

Your colleagues in China may be a little more interested in the Asian deal which would give a 30% market share of the Hong Kong market, attracting the attention of Japan's Aeon, China Resources Enterprise, Sun Art Retail, and Australian retailers Wesfarmers and Woolworths, among the eight parties invited to the process and weighing bids, with Walmart a possible late arrival. 

Walmart opened its first China store in 1996 and now operates over 380 stores spread across various formats, including Supercenters, Sam's Clubs and Neighborhood Markets.

KKR and TPG Capital have also been invited to bid and other buyout firms including Blackstone Group LP have held talks with banks about financing a possible bid.

In other words, by the bid deadline of the 16th August, that line up of talent will guarantee Li at least $4bn to enhance his global H&B offering… 

The real issue for global H&B suppliers is whether Li will now use the money in a final bid to catch up with Alliance Boots global ambitions via a bid for Celesio, a snip at €2.8bn....

This would provide A.S. Watson with a global wholesale arm, and in one move make it more of a match with Alliance Boots, as they each explore the world in search of H&B acquisitions....
Worth a thought?

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...